What is Abracadabra Money?
In a world of financial hocus-pocus, there's a lending platform that's truly magical. Say hello to Abracadabra.money, the Ethereum-based platform where DeFi is indistinguishable from sorcery.
With Abracadabra.finance, you don't need a wand or a crystal ball to get the funds you need. Just a few clicks, and you can borrow digital assets with ease. It's like magic!
But wait, there's more! With its user-friendly interface and powerful liquidation engine, Abracadabra.money is like a fairy godmother for your financial needs. And the best part? You don't have to give up your first-born child to get a loan!
Whether you're a warlock or a mere mortal, Abracadabra.finance has got you covered. You don't even have to do KYC – all you need is a crypto wallet and the will to make money. Just be sure not to get too mesmerized by its charm and forget to pay back your loans! Because even in the world of magic, there's no escaping the consequences of a defaulted loan.
The emergence of Abracadabra.money is shrouded in a bit of mystery. The protocol was founded in May 2021 by Daniele Sestagalli, a known developer that helped build Wonderland Money. Daniele was accompanied by another co-founder who today remains unknown. This person is only known to the public as “Squirrel.”
Abracadabra.money derives its value from allowing users to issue MIM, or Magic Internet Money. There is one catch though, for every $1 worth of MIM minted, the deposit must be overcollateralized. Just like with magic, you can't get something for nothing, which is why Abracadabra.money is the final arbiter between depositors and borrowers.
Specifically, Abracadabra.money is a set of smart contracts that power a liquidation engine. If the value of the collateral drops, the protocol automatically sells a portion of the collateral to maintain the peg of MIM. The main requirement from a lending protocol is that the liquidation protocol works every single time, even during extreme volatility.
For this reason, Abracadabra.money uses different collateral debt positions (CDPs) for every asset. If a user has multiple CDPs, say one with a stablecoin and one with ETH, then each will have separate liquidation eligibility parameters, separate liquidation processes, etc.
Abracadabra.money also has its native token, called SPELL. It is a governance token that keeps the protocol decentralized. Once a proposal is passed, the team is in charge of implementing the upgrade. SPELL is also used as an incentive for borrowing on the platform and it can be staked to earn extra rewards.
As of 2023, Abracadabra.money hasn't been hacked. There was, however, a controversy regarding one of its founders. Problems arose on January 27, 2022, when Wonderland’s Chief Financial Officer, who was operating under the pseudonym of 0xSifu, was revealed to be Michael Patryn.
Patryn is the former co-founder of the exchange QuadrigaCX, which lost $190M of user funds in 2019. Patryn has also been linked to a host of criminal activities, including ponzi schemes, identity theft, and credit card fraud.
While Wonderland and Abracadabra are separate endeavors, the two are linked though the "Frog Nation," a conglomeration of individual projects which share team members. Frog Nation includes Wonderland, Abracadabra, and Popsicle and also shares ties to SushiSwap.
Following the news that Wonderland’s CFO was a convicted criminal, Sestagalli (founder of Abracadabra.money) agreed that Sifu should step down. Abracadabra.money has since recovered from the incident and continues to go strong.
Despite a crazy 2023 for crypto, the TVL on Abracadabra.money holds strong at $250M. It appears that the strong memetics combined with a solid protocol have been the winning recipe for Abracadabra.
How does Abracadabra Money work?
Abracadabra.money is a lending protocol on Ethereum that enables users to borrow MIM (Magic Internet Money). Like the majority if money legos in DeFi, Abracadabra leverages the yVaults of Yearn Finance to unlock liquidity that otherwise would have been left unused.
What makes Abracadabra fit for decentralized lending is its isolated lending markets engine, called Cauldrons. Under the hood, Cauldrons is a modified and licensed version of Kashi lending Markets, that run on both Degenbox and Bentobox.
An isolated lending market is a lending market that operates independently from other markets. In an isolated lending market, borrowers and lenders can interact with each other without being affected by the liquidity or pricing of other markets.
Isolated lending markets use smart contracts to automate the lending process, which reduces the risk of counterparty default. The smart contract holds collateral in escrow until the loan is repaid, ensuring that lenders are protected from default risk.
You can think of Cauldrons as the central piece that makes Abracadabra an efficient lending protocol. Every operation on Abracadabra is done via Cauldrons.
Abracadabra MIM
The protocol uses a unique type of tokens called interest bearing tokens (ibTKNs) as collateral to borrow a USD pegged stablecoin called Magic Internet Money (MIM).
Interest bearing tokens represent the collateral that users deposit in order to borrow MIM. When a user wants to redeem his collateral, he will pay back the loan (in MIM tokens) plus the interest.
Before explaining how MIM works, it is important to remember to revisit collateralized stablecoins. The standard in DeFi is to use overcollateralized stablecoins, meaning that the collateral value must always exceed the loan value. For example, if an investor wants to borrow 100 DAI on MakerDAO, he has to put up $150 worth of ETH, equating to 150% collateralization ratio.
Abracadabra works in a similar way. In order to borrow MIM, users need to post more collateral than the value of the loan. After taking the loan, the Abracadabra interface will update the price of the collateral in real-time. If the value of the collateral drops below the liquidation threshold, the protocol will automatically liquidate some of the collateral to maintain the $1 peg of MIM.
When a user wants to redeem his collateral, he pays the MIM back to the protocol plus interest. The returned MIM will be burned, effectively reducing the total MIM token supply.
