[READY] [GF: Phase 1 Proposal] Abracadabra Money

Project Name: Abracadabra Money (abracadabra.money)

Author Name: 0xEdwardo, Romy

Number of OP tokens requested: 500,000 $OP

L2 Recipient Address: Abracadabra OP Multi-sig (0x4217AA01360846A849d2A89809d450D10248B513)

Relevant Usage Metrics:

  • $350M+ TVL
  • 8K+ outstanding CDP positions
  • $195M of circulating MIM
  • One of the highest yielding pools on Curve ($86M TVL) @ boosted yield of 22.5%

Optimism alignment (up to 200 word explanation):

Abracadabra is one of the leading decentralized lending platforms in DeFi. We provide loans in our collateral-backed stablecoin, Magic Internet Money (MIM), against a wide variety of collateral (e.g., LP tokens, ERC-20 tokens, Yearn vault tokens, etc.) to unlock maximum capital efficiency. We can help Optimism kickstart an active and robust DeFi ecosystem by introducing MIM to the chain and providing our battle-tested lending services.

It goes without saying that we are a team building for the long-term. We plan to build through the bear market and one of the technologies we are most excited about is L2 scaling. We are hopeful that Optimism will emerge as one of the leading solutions and we want to help make that dream a reality.

How will the OP tokens be distributed?

$OP incentives will be used to drive liquidity to our MIM-Stable pool (currently in discussion with Velodrome). Without deep liquidity, we cannot provide a low-slippage leverage platform. For this new stable pool, we are aiming for a 15%+ APY. At a $5M depth, that means annual yield will need to exceed ~$0.75M. We would like at least half of that to come from $OP tokens and the other half to come from a combination of $SPELL incentives and fees.

How will this distribution incentivize usage and liquidity on Optimism?

By producing a liquidity pool with a high APY, we can attract users to shift liquidity from other chains onto Optimism. Our stable-stable pool represents an attractive, low-risk opportunity to earn yield in the current environment and Optimism’s low gas fees dramatically lower the barrier to entry for users.

Why will the incentivized users and liquidity remain after incentives dry up?

With a robust DeFi ecosystem and consistent demand for leverage, we believe the Abracadabra product can be profitable and completely self-sustaining. We have a goal to get to zero $SPELL emissions (across all chains) and subsist entirely off of swap fees and operational fees (e.g., borrow interest).

Over what period of time will the tokens be distributed?

Ideally, the tokens will be distributed over the course of 12 months. However, we may need to revisit the timeline depending on the price fluctuations of the $OP token, $SPELL token, demand for leverage, etc.

Has your project previously received an OP token grant? If yes, what’s the status of these tokens?

No. This will be our first $OP token grant.

How much will your project match in co-incentives?

This will be discretionary and will depend largely on how far we are from our stated goal of 15% APY. We are prepared to deploy up to 7.5M ($7.5K) $SPELL tokens per week. As stated above, we are trying to be entirely sustainable and so we hope that $SPELL emissions can be dropped to zero whereby the pool is entirely sustained off of fees.

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Personally, I’ve lost all confidence in the Spell/MIM protocol, they’ve had some botches.
And they’re not even on Optimism, I think they should at least look at getting some metrics.

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We hope we can restore your confidence in our protocol! Adding a new chain has many moving parts and we want to be sure that we can be successful before we embark down a path. The $OP grant will go a long ways towards making sure that we can properly bring liquidity to the chain.

I hear you on the not having metrics yet (though it seems like many of the other proposals are in the same state). I’m not sure if this is possible, but we would be more than happy to structure the grant to take a smaller portion (say, 25%) now and the remainder of the grant after finishing the migration.

Its good to see that you are matching incentives with your project token.

Any time line on when you are moving to OP chain ?

Our dev team believes they can deploy the contracts, set up a handful of cauldrons, set up pools on Velodrome / Curve, and migrate liquidity with 2-3 weeks of concentrated effort. We would be looking to be live sometime in the September time frame.

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Why a partnership with Velodrone instead of a true and tested partnership with Curve?

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Apologies for the slow response! We have considered a partnership with Curve, however we feel like there are two important reasons to consider Velodrome. 1) Optimism is a partner of Velodrome and a recipient of the Velodrome airdrop. This means that they should be collecting fees (indirectly) through swap activity (someone please correct me if I’m wrong). 2) Curve seems to have less activity on Optimism than Velodrome does at the moment. 3) Velodrome is willing to support the Abracadabra team through a potential partnership which could mean boosted votes.

I like any project already launched on Optimism and would love to see a detailed distribution plan of OP tokens now, at the proposal submission stage.
So you don’t distribute 50% in the first month and 50% in the other 11 months.

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Our dev team is going to move forward and launch contracts on Optimism. We think the liquidity won’t be there without the right incentives, but I think it’s worth investing time now so we can hit the ground running if/when this proposal passes (plus it shows the community we’re serious).

I’m going to take a second pass at perhaps putting a cap on the OP token distribution, so we can stretch out time. I don’t necessarily believe we should stretch it to 12 months (especially if APY is too low), but I agree that we should exhaust rewards in 1 month either.

A quick update. Our developers are almost ready to deploy our first set of contracts onto Optimism. We will be going live with two cauldrons in the next two weeks, one for Velodrome’s OP/USDC Volatile pool and another for Stargate USDC. Will revert back to this thread with contract addresses shortly.

We have also deployed a Gnosis Safe

Lastly, given the recent rise in $OP price, we’re going to be dropping the ask from 750K $OP tokens to 500K $OP tokens.

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