While most people who are not into crypto see the industry as an incredibly complex thing, those who have spent some time on the inside understand that there are different levels of complexity. For example, there are various projects structured to facilitate payments solely. On the other hand, tokens like Ethereum are far more complex, in terms of ecosystem and use cases.
And then, there are tokens like the Spell Token (SPELL), which is a moderately-sized cog in a much larger machine, but also one that has been crucial for the whole system’s functioning. You see, SPELL is a token in the system of a decentralized lending platform called Abracadabra.Money.
It is also an ERC-20 token that runs on the Ethereum network, as well as other networks, such as Avalanche, Arbitrum, and Fantom, and within Abracadabra.Money’s ecosystem, it is only one of the multiple tokens and token types that all play important roles. Today, we were interested in seeing SPELL’s role in the ecosystem, whether it solves some problems, and if so, which ones, and what are the benefits of interacting with it.
What Problems Does Spell Token (SPELL) Solve?
SPELL is not exactly a type of token meant to solve problems in the crypto industry or the real world. However, it does have an important role play in Abracadabra.Money’s system, where it helps in two ways:
It helped revolutionize lending
On Abracadabra.Money’s platform, Spell Token functions as a reward token. The platform allows users to deposit collateral and borrow Magic Internet Money (MIM), engage in yield farming, staking, and more, in order to farm SPELL. All of this facilitates better liquidity for certain crypto pairs, such as ETH/SPELL, as well as MIM/3CRV. Currently, numerous pairs and pools are supported.
Providing incentive
Speaking of offering rewards, that is one of SPELL token’s main purposes in the ecosystem. By offering incentives to users, the project ensures their support and loyalty, which in turn ensures its price stability and potential growth.
Competitors
The decentralized lending space is increasingly competitive, with several established players. Abracadabra.Money, and therefore SPELL, faces competition from platforms like:
- Aave: One of the largest and most well-known DeFi lending protocols.
- Compound: Another major player in the decentralized lending market.
- MakerDAO: The platform behind the DAI stablecoin, which is a competitor to MIM.
These platforms offer similar services to Abracadabra.Money and have strong community support and brand recognition. Abracadabra.Money differentiates itself through its use of interest-bearing tokens as collateral and its focus on providing a user-friendly experience.
Benefits of Spell Token (SPELL)
While SPELL wasn’t created with problem-solving in mind, it was made in order to provide a number of benefits for the project’s users, to ensure that they will develop a stable relationship with the entire project. With that in mind, here is what you get if you decide to join Abracadabra.Money’s platform.
Liquidity rewards
We already mentioned that SPELL is used for offering liquidity rewards for users who wish to farm SPELL. Essentially, the process is similar to regular liquidity providing in any other ecosystem. All that users need to do is lock up their tokens in liquidity pools in order for the project to have them at its disposal and quickly process transactions when there is a need. In return, users are paid in SPELL, which brings passive income.
Staking
Staking works in the same way as elsewhere, too. In fact, staking has grown to be one of the most popular activities in the DeFi sector, which is not surprising, given what is involved. Users simply lock up their tokens and receive rewards for it, which removes the risks associated with other crypto activities, such as trading. In fact, staking has become particularly popular with long-term investors, or HODLers, as they are also known. Not only do they get to keep their tokens and hold them for months, or even years, as they are waiting for the token’s price to increase, but they also get new tokens as rewards. As a result, their total number of tokens is increasing without them having to buy them and spend their own money.
Other uses
Fees earned from the protocol are one of the two primary use cases for SPELL. Abracadabra uses interest-bearing cryptocurrencies such as CRV, CVX, and YFI. These tokens can be provided to the platform as collateral to mint MIM, which is a USD-pegged stablecoin. Meanwhile, the SPELL token is distributed as farming incentives, team allocation, and even during the IDOs (Initial DEX Offerings), where users have to use the token to invest in new tokens that are being sold.