Abracadabra Leverage
Abracadabra leverage is giving more exposure to an asset using interest bearing tokens. Because It's a DeFi protocol, Abracadabra has worked out a mechanism that uses MIM in order to open a leverage position.
The process can best be explained with an example:
Let's say you want to leverage up Yearn Finance's USDT stablecoin. This means users have to deposit USDT on Yearn Finance and got back a token as receipt that tokens are staked on Yearn aka an interest bearing token. That token can be used on Abracadabra as collateral.
Next, the interest bearing tokens are provided as collateral on Abracadabra to borrow MIM. So far, this is who borrowing on Abracadabra works.
The protocol will automatically swap that MIM for USDT and stake it on Yearn Finance to get more of that interest bearing tokens.
The final step is to provide that interest bearing token back as collateral on Abracadabra to then repeat the process of borrowing MIM, swapping it to USDT, and then going back to Yearn. This process is called looping – the more loops, the riskier the position becomes because it's more sensitive to the price movement of the underlying asset (the interest bearing token).
Does this sound complicated? You will be happy to learn that Abracadabra does all these operations automatically. Users only have to select their leverage.
How to make money on Abracadabra Money?
The primary methods of making money on Abracadabra revolve around borrowing MIM and staking SPELL tokens.
Abracadabra Borrowing
Borrowing is a useful strategy to increase your buying power while maintaining exposure to the underlying collateral. Unlike lending, borrowing is a more advanced strategy because there's always the risk of having the collateral liquidated.
On Abracadabra, users can borrow MIM stablecoin using their collateral. MIM can then be used for other financial operations. The amount of MIM you can borrow is automatically calculated based on the collateral you put up.
Because Abracadabra uses isolated lending markets, each lending position is treated independently. If a user has multiple lending positions, then each will have separate liquidation eligibility parameters, separate liquidation processes, etc.
With these caveats in mind, here's how you borrow on Abracadabra:
Open the Abracadabra app
Select the asset you would like to borrow in the Borrow tab
Input the amount of collateral
Approve the transaction
Deposit
The liquidation price that is shown will always refer to the collateral that has been deposited to borrow MIM. For example, a liquidation price of $1.12 means that if the price of the collateral drops to $1.12, your position is at risk of being liquidated.
Abracadabra Leverage
Leveraging means getting more exposure to an asset using borrowed funds. The UI of Abracadabra makes it very simple to monitor your leverage position and profit from the market movements.
If you look back at the explanation of how Abracadabra leverage works, the entire process has been automated to happen in one transaction. From this standpoint, leveraging on Abracadabra is similar to traditional exchanges.
Why leverage? If you are bullish on an asset and you want to multiply your gains on a small amount of money you have, then you might consider leveraging.
The downside of leveraging is that it's risky – if the asset goes down in price, then our position is at risk of getting liquidated by the platform. Leverage takes a lot of monitoring of the position in order to keep it safe.
Here's how you leverage on Abracadabra:
Open the Abracadabra app
Head over to the "Leverage" tab
Select the asset you want to leverage – it needs to be an interest bearing token on Yearn Finance
Input the amount of collateral you want to deposit
Set your leverage
Approve leverage
Approve the transaction
As you increase the leverage, the price of your collateral has to drop less in price for your position to get liquidated. If you go max leverage, any downwards price movement could liquidate your position. The Abracadabra interface is intuitive when it comes to monitoring your risk.
The leverage position can be monitored from the "Positions" page, where users have the option to deleverage their position, or add more collateral.
Abracadabra Staking
On Abracadabra, users have four tokens to stake: sSPELL, mSPELL, magicGLP, and magicAPE.
Each of these staking assets has its own incentives, although the staking process works the same.
sSPELL staking allows users to stake their SPELL tokens and receive more SPELL tokens in return.
mSPELL staking allows users to stake their SPELL tokens and earn stablecoin MIM income coming from the protocol revenue.
magicGLP is Abracadabra’s auto-compounder for GLP tokens, the native token of GMX protocol. By staking magicGLP, the ETH /AVAX yield produced by GLP farming is automatically auto-compounded back into magicGLP.
magicAPE is Abracadabra’s auto-compounder for APE tokens, where APE yield produced by APE farming is automatically auto-compounded back into magicAPE.
Here's how you stake on Abracadabra:
Open the Aracadabra app
Select the Stake tab and then the type of token to stake (sSPELL, mSPELL, magicGPL, etc.)
Input the amount of SPELL you want to stake
Approve the transaction
Stake
Staking is fit for beginners and advanced users alike because it's really simple and low risk. With four assets available for staking, all you have to do is pick your favorite way of earning.
Price Prediction for Abracadabra Money — Can it hit $1000?
Buying and hodling SPELL — the native token of Abracadabra Money— is one way of potentially making money on Abracadabra Money
By looking at its current price, it’s natural to think about the chance of SPELL hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.
Let’s examine the potential growth of the SPELL token by analyzing its tokenomics. SPELL’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} SPELL tokens being in circulation today, that means a price of {PRICE} per SPELL.
How did we come to that calculation? It’s quite easy, the price of a SPELL token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each SPELL coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of SPELL at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for SPELL to hit that price.
At a price of $1000 per token, that means the current market cap of SPELL would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. SPELL's whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} SPELL which means that no more coins above that number will ever be created.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of SPELL? Taking into account the current price of a SPELL token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. SPELL coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of a SPELL token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the SPELL protocol fully diluted market cap.
These are all crucial details to know when calculating if SPELL can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of SPELL depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some SPELL to your portfolio, the most trusted places to get some are Binance and Coinbase.
