Footprint: What magic will Abracadabra use to catch up with MakerDao?
Written by Footprint Analyst Simon (simon@footprint.network)
Date: November 2021
Data Sources:Footprint Abracadabra Dashboard
Written by Footprint Analyst Simon (simon@footprint.network)
Data Sources:stable currencyThe outbreak of the global epidemic has weakened the public's confidence in fiat currencies, but on the contrary, it has added a boost to the development of DeFi. The high fluctuations in the prices of various cryptocurrencies naturally cannot perform their monetary functions well, and stable coins based on stable demand have emerged as the times require.MakerDAOFootprint Analytics has previouslyLiquitystable currency
There has been a comprehensive introduction, and also the protocol for minting the stable currency DAI
with the minted stablecoin LUSD
If you have concerns about the centralization of DAI, as a critic of centralized stablecoins, Abracadabra co-founder Daniele Sestagalli even publicly questioned MakerDao on Twitter.
If you were worried about MakerDAO's diverse collateral assets, Abracadabra's choice of assets is more ambitious.
Abracadabra, a project that has been widely discussed, has risen unstoppably from less than US$300 million in TVL at the beginning of September this year to 4.4 billion, a 16-fold increase in less than two months. Ethereum as the main force occupies 78% of them. Abracadabra is also making efforts on other public chains. Currently, it can support Arbitrum, Avalanche and Fantom, and BSC is also being deployed.
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Another co-founder with the alias Squirrel concluded that the TVL of Abracadabra has risen so fast, in addition to the multi-chain deployment, it is also because it almost only accepts interest-bearing tokens (ibTKNS for short) as collateral, and has Attractive fee sharing mechanism.
A collection of functions, one-stop experience
Borrow
Abracadabra has slightly different functions for different chains. For Ethereum, which has the highest TVL, it currently integrates the functions of Farm, Borrow, Stake, and Tools (including Bridge, Swap, and Analytics).
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Image credit: Abracadabra
The main business of Abracadabra is lending. The outstanding difference from other over-collateralized lending platforms is that it supports interest-earning assets as collateral: for example, the interest-earning asset certificates obtained by depositing assets in yVaults in Yearn can still be used as collateral to lend out in Abracadabra. Coin MIM (Magic Internet Money), which allows the interest of the original assets to be preserved while borrowing funds to obtain additional liquidity.
At present, most of the collaterals supported by Abracadabra are still mainly interest-bearing assets, and the following tokens are also supported:
AGLD, the community governance token of NFT project Loot
Alchemix’s Governance Token ALCX
SHIB
The token FTT used to support the entire ecosystem of FTX
Token FTM of Fanton chain
Terra chain's native stablecoin UST
Abracadabra's own platform tokens SPELL and sSPELL
The liquidity of these pools above is between 170,000 and 6 million, which is not too large compared to the maximum scale of 300 million interest-earning asset pools. However, it can be seen that Abracadabra is no longer satisfied with the collateral for interest-earning assets, and is looking to a broader The market advances and expands the users of these new public chains by adding other public chain tokens as collateral.
In addition to the interest, there is also a one-time loan fee paid when borrowing. The borrowing fee is the same as Liquity's model and will be directly added to the debt amount that the borrower should repay. The interest and borrowing fees charged by different pools are also different.
The mortgage rate is also divided according to whether the collateral is a stable currency. The stable currency is basically 90%, and other collaterals with price fluctuations are around 50%-90%.
Abracadabra is also very "intimate" so that users can directly check to add leverage when borrowing, and the leverage can be increased by adjusting the mortgage rate and the number of cycles. This flash loan method will be completed in one transaction, which can greatly reduce the gas fee.
The leverage function automatically helps users convert the borrowed MIM into USDT, and deposits these USDT into the Yearn Vault to obtain yvUSDT, and these interest-earning assets will be deposited back to Abracadabra as collateral. Therefore, although the overall APY is increased by expanding the leverage, the user will not get any MIM in the wallet at this time.
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Image credit: Abracadabra
To facilitate understanding, we can give an example:
Users deposit $1,000 in assets in Yearn's Curve stETH pool, with an APY of 3.6%
The interest-earning asset yvcrvSTETH can continue to be pledged to the yvcrvSTETH pool in Abracadabra to lend MIM
Abracadabra's borrowing interest in this pool is 0.5%, and the maximum mortgage rate is 75%, that is, users can lend up to 750MIM
It is equivalent to the fact that the user actually only locks in assets with a value of 250 US dollars but can obtain 1,000 US dollars as the principal APY of 3.1%. The remaining 750 US dollars can be spent or made by other investments.
Farm
The costs involved in the whole process are: borrowing interest 0.5%, and one-time borrowing fee 0.5%.
At this time, if you choose to increase leverage, you can borrow MIM that is about 3.8 times the original collateral through 10 cycles, and the APY at this time can increase to 13.5%, which is nearly 4 times larger than the original APY.
