New collateralized stablecoin, Magic Internet Money (MIM) is challenging MakerDAO, the grandaddy protocol of DeFi.
MIM, issued by lending protocol Abracadabra, broke $1B in supply on Oct. 5, placing it seventh overall in terms of stablecoin market cap, according to CoinGecko.
Yet even though it’s behind in supply, Abracadabra has surpassed the lending incumbent in terms of fees generated, according to the site byebyedai.money.
Fees on Abracadabra come from the interest paid on the protocol’s loans. If holders of SPELL, Abracadabra’s governance token, stake their asset they receive sSPELL, which accrues 75% of the interest fees.
At $0.0096, the SPELL token has increased in value by over six and a half times in the last 30 days. For contrast, Ethereum is down over 9% in that same time span.
The Magic of Abracadabra
So what’s the secret sauce? For the pseudonymous co-founder of Abracadabra, who goes by Squirrel, the answer is multipart.
For one, Abracadabra accepts almost exclusively interest-bearing tokens as collateral. So for example, a user can deposit xSUSHI, which entitles its holder to fees from decentralized exchange SushiSwap into Abracadabra. The user can then borrow MIM against xSUSHI.
It’s a powerful combination to retain interest bearing capabilities while also gaining the ability to borrow.
Another reason for Abracadabra’s success is its focus on deploying to multiple blockchains, according to Squirrel. “By being multi-chain with Abracadabra, we are the first and only decentralized stablecoin that can be minted on various chains,” the co-founder told The Defiant. Abracadabra is available on Ethereum, Fantom and Arbitrum, an Ethereum Layer 2, according to its site.
Squirrel continued, a third reason Abracadabra is gaining steam is because of its generous fee structure. By giving a generous 75% of the interest payments on Abracadabra loans to SPELL stakers, so by another name sSPELL holders, the upstart lending protocol shares more fees than MakerDAO shares with MKR holders, according to byebyedai.money.
Squirrel laments Maker’s use of USDC, a stablecoin backed by U.S. dollar deposits, as collateral. Minting USDC necessitates going through a centralized party, which is ideologically incompatible with hardcore decentralization advocates.
Daniele Sestagalli, another Abracadabra co-founder and Bitcoin OG, according to Squirrel, is also a staunch critic of centralized stablecoins.
Sestagalli and Squirrel are even pushing the hashtag #occupyDeFi by putting it in their Twitter bios. Squirrel says the idea is to make sure DeFi stays decentralized. “It seems like it’s going in the wrong direction sometimes,” the co-founder told The Defiant.
Sestagalli regularly takes jabs at Maker on Twitter, visually comparing Abracadabra to David and Maker to Goliath.
It’s not clear whether the Occupy DeFi movement will catch on. Even Squirrel admits it may be cringe (though funny). Regardless, the emerging Abracadabra versus Maker saga is certainly a tale of disruptors disrupting disruptors as the newcomer guns for the “incumbent.”
With MIM crossing $1B in supply, Abracadabra does at least have undeniable momentum.