Expecto Patronum: A shield for all frogs
Final Update, and voting: AIP #7 - Expecto Patronum: A shield for all frogs - #97 by AbracadabraTeam
The Patronus is a kind of positive force, a projection of the very things Dementors feed upon. In the same way, Expecto Patronus will be the shield to protect all frogs.
Over the past 72 hours, our MIM liquidity pools on Curve Finance have been under heavy strain from third party players interested in taking profits from the depegging of $MIM.
The system has performed as we expected, MIM peg has been restored. Abracadabra survived one of the hardest stress tests a decentralised stablecoin ever had to face.
Despite this, it is clear to everyone that we have a problem to solve, in order to eliminate the possible attack point to the system: non-sticky liquidity.
We have thought a lot about how to do this in the light of recent events, and the Abracadabra Team came up with in our eyes a fantastic plan in light of the latest events.
What is the end-goal?
The end goal is to have deep, self sustainable liquidity, without having to rely solely on LP actors. This means that Abracadabra actually focuses on supporting the largest and most stress tested Stablecoin DEX that exists: Curve Finance.
Not however via the hyped “Curve Wars”.
Why Curve?
Curve is the biggest Decentralised Exchange for stablecoin trading. Its cutting edge technology allows it to perform even in extreme depegging scenarios like the ones we have seen in the past week.
Curve is a fundamental part of what we are trying to build, and it is the main Dex on which the Abracadabra system is built.
MIM pools are already, and across multiple chains, some of the most liquid and have the highest volumes. MIM - 3Pool and MIM-UST pools reached a combined$2B in volume on 27/01, producing a huge amount of revenues for CRV holders.
We believe it is important to strengthen Abracadabra support for this protocol.
How are we going to do this?
The “DAO Era” is coming to a halt. Some of the largest DAOs in the space, such as Squid DAO and yes of course the black sheep Wonderland, are currently voting to unwind their treasuries, giving back part of it to the holders of their tokens. Despite this though, we believe that the communities that built these DAOs are still there, and are still hungry to participate in a protocol that allows them to grow.
Our plan is simple, but powerful. These DAOs have a huge amount of capital that can currently either be given back to its holders, or left in the treasury without a clear guidance.
We are offering them a third option.
Expecto Patronum
Expecto Patronum is simple: receive SPELL for your DAO tokens.
Abracadabra will then use these tokens to redeem part of the treasury of these DAOs, and use the acquired capital to itself become a large holder of CRV, meaning we aren’t joining the Curve Wars of voting for the CRV holdings of users, but rather that the protocol itself owns the voting power.
We will work towards making our own CRV wrapper, called magic CRV <> mCRV and we will provide cauldrons with favourable partner conditions on Abracadabra to support the growth of the Curve Community!
Where do these SPELL tokens come from?
Our plan is to offer up to 30B SPELL as we want to attract at least $250M of assets coming from the different DAOs. These SPELL tokens, previously destined to incentivise non-sticky liquidity (emissions), are now used to acquire as much of the DAO treasuries as possible through the redemption of DAO tokens (SQUID, wMEMO).
How will this warchest be managed?
Once these DAO tokens are acquired, we will redeem the treasury and acquire large amounts of liquid capital. This capital will be managed by the SPELL holders, to be executed upon by the Abracadabra multisig which currently consists of
Michael (Curve Finance)
Poolpi (Yearn Finance)
Leo Cheng (Cream Finance)
Squirrel (Popsicle Finance and Abracadabra Money)
Danielesesta (Popsicle Finance and Abracadabra Money)
0xMerlin (Abracadabra Money)
Julien (Stakedao)
Georgiyxo (Popsicle Finance and Abracadabra Money)
What does this mean for SPELL holders?
This will stop SPELL dilution, and the tokens will be managed with the following plan:
- 30B SPELL will be sent to the Swapping contracts, on different tranches, according to market movements to assure smooth transactions.
- 3 months worth of SPELL emissions will be kept in the treasury to cover for any expenses while we transition.
- Once the transition is done, the protocol will not need emissions.
There is no need to incentivise liquidity with our own token anymore, if we are equal partners in taking decisions on the CRV emissions thanks to the huge amount of CRV we will buy.
The protocol becomes instantly profitable, and is trading future emissions that will bring only mercenary liquidity for permanent and deep decision power over the exchange on which this liquidity will be used.
In other words, we take the control over MIM liquidity in our own hands, eliminating any kind of third party that might want to destabilise the system we have built, as it happened in the last few days.
We will also use these acquired treasury tokens to deepen the liquidity on SPELL markets and reduce downward volatility. More specifically, we will use the acquired treasury to deepen Curve V2 Position for the SPELL ETH pair.
What does this mean for DAO token holders?
If you are a holder of one of the DAO tokens that we will accept, you are actually trading your share of treasury in a protocol that is unwinding, for a share of ownership of a protocol that will put that capital to use. Remember you can stake your SPELL for sSPELL tokens, to receive revenue share of Abracadabra.
We have been closely following what is happening with SquidDAO and Wonderland, and we understand how their holders feel.
We are offering them the chance to take part in Abracadabra building the future of DeFI, in exchange for their claim of ownership of the treasury.
Technical Details
We will have a swapping UI and smart contracts ready in the next few days, if this proposal was to pass. You can have a sneak peak of our UI though:
Here users will be able to swap their SQUID or wMEMO tokens for SPELL and take part in Operation Patronum. The UI will interact with a smart contract to which DAO tokens will be sent, in exchange for SPELL tokens. The ratio will be dynamically adjusted based on the SPELL price, and it will work as follows:
The oracle will compare the redemption price of the DAO token, with the current price of SPELL (coming from our battle tested chain-link oracle), compute how much SPELL users are entitled to and then ask them to confirm the swap.
The swap is a one way exchange, once you swap for SPELL you cannot get back your DAO tokens.
Once the DAO tokens are sent to the swapping contracts, they will be used by the protocol management to redeem their relative share of treasury in the respective unwinding UIs.
What happens if the proposal passes?
A snapshot vote will be put in place in the next 72 hours, and it will last then for an additional 48 hours to allow the community to discuss about it.
Once that is done, and the vote has passed, we will start with Expecto Patronus.
We will be waiting for the individual DAOs to share their redemption price, and then deploy our smart contracts and UI.
SPELL tokens will then be minted to fill the DAO Token <> SPELL swap contracts.
Last Thoughts
We have been working hard on this plan, and we strongly believe this is the best possible moment to act.
When the market is uncertain, and after hours of harsh attacks, Abracadabra and its team will not lie down.
We will act to become independent from market manipulation and depegging. We will work towards empowering Frog Nation holders.
We will keep innovating, together with the best players in this industry, to bring the Frog Nation and Curve Finance to the place our communities deserve.
We stick together. We tight our ranks.
We are, and we will continue, to fight back.
In our darkest hour, we came up with Expecto Patronum, our move towards controlling our liquidity, as well as our protocol profitability, and not relying on outside parties.
Update: AIP #7 - Expecto Patronum: A shield for all frogs - #95 by AbracadabraTeam
The voting period for AIP#7 starts now! Voting will last for 72 hours, and you can find the link to the snapshot here !