Prism is a portfolio market launched by ShapeShift. It just launched online through a private beta. Here’s our ShapeShift Prism review.
What is ShapeShift Prism?
Prism describes itself as “the world’s first trustless asset portfolio platform”. The platform is marketed towards those who are interested in cryptocurrency as an investment, but don’t know how to get started.
The platform was created by ShapeShift, best known for its cryptocurrency-to-cryptocurrency exchange services.
With Prism, users can create a “fund” of different crypto assets, then profit off the increased price of those assets. It’s just like a conventional investment – but it holds cryptocurrencies. All funds are held in a smart contract using Ether as the collateral.
Prism was announced at the end of May 2017.
How Does Prism Work?
Prism is based on a specific type of smart contract called a “Contract for Difference”, or CFD. That contract allows two users to create a “bet” on the future price of an asset. In order to make that bet, both users need to lock in an equal amount of ETH as collateral. This “bet” is called the “Prism”. When the Prism is closed, each user can withdraw an amount of ETH according to which side of the bet they took.
With Prism, the bet takes place between a user and ShapeShift. When the Prism opens, both parties have equal ETH in the bet. If the price goes up and the CFD Smart Contract is closed, the user gets more ETH than they put in, and ShapeShift withdraws less ETH. If the price goes down and the CFD is closed, the user gets less ETH than they put in, and ShapeShift gets more.
The prices of underlying assets are determined by something called an “Oracle”. The Oracle publishes prices to the Ethereum blockchain approximately every 30 minutes.
Another interesting thing about the Prism system is that ShapeShift is hedging their bets so they will not lose money – regardless of price fluctuations. Yes, ShapeShift takes the opposite side of all bets with users. However, they’re hedging the prices of the underlying assets out of band. Theoretically, that means they won’t lose money.
ShapeShift Prism Fees
One of the downsides of Prism is its high fees. ShapeShift makes money through fees. The platform charges users fees to offset the lock up of capital. Right now, there’s a 1% maintenance fee per month per prism. That may not sound like a lot, but it’s equivalent to an APR of about 11% (not 12.6%, as explained by commenter George Reith on Medium).
There’s also a 2.4% closing fee when you want to sell your Prism and cash in your bet. Oh, and there’s a “re-balancing fee” of 0.5%.
Here’s how the math works out: if you create a Prism with $1,000 USD, then re-balance it on a monthly basis and close it out after one year, you’ll lose about $160 of your initial investment.
An APR of 11% isn’t very good. Those high fees could push some people into taking alternative cryptocurrency bets – you could buy the cryptocurrencies with a credit card, for example, and make about the same amount of money on your bet.
How to Sign Up for Prism
Prism is currently in closed beta. All Prism bets are restricted to 10 ETH.
You can register a Prism account at the official website here: https://prism.exchange/login
Invites are sent periodically to registered users. However, there’s no guarantee that you’ll receive an invite to the beta after signing up.
ShapeShift Prism Conclusion
High fees aside, ShapeShift Prism is a unique new service that makes it easy for investors to get exposure to cryptocurrencies without individually buying assets on their own. It also keeps cryptocurrencies safe for the duration of your investment.
Despite the fact that Prism runs on the Ethereum network, users can purchase crypto assets outside of the Ethereum blockchain. Bitcoin and Litecoin are both available through ShapeShift Prism, for example.
Ultimately, Prism is in closed beta at the moment, and bets are restricted to 10 ETH. If the closed beta is successful, then Prism should continue to roll out over the coming months.