What is Spell Token (SPELL)?

Deep Dive

1. Core Functionality

Abracadabra.money focuses on leveraging interest-bearing tokens (e.g., staked ETH or LP tokens) as collateral. This lets users access liquidity without selling their yield-generating assets. Borrowers mint MIM stablecoins, which can be used for trading, yield farming, or leveraged positions.

The protocol uses Kashi Lending Technology to create isolated markets—each collateral type exists in its own pool. If one market fails (e.g., due to a hack or liquidity crash), others remain unaffected (SushiSwap).

2. Token Utility

SPELL serves two primary roles:
- Governance: Holders vote on protocol upgrades, fee structures, and collateral types.
- Revenue sharing: Stakers earn a share of platform fees (0.5% borrowing interest, liquidation penalties, and MIM stability charges). Rewards auto-compound, increasing staked balances over time.

3. Unique Leverage Mechanism

Users can recursively borrow MIM against their collateral to amplify yields—e.g., deposit collateral → borrow MIM → redeposit as new collateral → borrow again. This “debt looping” happens in a single transaction, reducing gas costs compared to multi-step protocols.

Conclusion

Spell Token powers a DeFi protocol that merges collateralized borrowing with leveraged yield strategies, using isolated markets to balance innovation and risk. Its staking mechanics directly tie token value to platform usage.

Open question: Can Abracadabra’s niche in interest-bearing collateral sustain demand as competitors adopt similar isolated lending models?