BOMB x Abracadabra: Fully Explained
BOMBERS and Wizards:
I am writing this article to give an in-depth look at Abracadabra Money, and to explain why we are so excited about pursuing a partnership with them.
Partnership Status
Currently we are in the early stages of presenting our collateral (xBOMB) to the Abracadabra community. We have completed the initial requirements and are on the verge of moving to the next stage of the approval process. The first stage was demonstrating that there is interest in using xBOMB as a collateral choice, which we clearly did in our forum post: https://forum.abracadabra.money/t/collateral-proposal-xbomb-on-bsc-high-apr-btc-peg-token/3361 (Great job BOMBERS! This is one of the most popular forum posts they have had in the history of the forum!)
We will continue to pursue the partnership as we feel it is very beneficial for Abracadabra and its stakeholders, as well as for our own protocol. More on that later in the article.
About Abracadabra Money
Firstly, what is Abracadabra Money?
Abracadabra is a protocol that operates on numerous blockchains, with their primary offering being the ability to borrow Magic Internet Money (MIM) by depositing a supported form of collateral. Typically, the type of collateral used to deposit is some form of yield bearing token, although this isn’t always the case.
What is a yield bearing token?
A yield bearing token is simply a token that inherently grows in value. The example token that I learned of when first hearing about Abracadabra Money was yvWFTM (Yearn Vault wrapped Fantom). Yearn Finance allows you to deposit Wrapped Fantom (wFTM) within their vaults, in return they provide yvWFTM as a receipt token. Yearn uses their own methods to generate a yield on Fantom, this then causes the ratio of yvWFTM to constantly grow its ratio of how many wFTM you can redeem each yvWFTM for. At the time of this post, yvWFTM is growing at a steady pace of 7% annually.
xBOMB works the exact same way as yvFTM, except with BOMB as the underlying asset, and with a much greater APR. When xBOMB launched, 1 xBOMB was equal to 1 BOMB. After only two months, the ratio is already 1 xBOMB = 1.32 BOMB. The majority of xBOMBs yield comes from when BOMB is over 1.01 peg, which has not been the case recently. The yield (ratio of xBOMB to BOMB) will grow significantly once we are reliably printing.
What is Magic Internet Money?
Magic Internet Money (MIM) is a token which is pegged to the US Dollar. It can be minted/borrowed from Abracadabra after depositing a supported collateral token. MIM can then be swapped for any token of your choosing; it works the same as the other US stable coins available.
MIM is also bridgeable cross chain. This allows you to borrow MIM on the chain where your collateral exists (BNB Smart Chain for xBOMB) and then bridge your MIM to any chain you like, to spend as you wish.
Why Borrow MIM?
There are numerous benefits to borrowing MIM:
- Maintain exposure to assets that you like (xBOMB / BOMB) while still having purchasing power to buy anything you may want or need.
- Yield bearing tokens such as xBOMB have high APRs. Borrowing MIM cost very little interest. I anticipate xBOMB APR to be more than 400% soon. For comparison, borrowing MIM costs 2–3% to borrow.
- Borrowing assets that are constantly losing value (USD with heavy inflation) while keeping assets that generally gain value (BTC long term chart very bullish) is smart.
Strategies and Examples
Breakdown & Example of Basic xBOMB Strategy
Let’s work with some basic numbers here to illustrate how you could utilize xBOMB and MIM. For this example, we will use the following variables:
- $1,000 USD equivalent of xBOMB to deposit as collateral
- Conservative MIM borrowing of 50% value
- 365% xBOMB APR (chosen for an easy to calculate 1% daily gain as well as likely to be accurate in the near future)
Firstly, if you do not have xBOMB, yet you are holding BOMB, you would need to inject your BOMB into our BOMB staking pool (xBOMB page) to receive xBOMB.
Now that you are an xBOMB holder, with $1,000 worth of xBOMB, at 1% daily APR (365% / 365 days), your xBOMB will grow in value by $10 per day.
Now let’s say you want to purchase more BOMB, or maybe BSHARES, or some BTCB to pair with BOMB to farm the [best investment in the world] BOMB/BTCB pair. These are just a few examples, you could purchase anything on any chain, or withdraw to fiat if you like.
Instead of selling xBOMB/BOMB to make your purchase, you borrow MIM from Abracadabra. To do this, you would deposit your $1,000 worth of xBOMB, and using our conservative borrow of 50%, you could borrow $500 of MIM (500 MIM).
