With the decentralized finance (DeFi) boom coming to a halt due to uncertainties in global market conditions, many protocols and applications are raring for what’s left of the bloody market. In this case, millions of interest-bearing tokens are left unused, which presents an opportunity for the remaining DeFi projects. Abracadabra.money is a lending platform that brings utility to these otherwise idle assets by using them as collateral by providing access to stablecoins.
Let’s discuss Abracadabra in full detail.
Table of Contents
Background
Abracadabra.money is a successful protocol that keeps evolving. The goal of abracadabra is decentralization. The protocol has partnered with Immunefi, a pioneer in the field of white hat rewards and bug discoveries, to host a bug bounty program on their website. The goal of this bug bounty program is to stop the theft of funds from inside cauldrons, cauldron crashes, theft and freezing of principal of any amount, and theft and freezing of unclaimed yield of any amount. It focuses on their smart contracts and app.
What is Abracadabra.money?
Abracadabra.money is a platform for lending that accepts interest-bearing tokens (ibTKNs) as security to borrow Magic Internet Money (MIM), a USD-pegged stablecoin that can be used like any other conventional stablecoin.
Many assets currently have locked-in capital that cannot be used in other ways, such as yVaults. Abracadabra provides a chance to employ it. Utilizing Kashi Lending Technology, Abracadabra offers isolated lending markets that let users modify their risk appetite by the collateral they choose to use.
There are three main tokens in abracadabra. The protocol’s incentive token, SPELL, is used for this. SPELL tokens can be staked to earn sSPELL, which is used for governance and fee-sharing, as well as MIM, a stable coin pegged to the USD.
Deprecated Markets
The cauldrons’ parameters cannot be changed once they have been deployed; as a result, new markets will be added with updated parameters, and the older ones will be deprecated. A Cauldron will no longer receive MIM replenishments when it is deprecated. The cauldron itself is still fully functional, and users can still repay any open positions at their own pace and time if they have any.
Leverage
One benefit of using Kashi as Abracadabra.money’s lending platform is that users can leverage their positions in interest-bearing tokens. A holder can do this automatically thanks to the one-click user interface that the protocol has developed.
mSPELL
Users can stake their SPELL tokens through mSPELL staking to receive stablecoin MIM income derived from protocol revenue. After AIP#8 was approved, mSPELL staking was put into place.
The fees generated by the lending markets for mSPELL remain in MIM and are proportionally distributed among the various staking pools. Or to put it another way, MIMs will be distributed in proportion to the SPELL bets made in the pool (the same process that is happening with the sSPELL pool). Stakeholders in mSPELL will have access to the claim button at any time to use to retrieve their MIM. On Avalanche, Arbitrum, Ethereum, and Fantom Opera, mSPELL staking is possible.
Tools
Farm
Users can stake their LP tokens in a variety of farming opportunities provided by Abracadabra to farm SPELL tokens. To maintain high liquidity on specific pairs, this mechanism is used. On Ethereum, farming is currently possible for the tokens MIM-3CRV LP and ETH-SPELL. When the governance portal is operational, future incentive schemes for LP pairs can be voted on through the governance process.
Supported Networks
At this time, only the Ethereum Mainnet, Fantom Opera, Binance Smart Chain, and Avalanche offer Abracadabra lending markets. The bridge of Abracadabra.money also enables MIM to be sent to Arbitrum L2.
On the Ethereum Mainnet, the tokens are created and then bridged to other chains. Users must send tokens on one chain and receive a wrapped version of the same token on another chain in order to bridge tokens (or L2 solution). Holders may do so by utilizing special structures known as bridges. With the exception of SPELL on Arbitrum, Abracadabra.money primarily uses the Anyswap Network to bridge both MIM and SPELL tokens. There are various types and brands of bridges.
The bridge contract on ETH receives ETH MIMs from users, locking the tokens. A wrapped version of the same token is created and released by Anyswap Bridge on FTM, and it is then sent to the user’s FTM wallet. Keep in mind that those two tokens’ addresses might differ! There is one ETH MIM locked in the bridge for every FTM MIM in use. As a result, Abracadabra.money can easily track the circulating supply since each token has one token locked on the native chain for each chain it is present on.
FTM MIMs are sent to the bridge, burned, and then ETH MIMs are released back onto the Mainnet and sent to the user wallet on ETH when bridging back.
Abritrum
The Anyswap Network and the official Arbitrum bridge are both utilized by Abracadabra.money. The protocol will receive two different MIM tokens on Arbitrum with two different addresses if a user bridges MIM using these tho bridges. Anyswap is the only official source of $MIM tokens on Arbitrum. A holder will receive L2MIM and must bridge back to Ethereum to obtain MIM if a user bridges using the Arbitrum bridge. On the other hand, employ the Abritrum bridge with SPELL tokens. The only token that is not bridged using Anyswap is this one.
Liquidation
Every MIM in abracadabra.money is backed by a specific interest-bearing token (ibTKN). In Abracadabra.money, each Collateralized Debt Position (CDP) is isolated and only at risk of its liquidation, in contrast to the majority of protocols where all users’ collateral is subject to a liquidation event. To be clear, if a user opens two CDPs with various ibTKNs, they can borrow MIMs as opposed to each of those ibTKNs separately and adjust their risk tolerance accordingly.
Nevertheless, a user’s ibTKN value may still drop and occasionally be indicated for liquidation. In this case, 3rd party players (typically bots) have the option of exchanging the ibTKN collateral used for that particular CDP for full repayment of the MIM debt.
Liquidation Fee
The liquidation fee varies by market, but generally speaking, ibTKNS with underlying stablecoins will have a liquidation fee of 3% and ibTKNS with price action will have a liquidation fee of 12.5%. Sharing the liquidation fee is the incentive provided to the parties conducting liquidations. The weekly sSPELL rewards on specific pools are also hard-coded to receive 10% of these collected fees.
From the viewpoint of the user, this fee is already taken into account when formulating a Liquidation price for the corresponding ibTKNs. Users are liquidated once their liquidation price is met.
Liquidation Price
The price of a holder’s collateral at which they will be liquidated is known as the liquidation price. A user’s position will be marked for liquidation if the value of their collateral falls to the point where the liquidation price coincides with the cost of the token that they are using as collateral. The user’s collateral is safe up to the stated total liquidation price because the contract forbids liquidators from performing liquidation above the liquidation price.
Conclusion
A simple and straightforward protocol could help lots of potential traders with their money. Because of this, more traders will find it easier to utilize the project. Furthermore, protocols will have the security to stay in the crypto industry in the long run.
