Abracadabra Money is a charismatic decentralized finance (DeFi) platform offering users, or Spellcasters, the opportunity to extend the utility of the interest-bearing tokens (ibTKNs) from other popular DeFi platforms. Furthermore, the Abracadabra Money protocol allows Spellcasters to use their ibTKNs as collateral to take out loans in Magic Internet Money (MIM) tokens. The MIM token has a US Dollar peg and is transferable for many popular stablecoins. The native SPELL token offers holders governance rights and the chance to earn a passive income through staking with the platform. In turn, Spellcasters receive sSPELL tokens granting utility and earnings from the protocol.
In this article, we are going to dive deep into the Abracadabra Money ecosystem. We’ll explore the options of the spell book and the functions of the SPELL token, sSPELL token, and the Magic Internet Money (MIM) token.
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What is Abracadabra Money?
Abracadabra.Money is an enchanting decentralized finance (DeFi) platform providing users a spell book of magical DeFi spells. This includes the ability to create Magic Internet Money (MIM)! The infamous and innovative blockchain wizard, Merlin, came to realize that there are underutilized assets within the DeFi ecosystem. As such, Merlin cast a spell on the following interest-bearing token (ibTKN) vaults to bring further value to users' assets.
yvWETH — WETH v2 Yearn Vault
yvUSDC — USDC v2 Yearn Vault
yvYFI — YFI v2 Yearn Vault
yvUSDT — USDT v2 Yearn Vault
xSUSHI — staked SUSHI
Users, or Spellcasters, who hold the above assets can mint Magic Internet Money (MIM) stablecoins. These are just some of the assets that are available as collateral for MIM token loans. Abracadabra Money values decentralization and uses the native SPELL token and sSPELL tokens to ensure security through global community governance.
Spellcasters have full control over reversing a spell at any time. Simply by returning the Magic Internet Money (MIM) tokens to the spell book, the mysterious locking charm of the interest-bearing token (ibTKN) collateral lifts. Then, Spellcasters are free to move their assets.
How Does Abracadabra Money Work?
In short, Spellcasters can deposit their interest-bearing token (ibTKN) as collateral and take out Magic Internet Money (MIM) loans. Then, Spellcasters can use the MIM tokens as they please. As the MIM tokens are fully collateralized with tokens bearing interest on other platforms, theoretically, the collateral of the loan should continually increase. The Abracadabra Money website breaks down a hypothetical real-life use case for the platform. We outline and expand on the narrative below:
A knowledgeable degen crypto wizard, Messiah, deposits 100,000 USDT in the Yearn Finance USDT V2 yVault on Monday, making his assets work for him by earning a passive income. As such, Messiah receives yvUSDT tokens in return, representing the value of his stake in the vault. As Messiah earns rewards through Yearn Finance, the value of his yvUSDT tokens increases accordingly.
On Tuesday morning, Messiah comes across a “classy Fiat Panda” and decides instantly that’s the car for him! Messiah decides to enter the Abracadabra Money spell book and deposits his yvUSDT tokens before choosing the collateralization ratio. Taking out the largest loan he can (90%), Messiah receives 90,000 Magic Internet Money (MIM) stablecoin tokens.
Messiah then confirms the price and preferred medium of exchange. The Fiat dealership state it will accept 30,000 USDT for the Fiat Panda. Messiah then returns to Abracadabra Money to swap his MIM tokens for USDT through the Curve MIM-3Pool Metapool. Within a few minutes, Messiah sends 30,000 USDT to the car dealership. He drives home that afternoon with his new Fiat Panda smugly content, knowing his yvUSDT is increasing in value while he’s cruising along. Messiah spends the remaining 60,000 USDT “to pimp his ride and install a TV and a Jacuzzi in the back”.
SPELL Token
The native SPELL token is an ERC-20 token with an initial maximum supply of 420 billion tokens. However, following a “Magical Burn” spell by Merlin, the supply was cut in half to 210 billion SPELL tokens. The distribution of SPELL tokens is primarily weighted towards the MIM-3LP3CRV LP tokens (45%) and an allocation for the Abracadabra Money team (30%). For the SushiSwap ETH-SPELL LP tokens, Abracadabra Money reserves 18% of the SPELL token supply. The remaining 7% was allocated to the initial DEX offering (IDO).
At the time of writing, the main role of the SPELL token is to provide governance of the platform. SPELL token holders can vote on proposals and updates to help improve the platform and user experience (UX). Moreover, SPELL token holders can also make a passive income by staking their assets. Holders can earn a percentage of platform fees in return for supporting the platform.
