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Abracadabra: algorithm stable currency 2.0 | project is introduced

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DeFi2.0 is to make users willingly leave their money in the agreement

The DeFi2.0 era has been thrown into the market for many people before they react to it.

As of the time of writing, the three DeFi2.0 algorithm stabilization coins representing Olympus, Alchemix, and Abracadabra have recorded monthly increases of 220%, 66%, and 575%, respectively.

What exactly are DeFi2.0? What are the differences between these and DeFi1.0? What does this iteration mean?

In this paper, the concept of DeFi2.0 is briefly introduced, and the possible changes with this iteration are analyzed. Finally, the representative DeFi2.0 protocol, Abracadabra, is introduced in detail.

DeFi2.0 vs DeFi1.0

Some people think that DeFi2.0 is to change the relationship between the provider of capital and the agreement through the agreement DAO, so that the fund of the provider of capital can be continuously retained in the agreement and become Protocol Controlled Liquidity. Rather than simply using liquidity mining incentives to attract "hot liquidity" with very low retention rates.

In the mid-summer with DeFi1.0, we often see people rushing to the DeFi1.0 pit together. The TVL of the agreement reached a peak in a short period of time. As more and more people participated in the agreement, the decline of the yield made people lose interest. The "hot liquidity" began to ebb.

Still remember that Big Data Protocol that was very popular at that time, TVL attracted more than 6 billion DOLLARS in one week after it was launched. However, after the event, TVL quickly fell back to 3.1 million dollars, and its token BDP also dropped from 14 dollars to 0.15 dollars, almost zero. Such "mining disasters" were common in those days.

So what exactly has changed in this 1.0 to 2.0 iteration? To put it simply, through the mechanism within the agreement, capital providers can be "willing" to keep funds in the agreement, not just "digging, selling and lifting" as before, so that the agreement can maintain stable TVL in a healthy and sustainable way.

To understand DeFi2.0 in more detail, we need to deeply understand and analyze the typical DeFi2.0 agreements.

Abracadabra: The age of algorithmic stablecoin 2.0

To sum up Abracadabra in one sentence, you can think of Abracadabra as the pledge of interest certificates and the printing of protocol native stabbcoin, which is then exchanged for highly liquid common stabbcoin (USDT/USDC/DAI) and traded.

There is no need to say much about the importance of liquidity pledge. From liquidity pledge of PoS public chain to liquidity pledge in DeFi world, financial liquidity of functional assets must be the top priority.

In the Abracadabra protocol, YvWETH, yvUSDC, yvYFI, yvUSDT users of Yearn as well as SushiSwap's pledors (xSUSHI holders) and other assets (whitelisted assets are constantly updated) can get Abracadabra by pledging these coupon certificates (assets) As the assets behind MIM are these interest-bearing certificates, the value of collateral behind MIM will gradually increase.

In Abracadabra, xSHUSHI is used as collateral and original stable currency MIM is printed and cast

After the user obtains the original stablecoin MIM of the protocol, the user can exchange the MIM into other stablecoins with more liquidity through Curve, and then conduct transactions.

Curve MIM exchange DAI/USDC/USDT stable currency interface

When the user wants to redeem the assets pledged by the printed and cast MIM, the user only needs to repay the MIM principal and certain interest.

The loan-to-value ratio (LTV) of different collateral varies according to the stability of different assets. As can be seen from the figure below, the LTV of yvUSDC and yvUSDT can be as high as 90%, that is to say, if a user pledges $10,000 worth of yvUSDC or yvUSDT, he can get $9,000 worth of MIM.

Abracadabra's native token $SPELL

A total of 210 billion SPELL tokens were allocated to 7% of user ID0 and 18% to provide liquidity for ETH SPELL trading pairs in SushiSwap, 45% is used to reward users who provide mi-3LP3CRV (MIM for strong liquid Stablecoin) liquidity in Curve.

SPELL holders may obtain sSPELL by pledging SPELL in the agreement, and sSPELL holders may participate in the governance of the agreement. At the same time, sSPELL users will receive a share of the rates generated by the agreement.

The agreed rate is mainly from the interest on the return of the MIM, 75% of which will be used to buy back SPELL tokens and distribute the repo tokens to sSPELL token holders, 20% will go into the Governance vault and be used as a liquidity mining reward, 5% will go into the multi-signature vault, And for interventional management in extreme market situations.

conclusion

At the time of writing, Abracadabra's total multi-chain lockup reached $3.53 billion, with Ethereum accounting for $2.86 billion, Avalanche agreement for $161 million, Arbitrum for $331 million, and Fantom for $177 million.

In the mechanism design of Abracadabra, we can clearly feel that the way in which the original tokens are properly mortgaged and the rights and interests of the contract are obtained significantly reduces the phenomenon of "DeFi1.0" and gives the SPELL token holders enough reasons not to sell their tokens.

However, how long can the so-called DeFi2.0 coins last? Can the craze for the DeFi2.0 algorithm continue? Can its status shake the decentralized stabilization coins DAI and the centralized stabilization coins USDT and USDC? Only time will tell.