Magic Internet Money (MIM): A Yield-Bearing Stablecoin
Magic internet money is a stablecoin that is embracing the DeFi mindset of interoperability via the Abracada.money protocol.
Updated February 23, 2022 • 3 min read
Using the protocol Abracadabra.money, users can collateralize crypto assets — including interest bearing tokens (ibTKNs) — to mint magic internet money (MIM). The MIM token is an innovative stablecoin that can be minted on multiple chains, including Ethereum and Binance Smart Chain. The Abracadabra.money protocol also features the SPELL token, a governance asset that can also be deposited for staked SPELL (sSPELL).
Magic Internet Money and Stablecoins Explained
Stablecoins are integral to the Web3 economy and are collectively responsible for over half of the daily trade volume on crypto exchanges. There are many types of stablecoins, and they use varying methods in their efforts to achieve the essential characteristic of price stability. Many popular stablecoins are pegged to USD or another major fiat currency via collateralized fiat reserves. In contrast, crypto-collateralized stablecoins earn their value from holding cryptocurrency like ether (ETH) or bitcoin (BTC) as collateral. The stablecoin magic internet money (MIM) is a crypto-collateralized stablecoin that features a number of innovations in regards to cross-chain compatibility and interoperability.
Built by Abracadabra.money, the MIM stablecoin is designed to be cross-chain compatible. This means that the MIM token can be incorporated into platforms and products built on the Arbitrum, Avalanche, Ethereum, Fantom, and Binance Smart Chain blockchains respectively, amongst others. While several protocols allow users to use popular assets like wrapped bitcoin (wBTC) and wrapped ether (wETH) as collateral to achieve some degree of interoperability, Abracadabra.money lets community members utilize interest bearing tokens (ibTKN) like Yearn.finance’s yTokens or SushiSwap’s xSUSHI as collateral.
Here’s how minting MIM works: When you deposit assets into the protocol, you receive magic internet money tokens in return, which are fully collateralized stablecoins pegged to USD. This allows you to simultaneously earn yield on ibTKNs deposited as collateral while borrowing against them to receive MIM tokens in return. These MIM tokens can themselves be utilized throughout the decentralized finance (DeFi) ecosystem.
Abracadabra.money: The MIM Crypto Protocol
MIM stablecoin development is overseen by Abracadabra.money, a DeFi lending platform with a focus on cross-chain compatibility throughout its products. The Abracadabra.money protocol has integrations with popular projects such as Convex Finance, Curve, Yearn.finance, and SushiSwap. In addition to ibTKN deposits, users also have the option to collateralize popular tokens like ftx token (FTT), fantom (FTM), and shiba inu (SHIB). On exchange platforms like Anyswap, you can send MIM between compatible blockchains in under ten minutes.
Abacadabra.money’s lending engine allows for leveraged yield farming while enabling users to mint MIM for staked crypto assets that are often illiquid on other DeFi platforms. These MIM stablecoins can then be used on other platforms to earn annual percentage yield (APY) interest — in tandem with the yield that staked ibTKNs earn during the same period.
SPELL Token Governance of Abracadabra.money
Abracadabra.money is community-governed via SPELL tokens, which are used for voting on platform directives and development, such as the rate of emission of SPELL assets. For example, voters approved a SPELL token burn which halved the supply from 420 billion to 210 billion SPELL. SPELL token rewards are on a fixed ten-year schedule, with SPELL crypto emissions halved annually. The total SPELL supply is allocated as follows:
Liquidity mining incentives: 63% of the supply is dedicated to promoting specific liquidity provider (LP) pairs and other LP programs.
Team member rewards: 30% of the SPELL token supply is earmarked for team members and has a four-year vesting schedule.
Spell crypto distribution: 7% of the supply was distributed via an Initial DEX Offering (IDO), with this supply split evenly between SushiSwap and Uniswap v3.
Those who choose to stake SPELL have another avenue for earning yield on the Abracadabra.money protocol. The majority of interest and borrow fees received from MIM minters — plus 10% of liquidation fees — is used to market buy SPELL and then proportionally distribute these purchases to those holding staked SPELL (sSPELL). The fee distribution is as follows:
sSPELL crypto rewards: The majority of the fees (75%) goes to the aforementioned sSPELL holders.
Governance treasury: To incentivize MIM pool liquidity, the governance treasury receives 20% of these fees.
Market treasury: A 5% fee allocation is dedicated to a multi-sig treasury rainy day fund, to be used if market conditions require action or intervention. This could relate to unforeseen liquidity issues, market volatility, or black swan events.
How To Mint and Leverage MIM Stablecoins
To mint MIM, you need a crypto wallet with crypto assets to use as collateral. Once set up, you can leverage your collateral to increase your APY.
Connect a WalletConnect-compatible wallet to Abracadabra.money and choose the blockchain network — and hence market — you want to use.
Select the type and amount of collateral you would like to supply. Then choose your liquidation price, which affects both the amount of APY you can earn and the chance that your position will be liquidated.
Prior to minting MIM stablecoins, the dashboard will show you a preview of your fees and your expected APY. Once confirmed, you’ll receive MIM, which can be used much like any other stablecoin. The maximum loan-to-value (LTV) ratio — or collateral ratio — allowed on the platform is generally 90%.
This MIM position is managed through the same dashboard; it allows you to repay your loan, track your liquidation risk, or deposit more collateral for more MIM. Should you choose to, you also have the option to leverage your position through a process called “looping” to increase your APY.
MIM Crypto Minting Fees and Risks Explained
In order to use Abracadabra.money tools and MIM, you will incur some costs and potential risk. For example, there is a 0.5% interest rate charged to borrow MIM tokens. There is also a 0.5% borrow fee charged every time you mint more MIM. Finally, there is a 4% liquidation fee that is triggered when the platform automatically sells your collateral if the collateral price drops below your liquidation price.
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