To activate governance rights and access rewards, SPELL token holders must stake their tokens to obtain sSPELL tokens. The magic surrounding sSPELL tokens is largely still “locked in the spell book”. However, we cover the value propositions and utility of the sSPELL token below.
sSPELL Token
Accessing the full utility of the SPELL token requires first staking the token in the Abracadabra Money protocol. Users then receive sSPELL tokens in return. sSPELL tokens will automatically replace and represent the SPELL token value in users’ wallets. Plus, sSPELL tokens grant Spellcasters the right to vote on adjustments to certain protocol parameters. This could include liquidation fees or future collateral options.
Furthermore, by holding sSPELL tokens, Spellcasters automatically receive compounding interest on their stake. sSPELL tokens and the SPELL token are redeemable 1:1. Therefore, when a Spellcaster decides to reverse the staking spell, they will receive their initial SPELL token deposit plus any further SPELL tokens accrued over time through fees.
Magic Internet Money (MIM) Token
The Magic Internet Money (MIM) token is a stablecoin and the crux of the operations of the Abracadabra Money platform. With a peg to the US Dollar, the protocol mints new MIM tokens upon confirmation of collateralization.
Upon launching the Abracadabra Money protocol, the sole income stream is from the interest payments of Magic Internet Money (MIM) token loans. In turn, 75% of these funds go towards purchasing SPELL tokens to award to sSPELL token holders. A further 20% goes to the governance treasury, using fees to incentivize MIM liquidity pools. Finally, 5% of platform fees automatically redirects to a multisig treasury managing a contingency fund. The treasury funds will only be used on such an occasion when “market conditions permit intervention” to minimize or prevent any losses to Spellcasters or Abracadabra Money.
The Magic Internet Money (MIM) token is available on popular decentralized exchanges (DEXs) across different chains in the crypto industry. On Ethereum, MIM token holders can trade on Uniswap, SushiSwap, and Curve Finance. Also, the MIM token is available to trade on the Avalanche blockchain using the Trader Joe and Pangolin exchanges. Plus, the MIM token is available to trade on Solarbeam, a DEX operating on Moonriver - a parachain within the Kusama network. Abracadabra Money hopes for the MIM token to be fully interoperable with all smart contract-compatible blockchains in DeFi.
Abracadabra Money Spell Book
Below we cover the different pages available in the Abracadabra Money spell book. To interact with the platform, users will need to be familiar with Web3 wallets such as MetaMask. For readers who would like an industry-expert tutorial on installing and using MetaMask, check out the DeFi 101 at Ivan on Tech Academy! We offer video guides on interacting with popular DeFi protocols - including Curve Finance and Uniswap! Then, our DeFi 201 shows students how to take their DeFi skills to the next level with yield farming, crypto arbitrage, and flash loan programming. Start your DeFi journey with Ivan on Tech Academy today!
Borrow (Summoning MIMs)
Spellcasters can carry out a “Summoning MIMs” spell. This spell generates the option to provide interest-bearing token (ibTKN) collateral and borrow Magic Internet Money (MIM) tokens. When entering the “Borrow” page of the spell book, there is a grid displaying a list of different “components” or ibTKN collateral tokens. Also, the page views the number of MIM tokens already borrowed, and the number of MIM tokens left available.
Furthermore, the display shows the interest rate and how much the Magic Internet Money (MIM) token debt will increase annually. A liquidation fee is in place as an additional amount of funds that will be lost in the unlikely event of liquidation. Upon choosing the component, Spellcasters will be prompted to state how much collateral they will be depositing. Then, they choose the amount of MIM tokens they would like to summon. Also, a colorful “safe indicator” warns Spellcasters if the collateral to loan ratio is over risky, next to the component liquidation price setting. Then, selecting the “ADD COLLATERAL AND BORROW” button will magically transform the tokens in Spellcasters’ wallets from interest-bearing tokens (ibTKNs) to MIM tokens.
Stake
The “Stake” page of the platform enables SPELL token holders to stake their tokens to receive sSPELL tokens in return. Using the staking page, SPELL tokens are subject to a 24-hour lock-up period. Moreover, sSPELL token holders can watch their staked funds grow, earning fees from Magic Internet Money (MIM) token loan repayments. Further, the interest is compounding, helping Spellcasters earn more yield faster.
