Spell Token (SPELL) is a token that governs Abracadabra.money, a platform that lets users deposit collateral in the form of interest-bearing crypto assets (such as yvYFI, yvUSDT, yvUSDC, xSUSHI) in order to mint MIM, a stablecoin that attempts to maintain a value of US$1.00. SPELL can be staked to earn sSPELL, which grants governance rights and other rewards.
What Is Abracadabra?
The launch of DeFi 2.0 has unfortunately seen a repeat of the inefficiencies that existed in its predecessor, with capital inefficiency key among them. Abracadabra Money is a lending protocol that aims to solve this problem by using interest-bearing tokens like yvWETH, yvUSDC and xSUSHI to serve as collateral to borrow Magic Internet Money, otherwise known as MIM.
MIM is a stablecoin that mirrors the stability of the U.S. dollar and does what virtually every other stable coin (e.g., DAI and Tether) does. With Abracadabra Money, cash doesn’t need to sit idly in the bank. There’s a new way to passively earn, using leverage, with close-to-zero risk involved.
What Is the Spell Token (SPELL)?
The Abracadabra protocol has two major tokens working in its ecosystem. The first is SPELL, the governance token of the platform, and the other is MIM (Magic Internet Money). Among other benefits, the primary function of the Spell Token is staking. Like most other tokens using the Ethereum platform, SPELL can be staked to gain various benefits. Two of them are:
Governance: Since the Abracadabra protocol is truly decentralized, the number of Spell Tokens you have will determine how much weight your opinion has in changing features such as liquidation fees, collateral and total value locked (TVL).
Passive Income: When Spell Tokens are staked, users earn a percentage of trading fees from the platform. These fees are interest that’s earned primarily from users borrowing MIM. 75% of the fee goes to token holders; 20% is allocated to the governance treasury, which aids liquidity pools; and the last 5% is kept in a multisig treasury that helps mitigate risks when market conditions worsen.
How Does Abracadabra Work?
Abracadabra Money uses a technique which is different from that of most protocols to provide lending services to traders. Called “isolated lending market,” the technique was first used with Kashi, a SushiSwap-owned lending platform. By using isolated lending, Abracadabra can successfully leverage the use of interest-bearing tokens and eventually allow users to produce Magic Internet Money. There are a few steps involved in this process:
Step 1 — Users need to deposit collateral (first USDT into yEarn, then collateralization of yvUSDT) on Abracadabra.
Step 2 — Abracadabra allocates a debt allocation, with interest, to the borrower.
Step 3 — After that, MIM tokens are deposited into the borrower’s wallet at the borrower’s chosen level of leverage.
Step 4 — Users take their MIM wherever they like. They can swap it to USDT, withdraw it or repeat the process of depositing in yEarn to get yvUSDT and more MIM.
The question now is, how can you get your collateral back? The answer is that after you repay your debt with the accrued interest, you’ll be able to withdraw your collateral.
The Magic Internet Money Token (MIM)
An integral part of the protocol, the MIM token is a dollar-pegged stablecoin that’s supported by ibTKNs. MIM tokens are Ethereum-based and minted by Ethereum multisig holders.
The good thing about stablecoins is that they’re not injected into circulation until they’ve been collateralized. There are persuasive (though unverified) claims that future improvements will include a bridge to other blockchains.
The amount of MIM you get as a loan depends primarily on two factors:
1. The collateral you’ve put down in USDT.
2. The loan-to-value ratio.
To help you understand how Abracadabra Money works, let’s run through a hypothetical scenario.
Lukas is an average crypto trader who got lucky with an ETH airdropAn airdrop is a marketing stunt, in which tokens or coins are sent out to blockchain wallets. Most commonly, it is done …, and now has $100,000 USDT to his name. Since he has some knowledge of yEarn, he decides to stake his newly found wealth to earn returns, and uses the USDT V2 yVault for this.
Now, Lukas has approximately $100,000 worth of yvUSDT, an amount that will grow, thanks to loan fees. Lukas then decides to start a business and wants to adopt a low- or no-risk approach with his money. How can he do this? Well, if you suggest that he convert yvUSDT to USDT, then USDT to cash to fund the business … you’re on the right track.
However, he can also choose to deposit his yvUSDT into Abracadabra. Let’s assume he mints 60% of his tokens: then, he’ll be given 60,000 MIM. He’ll pay interest of 0.8% on the loan, but his initial capital is still on yEarn, yielding returns.
SPELL Tokenomics
The figures below are accurate as of this writing.