Governance
Finally, there is the matter of governance to discuss, which is another of the SPELL token’s two primary use cases. With the project being fully decentralized, its community of token holders is the one who makes decisions that will impact the future of the project. They can either submit proposals for new upgrades, features, changes, and alike, or they can vote on the proposals submitted by others in order to provide their own insight.
How Does Spell Token (SPELL) Work?
Spell Token (SPELL) is a reward token created and used by a decentralized lending platform Abracadabra.Money. The platform uses interest-bearing tokens, or ibTKNs (such as xSUSHI, yvUSDC, yvUSDT, yvYFI, and yvWETH) to offer collateral for borrowing another token called Magic Internet Money (MIM). MIM is a stablecoin pegged to the US dollar. So, in a way, it is not too different from DAI.
However, if users contribute to the project by engaging in one or more of many offered opportunities, such as yield farming, staking liquidity providing, and alike, they receive SPELL token rewards.
With SPELL, they can also participate in the project’s governance, or simply stick to earning rewards and slowly increasing their wealth through a combination of HODLing and receiving passive income.
Tokenomics
Understanding SPELL’s tokenomics is crucial for assessing its potential value. Below is a brief breakdown of what this looks like.
- Total Supply: The initial total supply of SPELL was 420 billion tokens.
- Circulating Supply: As of October 26, 2023 the circulating supply is around 145 Billion SPELL.
- Distribution: SPELL tokens were initially distributed through various means, including farming incentives, team allocations, and IDOs.
Notably, SPELL initially had an inflationary model. However, a recent proposal that was approved by the governance aims to change SPELL into a deflationary token by burning roughly 10.5 billion tokens. This change will be implemented over a period of time.
Risks and Controversies
Abracadabra.Money and SPELL, like many projects in the decentralized finance space, face a number of risks and have experienced some controversies. While the project has taken steps to mitigate these risks, they remain important factors for potential investors to consider.
Regulations
One significant area of concern is the regulatory uncertainty surrounding DeFi. As governments around the world grapple with how to regulate cryptocurrencies and decentralized platforms, changes in the legal landscape could have a substantial impact on Abracadabra.Money’s operations and the value of SPELL.
Depegging
Another point of contention has been the stability of MIM, the platform’s algorithmic stablecoin. MIM has depegged from its intended $1 value on multiple occasions, notably in early 2022 during a period of market volatility and again in the fall of 2023 after a hack. These incidents raise concerns about the inherent risks of algorithmic stablecoins and their vulnerability to market fluctuations and security breaches.
Trust in Oracles
Furthermore, Abracadabra.Money relies on external oracles to provide accurate price feeds for the assets used on its platform. If these oracles are compromised or provide inaccurate data, it could lead to incorrect liquidations or other issues that negatively affect users and the overall stability of the system.
How to Buy Spell Token (SPELL)
Currently, Spell Token (SPELL) is available for purchase on the following exchanges:
Uphold – This is one of the top exchanges for United States residents that offers a wide range of cryptocurrencies. Germany & Netherlands are prohibited.
Uphold Disclaimer: Terms Apply. Cryptoassets are highly volatile. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong.
Coinbase – A publicly traded exchange listed on the NASDAQ. Coinbase accepts residents from 100+ countries, including Australia, Canada, France, Germany, Netherlands, Singapore, the United Kingdom, and the United States (excluding Hawaii).
Kraken – Founded in 2011, Kraken is one of the most trusted names in the industry and offers trading access to over 190 countries, including Australia, Canada, Europe, and the United States (excluding Maine, New York, and Washington state).
Spell Token (SPELL) — The governance and rewards token of Abracadabra
Spell Token is not a token meant to change the world, but it is a token meant to encourage users to approach a project that is trying to improve decentralized lending. Furthermore, those who include it in their portfolio are also opening doors to numerous benefits of its native ecosystem, which is quite rewarding in itself, which is why we believe that the token does have a great future as a reward cryptocurrency.