Farm (The Polymorph Spell)
According to the project’s Medium blog, the Polymorph Spell is a ritual spell that allows Spellcasters to summon more SPELL tokens. Users can add liquidity to the Curver Finance Magic Internet Money (MIM) pool, receiving crvMIM3POOL tokens. Holders can then use these crvMIM3POOL tokens on the “Farm” page of the Abracadabra Money spell book.
This means that users are still earning yield on their interest-bearing tokens (ibTKNs) on other respective platforms (e.g., Yearn Finance). Plus, crvMIM3POOL tokens accrue interest from trading fees on Curve. Now, users can also earn a yield on these tokens too, earning the platform’s SPELL token.
Bridge
The Abracadabra Money spell book contains a “Bridge” page, operating in conjunction with Anyswap. The Bridge is available for users to transfer assets between different blockchains. This includes Ethereum, Binance Smart Chain (BSC), Avalanche, and Fantom. The average time for a cross-chain transaction is between 10 and 30 minutes. However, for a large transfer of assets (e.g., one million or more Magic Internet Money (MIM) tokens), Abracadabra Money states this can take up to 24 hours.
Swap
The enchanting spell book provides a “Swap” page that automatically redirects Spellcasters to the Curve Finance website to swap any Magic Internet Money (MIM) tokens. Spellcasters can choose to swap MIM tokens for USDC, USDT, or DAI. Simply select the desired stablecoin and chosen amount, select “swap”, and ba-da-bing ba-da-boom - the assets will magically transform before your eyes!
Abracadabra Money Risks
On the Abracadabra Money Medium blog, the team presents users of the protocol with a breakdown of potential risks. Rightly so, Abracadabra Money makes the two risks perfectly transparent, so users are clear before interacting with the protocol.
As with all borrowing and lending protocols in decentralized finance (DeFi), liquidation is always possible. Only if the value of the collateral falls below a specified point (usually when the collateral isn’t enough to cover the debt) will the liquidation of assets occur. The liquidation limit is on display when Spellcasters open up debt positions on the Abracadabra Money platform. As the collateral for Magic Internet Money (MIM) tokens is through interest-bearing tokens (ibTKNs), the collateral ratio should continuously increase. However, if Spellcasters use ibTKNs representing volatile assets (e.g., SUSHI, YFI, and ETH), assets may fall below liquidation levels in the unlikely case of a black swan event.
Furthermore, the second risk for using Abracadabra Money also applies to every other application in the decentralized finance (DeFi) industry. The project operates through the use of smart contracts. While arguably one of the most critical components to decentralized applications (dApps), smart contracts can still fall vulnerable to exploits and bugs within the code. However, while awaiting contract audits, a review from rugdoc.io looked through the Abracadabra magic code and states there are “no overt rugs seen”.
Exploring Abracadabra Money & the SPELL Token Summary
Abracadabra Money is a mystical decentralized finance (DeFi) application offering utility for interest-bearing tokens (ibTKNs). The platform adds an additional layer of passive income, rewarding users, or Spellcasters, for depositing ibTKNs with the opportunity to then take out a loan. Then, Spellcasters receive a chosen amount of Magic Internet Money (MIM) tokens to do with as they please. Plus, as the loan is fully collateralized with interest-bearing assets, the collateralization ratio will continually increase.
Decentralization is a critical element of the Abracadabra Money platform. As such, the native SPELL token offers the chance to partake in platform governance alongside earning a portion of fees. To do so, Spellcasters must stake their SPELL tokens to receive sSPELL tokens in return. It is the sSPELL tokens that enable access to voting rights and share of the project fee.
Overall, Abracadabra Money presents an innovative use case for the interest-bearing tokens (ibTKNs) users receive when earning yield on DeFi platforms, including Yearn Finance and SushiSwap. Moreover, Abracadabra makes it super easy for anyone to take out an instant fully collateralized loan and swap the Magic Internet Money (MIM) token into a wide choice of popular stablecoins.
To learn about the emerging regulations and compliances surrounding stablecoins, cryptocurrencies, and digital assets, see our FinTech 101 course. We offer industry-expert tuition surrounding open banking, anti-money laundering (AML), and how to set up your own FinTech business! Plus, our US Taxation of Digital Assets course is a must for our US readers. Make sure your crypto assets are safe and contractually compliant with Ivan on Tech Academy today! Also, don’t forget to follow us on Twitter @Academy_IOT! Let us know your thoughts about Abracadabra Money and their Magic Internet Money (MIM) and SPELL tokens!
