Abracadabra never stops innovating, deep dive in this introduction article for our new version of Cauldrons: our isolated lending markets engine.

Let’s start with a brief introduction on what cauldrons are. Cauldrons are Abracadabra’s modified and licensed version of Kashi lending Markets, that run on both Degenbox and Bentobox.

Cauldrons allow users to borrow MIM using another asset as collateral. Each cauldron is collateral specific and the complete list of all the Abracadabra’s lending markets can be found here.

Here at Abracadabra, we believe that innovation is key to success, and so we have worked on improving them over the past few months.

Cauldrons V3: The latest Version of our Lending Engine

The new version of our cauldrons introduces new features and functionalities that will improve user experience as well as protocol stability. Let’s dive into them!

Borrow Limit Per Address

Abracadabra values community input, and strives towards improving wherever it can. Following your suggestions, we have implemented the optionality to impose a MIM borrow limit per address. Depending on what this parameter is set, we can limit the amount of leveraged MIM a single address can borrow, therefore allowing more individuals to enter high-demand cauldrons and avoid that all the spots are filled by few large players.

The owner of the contract (in this case our team) can decide to increase the borrow limit per address depending on demand and market conditions.

Variable Interest Rate

Protocol and MIM stability is of the utmost importance for the Abracadabra Team. V3 cauldrons have the optionality of a variable interest rate, decided based on market condition and executed only upon the main multisign executions. You can find Abracadabra main multisign here.

The conditions on which it can be increased are the following:

• From 0% to 1% instantly.

• After this initial increase, a maximum of 75% increase on the current interest rate can happen every 3 days.

As an example with made up numbers, consider that it can go from 0 to 1% instantly, and then to 1.75 only after 3 days.

Note that we will make sure to communicate with large anticipations any upcoming changes in the interest rate of our cauldrons, to allow every user to have the time to react accordingly.

What does this Variable Interest Rate solve?

As of v2 cauldron, Abracadabra finds it difficult to match the market demand of MIM with supply exactly, since interest rates are fixed. V3 cauldrons change that by allowing the protocol to gain a strong mechanism in maintaining the peg by incentivising borrowing/lending to return the market to an equilibrium.
In an instance of a depeg occuring or being close to occuring, an interest rate change can be executed upon in order to make more people either borrow MIMs, or to pay back MIMs. Therefore adjusting the amount of MIM in supply. This makes the protocol overall much more bulletproof to depegs.

Greater ability to control MIM availability

As of right now, in order to reduce the amount of MIMs available in a particular market, we need to burn the MIMs deposited using Abracadabra Main Multisign. This process takes time, and is sometimes not the most appropriate in order to react to sudden market movements. In cauldrons V3, the team will have the ability to reduce the amount of MIMs available without burning them. Note that this is possible of course only for MIMs that have not yet been borrowed.

This is implemented by imposing a borrow limit per address at 0, hence not allowing any new open positions or by using a total borrow limit function!

Timeline

Cauldrons V3 are already working! Our yvDAI market is the first of its kind, many more will follow, that will allow our users to farm and leverage the best possible yields available in DeFi. If you wanna find out more on when these cauldrons are released, make sure to follow and turn on notifications to our Twitter account!

If you have any questions, make sure to join our Discord channel, our mods will be more than happy to help you!