Stake
It is worth noting that the liquidation price will also increase with the increase of leverage, which means that the risk fluctuations that users can bear gradually narrow. Once liquidated, users will no longer own any assets. Users need to carefully assess their risk tolerance when using high leverage.
Tools
Abracadabra's APY on Curve is as high as 10.9%, and there is also a 5.09% SPELL reward, which is also among the best in Curve's trading volume rankings. In order to maintain users' confidence in the stable currency MIM, Abracadabra has worked hard to maintain the stability of the MIM price in the market.Cross-chain bridgeUsers can pledge SPELL obtained from Farm to obtain sSPELL and participate in Abracadabra's fee-sharing mechanism. Reminder: Staking has a 24 hour lock time.
Abracadabra also provides a direct integration of AnySwap
Cross-chain bridge(Bright), the user's MIM can be exchanged directly on Ethereum, Arbitrum, Avalanche, Fantom and BSC.Swap can directly jump to Curve to convert between MIM and DAI, USDC, and USDT.
In the near future, the Analytics function has also been added, allowing you to directly view the overview of Abracadabra's loan situation and liquidation data. You can also pay attention to the official website of Footprint Analytics about
Abracadabra's Dashboard
MIM
Understand the key figures of the agreement.
Similar to Liquid's model, Abracadabra's stable currency is MIM linked to the US dollar; SPELL is its platform incentive token; sSPELL is a token obtained by pledging SPELL for fee sharing and governance.
MIM's stable currency mechanism mainly relies on arbitrage. Similar to DAI, the capital cost of MIM is regulated through the coinage rate, thereby affecting the supply and demand relationship of MIM currency. At the same time, through high APY and incentives on Curve, liquidity mining rewards are provided for Sushiswap specific currency pairs in Farm to deepen the depth of the MIM pool and ensure the stability and liquidity of MIM in the market.
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MIM price data source: Footprint Analytics
SPELL
As a stable currency minted as an over-collateralized currency, the market value of MIM has far exceeded that of its predecessor LUSD. MIM ranks sixth only to UST among stablecoins. It can be seen that when the liquidity of interest-earning assets is mined, users' demand for this aspect is also quite strong.
Stablecoin Market Cap Data Source: Footprint Analytics
The way to obtain SPELL is mainly to earn by staking LP tokens in the Farm (the Curve pool needs to jump to the Curve interface to operate). As a governance token, SPELL, similar to MKR, can be used to adjust the parameters of the protocol. From the distribution ratio of SPELL, it can be seen that the team has put a lot of effort into liquidity incentives. 45% will be used for the incentive of the MIM-3LP3CRV pool, and 18% will be used for the incentive of ETH-SPELL in the Sushiswap currency pair.
sSPELL
The price of SPELL was only US$0.18 as of November 17, and the price of LQTY, a token of Liquity with a similar model, has reached US$13.73 (LQTY does not have governance functions). In terms of currency price, SPELL is still far from its predecessors.
SPELL price data source: Footprint Analytics
in conclusion
The main way to obtain sSPELL is to pledge SPELL in Stake. In addition to being a governance token, sSPELL helps holders capture interest, borrow fees, and liquidation fees from the protocol. According to the founder Squirrel, one of the secrets of Abracadabra's success is the use of a generous fee distribution mechanism, that is, 75% of the interest fee is distributed to sSPELL holders; and 10% of the liquidation fee is also distributed to the weekly sSPELL award.
Similar to the SUSHI/sSUSHI relationship, the amount of sSPELL represents the share in the fee pool. When the user withdraws his SPELL, he will receive additional income returned in the form of SPELL. On the Stake interface, users can see the ratio of sSPELL - SPELL. As more and more fees are added, the value of 1 sSPELL token will become higher and higher.
Footprint Analytics is a one-stop visual blockchain data analysis platform. Footprint assisted in solving the problem of data cleaning and integration on the chain, allowing users to enjoy a zero-threshold blockchain data analysis experience for free. Provide more than a thousand tabulation templates and a drag-and-drop drawing experience, anyone can create their own personalized data chart within 10 seconds, easily gain insight into the data on the chain, and understand the story behind the data.
The above content is only a personal opinion, for reference and communication only, and does not constitute investment advice. If there are obvious understanding or data errors, feedback is welcome.
About Footprint Analytics:
Footprint Analytics is a one-stop visual blockchain data analysis platform. Footprint assisted in solving the problem of data cleaning and integration on the chain, allowing users to enjoy a zero-threshold blockchain data analysis experience for free. Provide more than a thousand tabulation templates and a drag-and-drop drawing experience, anyone can create their own personalized data chart within 10 seconds, easily gain insight into the data on the chain, and understand the story behind the data.
Footprint Analytics official website: https://www.footprint.network/
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