A Step Further towards the democratisation of Cauldrons

The beauty of open protocols is that the code is there, anyone can read it, learn it and then essentially use it and build their own things around it. In other words it makes it possible for anyone to build on-top of protocols.

As a whole this means that projects can innovate on new products and features while other projects can easily integrate with existing products.

This, of course, is a huge innovation, especially if compared to traditional finance. If two financial companies’s teams want to make a partnership, they first need to compare ideas, find a deal that is mutually beneficial for both and then move everything to the legal and compliance departments. This whole process can take more than year, making following the market trends extremely difficult.

With Abracadabra, this process is gone.

The current products of Abracadabra are relatively simple, as you know we have cauldrons, which are smart contracts that allow funds to be deposited as collateral. In reality this is the only function that these cauldrons have. Separately then, top ups of MIM occur, these top ups already imply the amount that needs to be paid onto (fees) that then go towards Abracadabra/sSpell holders.

So what this really means is that any project, can decide to build a cauldron.
Now our documentation is not great currently. We wanted however to make a test, since we want to go the route where projects build these cauldrons, then, governance just votes whether MIM should be backed by these assets and finished, just like that, new cauldrons exist!

So what are the steps that a project needs to take to build a cauldron, get it deployed and then get MIM topped up?

1. The projects need to learn how the cauldrons work, and deeply understand the code.
2. The project builds the cauldron.
3. The project themselves deploy this contract on either Bentobox or Degenbox, depending on what they are looking for.
4. With deploying the contract the team sets parameters of collateral type, interest rate, borrow fee, etc.
5. Then this cauldron can be deployed on the projects frontend, plus can also be handed over to Abracadabra so that it is added to the Abracadabra frontend IF Abracadabra governance votes this in.
6. If Abracadabra governance approves the cauldron, MIMs are topped up to this cauldron.
7. The fees generated then go to Abracadabra and sSpell holders as usual.

Now of course risks exist with this.

If projects or individuals are free to build these cauldrons they may input malicious code, due to this governance really has to set an extremely strong standard on security. Of course MIM should not be topped up to a malicious cauldron/contract. This is something we will need to figure out, whether there is a security council etc.

While we were internally discussing this whole move towards a more decentralised and collaborative way of moving cauldrons forward we wanted to do a pilot.

So the Pilot is now here.

Squirrel a few weeks back made a governance proposal on the behalf of Popsicle Finance to make a partnership in terms of fee sharing for leveraged LPs. The community brought up points in terms of the partnership not being fair.

Exactly for this point the aspect of this decentralisation of cauldron building is fantastic.

Popsicle Finance has now built cauldrons for their PLPs (Uniswap V3 optimised LPs, to read more check here). These cauldrons were reviewed by Abracadabra Team and they are up to our standards. The terms for the Cauldron are exactly the same as for other LP cauldrons that Abracadabra has:

• Interest Rate: 3%
• Maximum Collateral Ratio: 85%
• Liquidation Fee: 8%
• Borrow Fee: 0.5%

All of these collected fees will go to Abracadabra and sSPELL holders, if the governance votes these cauldrons in.

A governance vote will now need to be made to decide whether we want these PLPs as collateral for MIM. Popsicle puts them on their frontend, and the fees as previously mentioned are given to Abracadabra.

In Conclusion

We want to reiterate that Abracadabra is a decentralised protocol, with this step of essentially allowing ANYONE and EVERYONE, to make cauldrons we are drastically changing the fee generation game of Abracadabra.

Furthermore we are making it possible for our team to focus on more innovation, rather than just building and deploying cauldrons. Governance does become more important since we need to do more in depth security reviews as we are not deploying all the contracts anymore. All in all, we believe that this step is moving into the direction of making it easier for projects to build cauldrons themselves. And it is a big one.

We are excited to see what other projects start building!

As usual, if you have questions or concerns do not hesitate to reach us out on Discord.