Dear wizards, it’s been a while since we had a proper update on our operations. Many things have happened since then, and so we’d like to take a moment to give you all a comprehensive look at what we’ve been working on behind the scenes.

Bad Debt Repayment

The first tranche of our bad debt repayment happened a few weeks back. Our outstanding bad debt has been reduced from an initial 12.5m MIM to less than 8.5m. As part of AIP #10, we have also increased the percentage of treasury protocol fees from 25% to 80%. This marks the first step towards completely repaying the bad debt created by the Terra-Luna Ecosystem collapse. In light of the recent FTT crisis, our treasury has reduced its exposure to volatile assets, in order to have a focused approach on maintaining a strong base of stable reserves at all times. The current treasury currently consists of:

• 6,213,784.085371 USDT

• 3,300,000.00 yveCRV-DAO (Which will be used to collect bribes and incentivize liquidity)

• 975,274.26576848 unlocked CRV tokens

• 371,233.839528 USDC

• 446,941,713 SPELL (Coming from Yearn bribes)

• 96.5 ETH

• Another approximately 120k in other stablecoins

The total treasury value, at the time of writing this article, is $9,572,789.85.

Going forward, on the first day of each month, our treasury will repay approximately 5% of the outstanding bad debt, 425k MIM, to the UST cauldron.

Spreading the repayment over a 20 month period will give us a buffer to experiment with various initiatives that require liquid capital, such as active treasury management or protocol-owned liquidity.

As soon as we resolve the bad debt situation, we can resume our plan of accumulating CRV tokens and other volatile assets. We will share more details on how we plan on executing this in the upcoming weeks so stay tuned!

Our initial analysis suggests that we should be able to keep all the CRVs that are currently locked in Yearn, and simply liquidate whatever has not yet been locked over time. More information on this will be coming soon depending on market movements. This will allow our treasury to earn a positive cash-flow coming from other protocols’ bribes that we can use to repay bad debt or incentives our own bribers.

Team Restructuring

As some of you may have heard, we have recently undergone a restructuring of the team. For multiple reason, Daniele is no longer an active member of Abracadabra. The team looks forward to being able to focus on moving the protocol forward and is excited to share upcoming plans. The current team, which has been managing on behalf of the DAO the Abracadabra day-to-day operations for the past 10 months is structured as follows:

• 0xMerlin: Co-founder, Security and Solidity Lead

• Romy: Co-Lead BD and Community Manager

• Wicked: Co-Lead BD

• Georgiyx0: Tech Coordinator

• 0xCalibur: Solidity Development

• Moderation and Support team constituted by all of our mods on discord.

• Frontend and Backend team, as well as BD help.

These team members will continue to execute on DAO decisions and ensure that Abracadabra keeps building through this bear market.

Emissions Reduction

Following this restructuring, the first actual change to the protocol operations will be a reduction in our emissions across the board. As you have seen in our Sunday update, this week’s reduction will be as follows:

• 20% reduction to our MIM-3pool bribes

• Deprecation of MIM-ETH and ETH-SPELL farming rewards on Arbitrum.

The protocol is currently emitting 239,812,684 SPELL per week, compared to the 311,380,608 SPELL of last week.

You can find each individual allocation here.

Note: The Optimism rewards have been kept at 5m for the past month, while waiting for more cauldrons to be launched on that network.

We are carefully planning further reductions to emissions in the upcoming weeks. While these reductions will probably cause a reduction in overall liquidity for MIM, we feel that this is a critical step in getting on a path towards profitability and building back a strong foundation for future developments. At the time of writing this article, MIM is trading at 5-6 bps off peg, and the Curve pool looks the healthiest it has been in months.

A reduction of emissions in combination with a general increase in interest rates will allow us to focus on our more efficient cauldrons to maximise returns and profits for SPELL holders!

Lastly, reducing emissions in the short-term will also reduce selling pressure on SPELL, which will be beneficial for the project’s tokenomics in the long run.

New Cauldrons

As we focus on more profitable strategies for our protocol, we want to share a sneak peek into what we have been working on.

• Volatile-pair LP tokens cauldrons with leverage strategies on Velodrome

• Leveraged delta neutral vaults on Arbitrum

• GLP self repaying cauldron on Arbitrum

• Increasing MIM supply on our Stargate USDC and USDT cauldrons.

Stay tuned to find out more about each of these opportunities!

Issues regarding MIM backing

In the last few weeks there has been a lot of noise around the collateral that backs the MIM stablecoin. We have heard our community’s concerns and have worked together with the involved party to reduce the amount of FTT backing MIM. As you have probably heard, the MIM loan backed by FTT has been repaid for a vast majority. There is still 30k MIM backed by such collateral, which could be easily liquidated if needed be.

Going forward, we will work towards assembling a risk committee that will decide how much MIM should be issued against a certain collateral type given various risk factors (e.g., liquidity, TVL, etc.). If you are interested in participating in this risk committee, please send a DM to our moderators on Discord.

Potion

Our P2P NFT-collateralised loan marketplace has finally started its testing phase! We expect it to be live on chains with lots of NFT activity! If you are working on interesting NFT implementations and are looking for a place to allow your community to borrow against these tokens, please reach out as we are always happy to collaborate with other projects! If you want to read more about how Potion works, you can refer to this article here.

Increase in Interest

Lastly, as mentioned in our previous peg stability article, we are nearly ready to apply the negative interest rate strategies. After we finish working through some of the final tech-related issues, we will push these changes on the WBTC and WETH cauldrons, which will result in higher interest rate fees for these cauldrons’ borrowers.

If you have a position open, make sure to monitor our announcements closely.

We are sure that you will have plenty of questions about this, so we are happy to announce that the team will be keeping an open AMA session on our Discord server! Come and join us if you have any questions tomorrow 12:00 PM EST!