AIP #1 - MIM Replenishes for PLP Cauldrons

Updated Proposal made on 16th December can be found here

TLDR:

A 50/50 profit share should be done between Popsicle Finance and Abracadabra. Leveraged LPing makes the most sense to be done via the Popsicle Finance UI, not via Abracadabra, in order to create the best user experience and attract the ideal target market.

Current Usage of Abracadabra:

Abracadabra at the current state is largely being used by single assets to make them liquid, or to leverage them up. In terms of LPs that are actually being used, only the Curve LPs are being utilized, these LPs however are like kind assets. Meaning that volatility is not high.

Product Market Fit

If we then look at the utilization rate of the Trader Joe LPs it’s clear that it is low - only 6% utilization. This is not due to a product market fit issue, but rather due to Abracadabra.money not being the venue where users enter into LP positions.
If a user is thinking about LPing, the first thing that pops into their head is not Abracadabra.

In comes Popsicle Finance…

Popsicle Finance is solely focused on LPing. Popsicle recently relaunched Sorbetto Fragola, the Uniswap V3 LP optimizer that sets and dynamically changes the ranges that funds are being LPd in to optimize for the most yield. In the near future, Sorbetto Limone product will be launched. Limone is the multichain LPing strategy, where the protocol optimizes LP capital across DEXs on multiple blockchains in order to earn the highest yield. The current Sorbetto Fragola TVL sits at $32million.

Considering that Popsicle Finance is all about LPing, it would make sense to on all chains deploy the opportunity for users to LP on whatever DEX they choose for whichever pair they choose, and there after allow them to add leverage on top.

The synergies here make total sense!

Abracadabra provides the opportunity to leverage under the hood, Popsicle Finance provides the opportunity to provide liquidity and leverage that liquidity all from one page.

Current user flow on Abracadabra:

  1. User decides to LP on DEX

  2. Finds out he can leverage them on Abracadabra

  3. Deposits LP on Abracadabra

  4. Leverages

In comparison to the user flow on Popsicle Finance which would be:

  1. User chooses a pool to LP

  2. User deposits X and Y or Zaps into the LP

  3. User chooses leverage

  4. User has open leveraged LP position

The Proposal:

Initiate a 50/50 profit share between Abracadabra and Popsicle Finance, for all leveraged LPs on Popsicle.

Fees from Abra: Interest + liquidation fee + borrow fee

Formula: (Fees for interest + Liquidation fee + borrow fees)/2

In short:

  • Abracadabra has the ability to generate leverage through MIM.

  • Popsicle Finance has the front end for LPing, as well as the target user base.

A snapshot proposal will be created up for voting, and this post will be edited to include that and allow all the wizards to vote about it!

Edit

A new proposal has been posted following this one on the 16th December, you can find it in here: AIP #1 - MIM Replenishes for PLP Cauldrons - #89 by Squirrel

45 Likes

Looks great for me! Specially zapping into the LP and leverage directly… cuts a bunch of steps.

9 Likes

Agrees with that, as @Gylve said, this allow users to leverage without having to switch dApps to do so hence reducing possible confusion.

4 Likes

Great work peeps , loving the forum and great idea to get Abra and pop to work together more closely together, one tip would be next to each button have a short but clear explanation and also some intro videos on all the features and how a absolute beginner would use it , this would help mass adoption :pray::heart:

9 Likes

@Squirrel why 50/50 and not something like 80/20 abra/popsicle?

9 Likes

agree. for the whole picture and ecosystem. but will the fees generated by popsicle be shared by Abra?

7 Likes

Did someone say Valhalla :fire: :rocket: lfg! This is so badass. Frogz Together Stronk
:fist: :frog: :fist:

2 Likes

I agree, 50/50 seems a bit too generous

5 Likes

Sounds great I think this will make the whole ecosystem more sustainable!

