The PRM Token : Liquid Staking Power

PRM Token

The PRM token, as the native yield token of the Primis Protocol, offers both a concentrated yield and serves as a mechanism for liquidity allocation or provision into various LST protocols and strategies. This ensures that the token is fully backed by the yields generated from assets deposited in various forms of LSTs, such as stETH, rETH, frxETH, cbETH, and more, encapsulating a broad spectrum of liquid staking assets.

Universal Liquid Staking Power

With the protocol's native yield token, you have the opportunity not just to stake these tokens for sPRM and earn a rebase reward of concentrated yield, but also to utilize them as a tool for liquidity allocation within the protocol. This function allows you to steer the LST assets deposited through the bonds, directing concentrated staking power toward various strategies or LSTs.

By staking PRM tokens, you effectively harness the staking power and liquidity of all LSTs deposited into the protocol. This implies that a single PRM token, even if it represents the yield equivalent of .1 ETH of LSTs from bond deposits, could wield influence over the allocation of significantly larger sums of deposited ETH, amplifying its impact. This capacity to direct vast quantities of deposited assets underscores the potent leverage and utility of LSP (Liquid Staking Power) tokens within the ecosystem.

Concentrated Yield Token

The yield splitting process allows PRM tokens to achieve a concentrated yield, derived from the asset yield rate of LSTs bonded. The mechanism works by initially issuing a portion of the yield in PRM tokens from bond deposits, establishing a base supply that's fully backed by this initial yield share.

These PRM tokens, representing a fraction of the total asset yield, can then be staked to capture the residual portion of the rewards. This setup ensures token holders receive a proportionally larger share of the rewards relative to their supply, thus enabling a concentrated yield from the liquid staking rewards of the LSTs.

Yield Splitting

The PRM token operates through a unique "yield splitting" mechanism, which divides the bond deposit yield from LSTs into two parts. Initially, bond depositors receive part of this yield as a bond reward in the base supply of PRM tokens. Subsequently, by staking these PRM tokens, a rebase occurs, allocating the remaining rewards from the bond deposits to the stakeholders.

This process establishes a token system where PRM can be staked for concentrated yields, backed by the foundational yield from bond deposits. It enables bond depositors to monetize their liquid staking yields, effectively creating a marketplace for staking power where yields can be traded and optimized.

Rebasing Reward

When you obtain PRM tokens, you have the option to stake these tokens to earn rebase rewards at the end of each epoch. The treasury accrues staking yields from the LSTs invested in the bonds. To determine the rebase reward value, we subtract the bond reward in PRM tokens from the LST deposit returns, rebasing this resulting value across staked PRM tokens.

This approach ensures that PRM tokens benefit from the bond yields and are consistently over-backed by the deposit returns up to each rebase point. This rebasing process effectively "rebalances" the token supply to align with the backing ratio of treasury assets, which includes both the bond deposits and their yields.

Staking Rebasing Calculation

The rebasing mechanism at the heart of the Primis Protocol calculates the backing of PRM tokens based on the bond deposit return and the yield return in PRM tokens, which are issued against the LST returns at a lower rate. This rebasing process ensures the PRM token achieves full backing.

The formula to calculate the staking rebase value is as follows:

Deposit Return - Bond Return + Nominal Return = Staking (Rebase) Return

The deposit return is the return from the LST yield.

The bond return is the bond reward based on the bond yield in PRM.

The nominal return adjusts for the compounding returns from treasury assets, which are essentially the deposit returns after PRM tokens—minted through bonding and staking mechanisms—have achieved full backing. Over time, as compounding returns from the treasury increase the backing of PRM tokens, the nominal yield rate is set to counterbalance this growth.

The outcome is a rebase value or staking return that ensures PRM tokens are fully backed based on the deposit returns.

Using a table, we can also show how the deposit flow works and the values being calculated for each column, in this example:

Day	Deposit Return (stETH)	Bond Return (PRM)	Staking Return (PRM)	Total Supply (PRM)	Total Deposit Return (stETH)
1	0.015068493151	5.4794520548	9.589041	15.068493	0.0150684932
2	0.016575342466	6.0273972603	10.547945	31.643836	0.0316438356
3	0.018232876712	6.6301369863	11.602740	49.876712	0.0498767123
4	0.020056164384	7.2931506849	12.763014	69.932877	0.0699328767

The total deposit return directly supports the entire supply of PRM tokens, ensuring a 100% backing. However, the staking returns derive from the bond returns, allowing for the staking of PRM obtained from these bond returns to yield concentrated earnings. This approach amplifies the yield through the staking of PRM.

It's important to note that this framework doesn't fully capture the treasury's value backing the PRM tokens, which is progressively compounded on top of the total deposit return. Over time, this compounding effect results in an over-backing of PRM tokens, identified as treasury return.

Adjustments to this value can be made through nominal returnand further optimized via the Treasury Mint, enhancing the overall financial structure and stability of the PRM token ecosystem.