As the xBOMB deposited at Abracadabra remains your xBOMB, you still benefit from its yield bearing characteristics, which, in this example is 1% daily. Provided the price of Bitcoin / BOMB stays flat, you would be able to borrow $5 more MIM every day, without needing to add any additional collateral to your position. Just the fact that xBOMB grows/increases in value, will allow for this. If BOMB / Bitcoin is also moving up in price this creates even more value for your collateral, allowing even more borrowing.
Boardroom Printed BOMB
Our users who have BSHARE in the boardroom will receive BOMB whenever over 1.01 peg. It is in the best interest of BSHARE holders that BOMB stays over 1.01 peg, so they can continue to receive BOMB rewards every 6 hours. With xBOMB and Abracadabra, the following strategy can be executed:
- Take reward BOMB from the boardroom, and deposit it into our BOMB staking pool (xBOMB page) to receive xBOMB. Now you will be gaining a great APR from xBOMB for the BOMB you just received from the boardroom!
- Deposit your xBOMB at Abracadabra, and borrow MIM to fund whatever you wish to purchase.
This will allow BOMB to stay very healthy above peg, keeping the boardroom printing. Allowing you to keep exposure to BOMB + Bitcoin, gaining additional yield through xBOMB, all while still having the purchasing power that selling BOMB would have provided you.
It’s a win-win-win for all parties involved! Our users gain the most returns possible, our protocol stays very healthy with constant prints, while Abracadabra collects fees and interest from borrowed MIM to hugely benefit Spell holders!
Strategy for Abracadabra users / Non-Bombers
One of the truly amazing aspects of this partnership would be the opportunity presented to any Abracadabra users, or really anyone participating in the world of DeFi on BSC.
We will have the safest and highest APR paying collateral choice, so even for non-BOMB users, it will make sense to participate. Follow these simple steps to get exposure to Bitcoin, and a huge APR, while still buying whatever assets you had originally planned:
- Instead of buying token XYZ (replace with any token) that you would have normally bought, buy BOMB.
- Deposit BOMB to receive xBOMB, which can then be used as collateral on Abracadabra
- Borrow MIM, use MIM to buy token XYZ you were planning to buy in step 1
At the very beginning, you will end up with a smaller position in token XYZ than if you bought it directly, however the advantages of doing it this way are vast:
- Earn xBOMB APR of 300+% on your entire position
- Continuously be able to borrow more as xBOMB becomes worth more
- As you borrow more, you can keep increasing your position in your other token
- Likely join the #BOMBSQUAD once you see the potential in the protocol :-)
Benefits of a BOMB Money x Abracadabra Partnership
Benefits to BOMB Money Protocol
Our users can keep their high yield bearing xBOMB, while still being able to take profits or purchase anything they desire! This can be assets on BSC, assets on another chain, or anything you can buy with fiat money! Simply convert MIM into the asset you need then do as you please with it!
This will keep our protocol very healthy, as sell pressure on BOMB will be greatly reduced. Personally, I believe that sell pressure will be almost non-existent once our BOMBERS realize the true power of using Abracadabra with their xBOMB as collateral.
As can be seen in the example strategy for non-BOMB users above, this will also create big buy pressure that we otherwise would not have experienced!
Benefits to Abracadabra Money Protocol
Abracadabra benefits by earning fees from our users borrowing. There are initial borrow fees (between 0.1–1% typically), as well as annual interest (from 2–3%, or in some cases slightly more).
In addition to this, Abracadabra is looking to grow their presence on BNB Smart Chain (BSC), partnering with BOMB and using xBOMB as collateral is an excellent way for them to accomplish this!
What are the Risks?
If you push your borrowing to the absolute limit, a small/moderate drop in BOMB or Bitcoins value could cause you to have your position liquidated. The stability of Bitcoin, combined with the yield generating properties of xBOMB, greatly reduce the risks of liquidation.
If you keep your borrowing at conservative values (below 50%), or keep a close eye on BOMB price, you will easily be able to prevent yourself from getting liquidated. At any time, you may deposit additional collateral, or repay some MIM if you are getting too close to liquidation for comfort.
Further Reading
Once we have been accepted as a partner to Abracadabra Money, in-depth strategy guides and recommendations will be created. In addition, we will cover these strategies during our live streams (BombMoney on YouTube) to show how to use the features step by step as well as answer any questions that anyone may have!
Enjoy BOMBERS!
Aaron
