With the decentralized finance (DeFi) boom stalled due to the uncertainty of global market conditions, many protocols and applications are rushing towards what is left of the bloody market. In this case, millions of interest-bearing tokens remain unused, opening up opportunities for the remaining DeFi projects. Abracadabra.money is a lending platform that leverages these dormant assets by using them as collateral, providing access to stablecoins.
Let’s discuss Abracadabra in detail.
Abracadabra.money is a successful protocol that continues to evolve. The goal of abracadabra is decentralization. The protocol has partnered with Immunefi, a pioneer in white hat bounty and bug detection, to host a bug bounty program on its website. The purpose of this bug bounty program is to stop theft of funds from boilers, boiler failures, theft and freezing of principal of any amount, and theft and freezing of unclaimed income of any amount. It focuses on their smart contracts and application.
What is Abracadabra.money?
Abracadabra.money is a lending platform that accepts interest-bearing tokens (ibTKN) as collateral to borrow Magic Internet Money (MIM), a USD-pegged stablecoin that can be used like any other regular stablecoin.
Many assets currently have locked capital that cannot be used in any other way, such as yVaults. Abracadabra makes it possible to use it. Using Kashi Lending technology, Abracadabra offers isolated lending markets that allow users to change their risk appetite based on the collateral they choose.
There are three main tokens in abracadabra. For this, the SPELL protocol reward token is used. SPELL tokens can be staked to earn sSPELL, which is used to manage and distribute fees, as well as MIM, a stablecoin pegged to the US dollar.
Boiler parameters cannot be changed after they have been deployed; as a result, new markets with updated parameters will be added, and the old ones will become obsolete. The boiler will no longer receive MIM replenishment when it is out of date. The cauldron itself is still fully functional and users can still pay off any open positions at their own pace and anytime they have.
One of the benefits of using Kashi as Abracadabra.money’s lending platform is that users can use their positions in interest-bearing tokens. The owner can do this automatically thanks to the one-click user interface developed by the protocol.
Users can stake their SPELL tokens through mSPELL staking to earn MIM stablecoin income derived from protocol income. After AIP #8 was approved, mSPELL staking was launched.
The fees generated by the credit markets for mSPELL remain in MIM and are prorated across the various staking pools. Or, in other words, MIMs will be distributed in proportion to the SPELL bets made in the pool (the same process that happens with the sSPELL pool). Interested parties in mSPELL will have access to the claim button at any time to use it to obtain their MIM. mSPELL staking is possible on Avalanche, Arbitrum, Ethereum and Fantom Opera.
Users can invest their LP tokens in various farming opportunities provided by Abracadabra to farm SPELL tokens. This mechanism is used to maintain high liquidity on specific pairs. Farming of MIM-3CRV LP and ETH-SPELL tokens is currently possible on Ethereum. When the Governance Portal goes live, future incentive schemes for LP couples may be voted on during the Governance process.
Currently, only Ethereum Mainnet, Fantom Opera, Binance Smart Chain, and Avalanche offer Abracadabra Lending Markets. The Abracadabra.money bridge also allows you to send MIM to Arbitrum L2.
On the main Ethereum network, tokens are created and then connected 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 connect tokens (or L2 solution). Holders can do this using special structures known as bridges. With the exception of SPELL on Arbitrum, Abracadabra.money primarily uses the Anyswap network to connect MIM and SPELL tokens. There are different types and brands of bridges.
The ETH bridge contract receives MIM ETH from users by locking the tokens. A wrapped version of the same token is created and issued by Anyswap Bridge on FTM and then sent to the user’s FTM wallet. Keep in mind that the addresses of these two tokens may differ! One ETH MIM is locked in the bridge for each FTM MIM used. As a result, Abracadabra.money can easily track the circulating supply since each token has one token locked in the native chain for each chain it is on.
MIM FTMs are sent to the bridge, burned, and then MIM ETH is released back to the main network and sent to the user’s wallet in ETH on the reverse connection.
The Anyswap network and the official Arbitrum bridge are used by Abracadabra.money. The protocol will receive two different MIM tokens on Arbitrum with two different addresses if the user connects the MIM using these bridges. Anyswap is the only official source of $MIM tokens on Arbitrum. The holder will receive L2MIM and will need to connect back to Ethereum to receive MIM if the user connects using the Arbitrum bridge. On the other hand, use the Abritrum bridge with SPELL tokens. The only token that is not associated with Anyswap is this one.
Each MIM in abracadabra.money is backed by a special interest token (ibTKN). In Abracadabra.money, each collateralized debt position (CDP) is isolated and subject only to the risk of its liquidation, unlike most protocols in which the collateral of all users is subject to liquidation. To be clear, if a user opens two CDPs with different ibTKNs, the user can borrow the MIM rather than each of those ibTKNs individually and adjust their risk tolerance accordingly.
However, a user’s ibTKN value may still be declining and may sometimes be ordered to be terminated. In this case, third party players (usually bots) have the option to exchange the ibTKN collateral used for that particular CDP for the full repayment of MIM’s debt.
Liquidation fees vary by market, but typically 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 an incentive given to liquidation parties. The weekly sSPELL rewards in certain pools are also hardcoded to receive 10% of these collected commissions.
From the user’s point of view, this commission is already taken into account when formulating the liquidation price for the respective ibTKNs. Users are liquidated after reaching their liquidation price.
The price of the holder’s pledge at which they will be liquidated is called 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 matches the value of the token they are using as collateral. The user’s deposit is safe up to the specified total liquidation price, since the contract prohibits liquidators from conducting liquidations above the liquidation price.
A simple and clear protocol can help many potential traders with their money. Because of this, it will be easier for more traders to use the project. In addition, the protocols will have the security to stay in the crypto industry for the long term.