SPELL Token
- Name & Ticker: Spell Token (SPELL)
- Token Standard: ERC20
- Token Type: Governance
- Maximum Supply: 420 billion SPELL
- Circulating SupplyCirculating supply is the number of cryptocurrencies or tokens that are publicly available and circulating in the crypto…: 70 billion SPELL
- 24h Trading Volume: ~290 million SPELL
- Contract Address: 0x090185f2135308BaD17527004364eBcC2D37e5F6
MIM Token
- Name & Ticker: Magic Internet Money (MIM)
- Token Standard: ERC20
- Token Type: Utility
- Maximum Supply: Unlimited
- Circulating Supply: 1.6 billion MIM
- 24h Trading Volume: ~280 million MIM
- Contract address: 0x99d8a9c45b2eca8864373a26d1459e3dff1e17f3
Pros and Cons of Abracadabra
Let’s take a look at some strengths and demerits of Abracadabra.
Pros
- Few protocols allow you to borrow tokens and still earn interest on your collateral, and Abracadabra is one of them.
- With isolated risk markets, you can calculate the risks you want to undertake in order to maximize returns.
Cons
- The risk of liquidation is high because the collateral value can drop below the point where your loans are covered.
- The Abracadabra protocol is decentralized; hence, it uses smart contracts, which can be vulnerable to bugs and data leaks.
Is Abracadabra (SPELL) a Good Investment?
We’ve yet to fully grasp the complexities of DeFi 1.0, but improvements being made to it give us a great preview of DeFi 2.0. One noteworthy feature DeFi 2.0 brings to the table is capital efficiency, and Abracadabra Money has been amazing in this regard.
What the market is saying about Abracadabra Money will help us gauge its relevance. In just two months, the TVL of Abracadabra Money has increased by 354%, from $1.07 billion to $4.86 billion. This stems from the effective work model of the platform and from investors’ generally warm reception to it. We strongly believe the real bull run has not yet begun for this crypto. As the project migrates into multichain, more room for growth will be created.
To dive deeper, MIM is actually a decentralized stable coin. So far, we’ve not seen many truly decentralized stablecoins — only names such as DAI (MakerDAO) and UST (Terra) are well-known in the market. With the recent collaboration between MIM and UST, however, decentralized stablecoins could well be the catalyst for the next trend.
Over time, centralized stablecoins (full-reserve stablecoins) such as USDT and USDC have revealed their legal shortcomings, paving the way for decentralized stablecoins such as MIM to grow and possibly outperform them eventually. MIM is one of the stablecoins that could help achieve this vision.
Which products support SPELL?
| Send/Receive | Trading | |
|---|---|---|
| Coinbase | ✔ | ✔ |
| Pro | ✔ | ✔ |
| Wallet | ✔ | ✖️ |
What regions support SPELL?
| US | NY | CAN | EU | UK | DE | SG | JP | |
|---|---|---|---|---|---|---|---|---|
| Coinbase | ✖️ | ✖️ | ✖️ | ✖️ | ✖️ | ✖️ | ✖️ | ✖️ |
| Pro | ✔ | ✖️ | ✔ | ✔ | ✔ | ✖️ | ✖️ | ✖️ |
| Wallet | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✖️ |
Crypto to fiat trading pairs
| US | UK | EU | |
|---|---|---|---|
| USD | ✔ | ✖️ | ✖️ |
| GBP | ✖️ | ✖️ | ✖️ |
| EUR | ✖️ | ✖️ | ✖️ |
Note: Coinbase Wallet does not support direct bank transactions. You’ll need to transfer your crypto to Coinbase.com or send it to an external address in order to cash out.
Crypto to crypto trading pairs
| USDC | BTC | ETH | USDT | |
|---|---|---|---|---|
| SPELL | ✖️ | ✖️ | ✖️ | ✔ |
See the full list of countries that Coinbase supports for crypto-to-crypto trading.
Note: Only assets hosted on the Ethereum blockchain can be converted through the Coinbase Wallet mobile app at this time. Learn more about trading on Coinbase Wallet.
How many confirmations are needed for SPELL?
SPELL requires 35 network confirmations. Learn about transaction confirmations.
Which blockchain network hosts SPELL?
SPELL is hosted on Ethereum.
What are the minimum and maximum withdrawal amounts?
Coinbase has implemented safeguards to ensure a healthy and efficient network both on-chain and through our platform.
These safeguards include both minimum and maximum amounts for each cryptocurrency we allow customers to send through the blockchain. These amounts vary by asset and are subject to change.
By Coinbase and Bybit Learn