How Does Prisma Finance Work?
A stablecoin protocol where you deposit liquid staking tokens (like stETH) and borrow mkUSD against them. It holds $50M in deposits. Its C grade is driven by a $12M hack in March 2024 where attackers exploited a migration tool, plus the persistent problem of mkUSD losing its dollar peg when crypto prices rise.
TVL
$50M
Sector
Stablecoin
Risk Grade
C+
Value Grade
C+
Core Mechanisms
CDP/Overcollateralized
Trove-based CDP for minting mkUSD against LST collateral
Based on Liquity architecture: users open Troves, deposit LST collateral, and mint mkUSD stablecoin. Minimum collateralization ratio enforced through liquidation.
Stablecoin/CDP-Backed
mkUSD stablecoin backed by diversified LST basket
mkUSD accepts multiple LST types (wstETH, rETH, cbETH, sfrxETH) as collateral, diversifying backing but creating correlated risk.
Governance/veToken
vePRISMA vote-escrowed token with gauge-directed emissions
Novel veToken model where locked PRISMA directs emissions to specific LST collateral pools, creating competitive incentive dynamics between LST providers.
Liquidation/Stability-Pool
Stability Pool for mkUSD liquidation absorption
mkUSD holders deposit into stability pool to absorb liquidations and receive discounted LST collateral. Follows Liquity's stability pool pattern.
Integration/Convex-Yearn
Deep integration with Convex and Yearn liquid lockers
Convex and Yearn lock PRISMA tokens to boost rewards and provide liquid locker wrappers, adding composability layers on top of the base protocol.
Migration/Zap
MigrateTroveZap contract for position migration
Zap contract enabling flash-loan-assisted Trove migration between collateral types. Was the vector for the March 2024 exploit due to insufficient input validation.
Fee/Borrowing
One-time borrowing fee plus ongoing interest rate
Borrowers pay an upfront minting fee plus ongoing interest on mkUSD debt, with rates adjustable via governance.
How the Pieces Interact
Insufficient input validation in the onFlashloan() callback enabled the March 2024 exploit where attackers closed victim Troves, withdrew collateral, and reopened with less collateral, stealing 3,479 ETH ($12M).
Multiple LST oracle feeds create a wider attack surface; a single oracle manipulation could trigger cascading liquidations across all Troves using that LST type.
In bull markets, rising collateral values incentivize maximum minting and immediate selling of mkUSD, creating persistent downward peg pressure that can cascade into liquidations if collateral reverses.
LST providers can bribe vePRISMA holders to direct emissions toward their specific LST, potentially over-concentrating protocol exposure in a single liquid staking provider.
If stability pool is depleted during rapid liquidation cascade, remaining bad debt is redistributed to other Trove holders, socializing losses across all borrowers.
What Could Go Wrong
- Major $12M exploit (March 2024) via MigrateTroveZap input validation failure demonstrates prior security gaps
- CDP stablecoins face persistent sell pressure in bull markets as vault owners mint and sell mkUSD
- Multi-LST collateral types create correlated depeg risk across all supported liquid staking tokens
Zap Contract Re-Exploit Cascade
ElevatedTrigger: A previously undetected input validation vulnerability in remaining zap or migration contracts is exploited, similar to the March 2024 MigrateTroveZap attack pattern
- 1.Attacker discovers unpatched input validation flaw in a zap contract using flash loan interaction — Attacker closes victim Troves and re-opens with reduced collateral, siphoning LST assets
- 2.Multiple Troves drained before the team can pause contracts — Total stolen assets reach $5-15M depending on speed of detection
- 3.Emergency multisig pauses all protocol operations — All Trove interactions frozen; mkUSD holders cannot redeem, borrow, or adjust positions
- 4.mkUSD depegs on secondary markets as redemption is blocked — mkUSD trades at 80-90 cents as traders price in potential haircuts
- 5.Stability Pool depositors face diluted returns as bad debt is socialized — Remaining users absorb losses; trust in the protocol collapses permanently
Risk Profile at a Glance
Overall: C+ (39/100)
Lower score = safer