2 Likes

Hi all. While I appreciate the proposal (thank you Squirrel) and the general idea of the integration, I have to be honest that I don’t feel very good about the mechanics of this proposal. Over the past months it has been demonstrated that there is huge appetite for MIM borrowing for looping (I think that the tricrypto2 vault is an important example, with a different use history, that was not mentioned). Absolutely, the power and utility of popsicle will greatly enhance adoption of MIM, and I don’t disagree with integration on the popsicle UI (though, actually, I think the functionality should be on both UIs – why not). But the suggestion of 50% profit share is problematic for several reasons; I’ll mention a few here. One, the long-term abracadabra model is designed as low margin but very large scale. Cutting into half of the profits is a huge hit for abra mechanics and sSPELL holders, when it is the low margin part of the system in the first place that here is incentivizing and enabling scale for popsicle and will be a great benefit to nICE holders already, without the profit share. Two, scaling up MIM already has a cost… it requires continued SPELL emissions and/or (and eventually, completely) buybacks to incentivize the peg system to enable the functioning ecosystem. Abracadabra and its investors are thus already paying to facilitate popsicle to scale in this way. In the proposal as written, popsicle would get huge benefit from the abracadabra functionality and cut 50% of the profit of that use but without providing anything other than front-end UI (which hasn’t been demonstrated would actually be necessary to drive adoption… it’s not like abracadabra is an unknown, and for a good product the demand would be very high for use on the abracadabra UI), and actually risking eroding value for abracadabra investors via the need to cut into the (now smaller) profit even more to incentivize the peg. Without reciprocal revenue sharing in the other direction and/or popsicle’s purchases of SPELL for incentivizing the peg this is a really hard proposal to get behind in terms of the benefit to abracadabra. Integration of the two protocols on this feature already drives value for both and I am having a hard time understanding why anything further makes sense especially when it puts the delicate abracadabra balance (given its model) at risk.

35 Likes

Will the cost sharing with ICE reduce our sSPELL award?

2 Likes

beyond that not all of us support ethereum. i have no intention on wasting my money on mev via 2.0 validators.

3 Likes

This is awesome. I’m looking forward to it.

1 Like

Yes there is a huge call for mim but flooding the market would only hurt things. As it stands we are constantly bonding in creating a positive feed back loop and adding buy pressure for the economy already. Plus vaulting it creating scarcity at the same time. If endless mim becomes available it will only decrease the worth of everything as a whole. Eth while expensive that’s also going to be where the vast majority of people are and that’s where things need to function to get hyped up for mass adoption.

Now if there was a way to use an interest baring token folded to pay for gas…

2 Likes

I agree.

Splitting 50/50 on what could be a significant at share of spells business model for a UI plug in seems steep.

9 Likes

very well explained, this proposal needs more eyes to go through it and hash something out that wont devalue abra

3 Likes

While I understand your take (UI wise and fees wise) I think it is missing some context, which the team would need to explain better when these product will launch.

First of all, UI wise, the user will LP via Popsicle, so it makes sense to leverage via Popsicle too.
Even tho we could also allow the leverage of an already existing Popsicle position in Abracadabra, it makes no sense from a UX perspective since users would still need to use popsicle first, so they better do all of it there.

Regarding the fees, it has to be noted that the leveraging of LP position is some sort or meta-product of Popsicle and Abracadabra, so it makes sense to share this revenue with both projects. Without Popsicle there is no liquidity to leverage and therefore no fees for abracadabra, and without abracadabra there is no leverage engine for popsicle. 50/50 seems fair for me as Popsicle won’t charge users for additional fees on top of it, so it’s not really abracadabra fees but Abra x Popsicle fees.

If popsicle charged fees on top of the cauldron fees, it would make sense indeed to either adjust the 50/50 model or make Popsicle share it’s part of the revenue with abracadabra too. But since it’s not the case, I believe that model to be fair.

As always, this idea is still a draft and as more details come through, more thinking will happen.

4 Likes

I’d like to know more on how Popsicle will contribute to the ongoing emission costs for maintaining MIM liquidity. If they can contribute ICE to that I believe their contribution is much more fair here and deserves 50/50.

The basis of the leverage system at Abra is a solid stablecoin like $MIM. That costs to keep up ($Spell is used for providing liquidity and for bribes on CRV). If that system is then used by Popsicle for leveraging it should pay some of the cost for doing so. This will benefit $Spell holders by reducing emissions needs.

9 Likes

Is there is a different fee structure that you think would be more fair, such as 25/75?

For me, I feel like Abracadabra users are already suffering in terms of opportunity costs as the team has been holding back MIM replenishments solely for Popsicle. If the situation wasn’t so zero-sum and we weren’t hurting for more MIM than I’d be more supportive of such a mutually beneficial arrangement. But as it stands now the project is too much in its infancy with regards to the MIM replenishment shortage.

Existing Cauldrons should get priority over onboarding new users. I’d like the team to remove the zero-sum nature to this and make sure all existing cauldrons have available MIM before bringing on Popsicle.

2 Likes

We’d have to check wether the added TVL to abracadabra by popsicle doesn’t already bring more than enough fees that would’ve never been earned by Abra otherwise, and if it doesn’t, then yeah it’d make sense to adjust that fee model / use other mechanisms to balance that partnership.

2 Likes