Yet another stablecoin seems to be biting the dust!

Dec 21, 2022by, Pooja S Kumar

Block Chain

Abracadabra, it’s the magic money guys!

Abracadabra money, decentralized finance or defy lending platform is built upon a number of commonly referenced cryptocurrency concepts like interest-bearing tokens, lending pools a cross-chain system and US dollar-backed stablecoins. Interest-bearing tokens are cryptos that are lent out and slowly accumulate value as a borrower holds them. These MIMs refer to the communal collection of user-contributed cryptocurrencies. Generally, cryptocurrency platforms operate exclusively on a single blockchain which acts as a ledger for transactions made on the platform. Companies like Abracadabra choose to follow the cross-chain route for a number of reasons increased security, enhanced operability or simply to increase and diversify their user base. 

A stablecoin backed by the US dollar is exactly what it sounds like a cryptocurrency that cannot be issued unless there are a certain amount of US dollars stored in the issuing company’s deposits.  This is usually done at one to one ratio, meaning that there could only be one coin issued for every dollar in storage. However, MIM Abracadabra stablecoin falls just below that. As a result, MIM is currently valued at 99 cents. 

Abracadabra allows its users to pledge other cryptocurrencies to use as collateral giving them a supply of their own stablecoin in exchange. This is Magic Internet money or MIM. This is given out as a form of loan which must eventually be returned to the issuing company, or the borrower will incur penalties. Here are two possible courses of action for a loan taken out in MIM. The 1st possibility is a successful loan. If a user wishes to reacquire collateral pledged in exchange for MIM, they must simply return their MIM including pre-arranged interest fee and whatever capital they pledged whether it be crypto via or some other form of currency will then be transferred to them almost immediately. This is considered to be a successful loan. However, there are also failed loans. If a user fails to return their borrowed MIM before an allotted date or their collateral dips below a certain value, they will automatically forfeit whatever form of an asset they pledged. However, they get to retain their MIM i.e; the platform gets to retain its user base but this form of loan is deemed to be failed. MIM can be exchanged for other stablecoins or traded for cryptocurrencies on platforms where it’s accepted. 

Abracadabra recognizes that its users would want to be borrowed against their funds tied up in other passive income crypto schemes of which there are many. In addition, other users would be more than likely to want to contribute to a form of lending pool provided they earn some form of passive income as a form of compensation. This type of lending usually comes in one of two formats either illiquid or liquid token formats.    

Abracadabra has turned these two more conventional approaches into a business model of their own design. Even though at first glance that might seem impossible, Abracadabra did this and created a unique system. The company allows users to contribute illiquid assets in return for liquid assets, the stablecoin MIM. This innovation has allowed Abracadabra to provide other platform users who have already locked up their funds and yield schemes to still use their contributed tokens. Although often with slightly limited functionality as MIM is often accepted on fewer platforms than other forms of cryptocurrency. 

Spell is the second major token issued by Abracadabra and it’s based on the Ethereum blockchain. Though it’s much higher in quantity than MIM, these coins are actually found less commonly in circulation. This is because they are largely used as a form of governance token on Abracadabra’s own platform. 

Governance tokens give holders the option to either vote for themselves or delegate their votes regarding changes on the platform’s upgrades. This essentially means that they become a former stakeholder and just as with normal stakeholding, the more capital they pledge, the greater their say in the proposed changes to the platform’s format. Spell tokens also allow their holders an option to earn passive income by stocking the actual tokens themselves. Spell contributors are given MIM in exchange for their contributed tokens which can also be used at the risk of losing their spell. 

Spell contributors also earn periodically from trading fees made on Abracadabra’s trading platform. When they stake spell, these earnings are distributed by a third; much more minor token on the platform called ‘spell’. 

How does Spell token work?

Since its launch in August 2021, as per the available data on CoinMarketCap, the Spell token has seen a tremendous rise. You might want to know how it works and the secret to its growth. Spell token technical analysis shows that this token’s protocol is different from others.

The protocol is an ‘isolated lending market,’ and it helps earn the users’ magical money. Abracadabra completes this process in five steps which are as follows.

The first step is the deposit of the collateral amount on Abracadabra. The next step is the debt allocation to the borrower, and thus the borrower becomes eligible to take the benefit of interest. The third step is the deposit of MIM tokens stored in the borrower’s wallet. The final step is the investor’s free use of MIM. They can continue using or divest it by turning it into fiat money or another cryptocurrency.

Is MIM a successful stable coin?

The all-time price chart of MIM over its short eventful lifetime barely looks real. The tokens price may have started out low but as it became properly backed by the US dollar, it shot upward starting out at almost infinitesimally small. When it was first printed, MIM predictably rose to an almost  1 to 1 ratio by October 2021 when it was properly released to the public. However, the most recent performance of MIM gives a much more interesting picture of what the tokens price has been able to achieve as a stablecoin. 

Future of MIM 

While MIM’s trajectory might look slightly concerning to some, it’s important to remember that this currency is still relatively young. And it started out its journey during a period of extreme uncertainty for the crypto market as a whole even for the stablecoins. The simple fact that it endured with a few hiccups as it has speaks volumes to the emerging token’s durability and stability and whether it will continue to last. However only time will tell. If you have any projects regarding the above, contact us.

Disclaimer: The opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Dexlock.

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