Abracadabra proposes hiking loan interest rate by 200% to manage Curve risk
Abracadabra Money, a cross-chain lending platform, has proposed increasing the interest rate on its outstanding loans to manage risks associated with its exposure to Curve DAO (CRV). The proposal drew mixed reactions from the community, with several questioning the modification of loan terms, while others called it a great plan to cut down exposure to CRV.
Abracadabra protocol allows users to earn money by using interest-bearing assets such as CRV, Convex Finance (CVX) and Yearn.finance (YFI) as collateral to mint Magic Internet Money (MIM) — a United States dollar-pegged stablecoin. Spell Token (SPELL) is the native governance and staking token of the Abracadabra platform.
Curve Finance founder Michael Egorov has nearly $100 million in loans across various lending protocols backed by 427.5 million CRV, which is 47% of the total circulating supply of CRV tokens. The Curve founder has 51.65 million CRV collateral and 14 million MIM debt positions on Abracadabra.
Abracadabra is exposed to significant amounts of CRV risk due to recent exploits on the decentralized finance (DeFi) protocol, leading to a liquidity crisis. The incident changed the liquidity conditions that led to the listing of CRV as collateral on Abracadabra.
In order to address the issue, a new proposal has been made to apply collateral-based interest to both CRV cauldrons. Cauldrons allow users to borrow MIM using another asset as collateral, with each cauldron being collateral specific.
The improvement proposal called for an increase in the interest rate to reduce Abracadabra’s total CRV exposure to around $5 million in borrowed MIM.
Related: Ethical hacker retrieves $5.4M for Curve Finance amid exploit
The proposal aims to apply collateral-based interest similar to what the decentralized autonomous organization (DAO) did with the Wrapped Bitcoin (WBTC) and Wrapped Ether (WETH) cauldrons. All interest will be charged directly on the cauldron’s collateral and will immediately move into the protocol’s treasury to increase the reserve factor of the DAO.
The DeFi protocol proposal estimated that for an $18 million principal loan amount, the base rate would be 200%. At this interest rate, the loan would be fully covered within six months. The proposal noted that the base rate would decrease as the principal is repaid.
Voting for the proposal opened on Aug. 1 and will last until Aug. 3, with 99% of the votes cast in favor of the proposal by publication.
The proposal also drew various reactions from the crypto community, including Frax Finance executive Drake Evans who called it a governance rug.
I’m sorry but jacking interest rates to 200% via governance is a rug. Changing the fundamental terms of a loan (10x interest rate) in a single transaction is very bad and we should call it out.
Very sympathetic to protecting protocol integrity but rugging is not the way https://t.co/sqWy7R0YPq
— Drake Evans (version 3) (@DrakeEvansV1) August 2, 2023
Others supported the proposal, claiming it could help the lending protocol eliminate CRV exposure.
If @MIM_Spell really tries this, I’d say there’s a good chance $MIM loses all $CRV gauges fairly quickly.
41m MIM (61% of total mcap) is on Curve!$SPELL #DeFi https://t.co/vpm3bH4xct
— DefiMoon (@DefiMoon) August 2, 2023
With the price of CRV experiencing a stress test, the risk of a token dump has increased. In the meantime, many lending protocols are looking for ways to clear their CRV exposure.
Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.
Magazine: Should crypto projects ever negotiate with hackers? Probably
Politics
Labour deputy leadership candidate accuses opponent’s team of ‘throwing mud’ and briefing against her
Lucy Powell has accused Bridget Phillipson’s team of “throwing mud” and briefing against her in the Labour deputy leadership race in a special episode of Sky’s Electoral Dysfunction podcast.
With just days to go until the race is decided, Sky News’ political editor Beth Rigby spoke to the two leadership rivals about allegations of leaks, questions of party unity and their political vision.
Ms Powell told Electoral Dysfunction that through the course of the contest, she had “never leaked or briefed”.
But she said of negative stories about her in the media: “I think some of these things have also come from my opponent’s team as well. And I think they need calling out.
“We are two strong women standing in this contest. We’ve both got different things to bring to the job. I’m not going to get into the business of smearing and briefing against Bridget.
“Having us airing our dirty washing, throwing mud – both in this campaign or indeed after this if I get elected as deputy leader – that is not the game that I’m in.”
Ms Powell was responding to a “Labour source” who told the New Statesman last week: “Lucy was sacked from cabinet because she couldn’t be trusted not to brief or leak.”
Ms Powell said she had spoken directly to Ms Phillipson about allegations of briefings “a little bit”.
Bridget Phillipson (l) and Lucy Powell (r) spoke to Sky News’ Beth Rigby in a special Electoral Dysfunction double-header. Pics: Reuters
Phillipson denies leaks
But asked separately if her team had briefed against Ms Powell, Ms Phillipson told Rigby: “Not to my knowledge.”
And Ms Phillipson said she had not spoken “directly” to her opponent about the claims of negative briefings, despite Ms Powell saying the pair had talked about it.
“I don’t know if there’s been any discussion between the teams,” she added.
On the race itself, the education secretary said it would be “destabilising” if Ms Powell is elected, as she is no longer in the cabinet.
“I think there is a risk that comes of airing too much disagreement in public at a time when we need to focus on taking the fight to our opponents.
“I know Lucy would reject that, but I think that is for me a key choice that members are facing.”
She added: “It’s about the principle of having that rule outside of government that risks being the problem. I think I’ll be able to get more done in government.”
👉 Click here to listen to Electoral Dysfunction on your podcast app 👈
Insider vs outsider
But Ms Powell, who was recently sacked by Sir Keir Starmer as leader of the Commons, said she could “provide a stronger, more independent voice”.
“The party is withering on the vine at the same time, and people have got big jobs in government to do.
“Politics is moving really, really fast. Government is very, very slow. And I think having a full-time political deputy leader right now is the political injection we need.”
The result of the contest will be announced on Saturday 25 October.
The deputy leader has the potential to be a powerful and influential figure as the link between members and the parliamentary Labour Party, and will have a key role in election campaigns. They can’t be sacked by Sir Keir as they have their own mandate.
The contest was triggered by the resignation of Angela Rayner following a row over her tax affairs. She was also the deputy prime minister but this position was filled by David Lammy in a wider cabinet reshuffle.
HMRC sent nearly 65,000 warning letters to crypto investors last year, more than double the previous year, as the UK steps up efforts to trace undeclared capital gains.
Politics
‘Additional resources’ offered by govt to reverse ban on Maccabi Tel Aviv fans at Villa game
The government says it is exploring what “additional resources and support are required” to allow “all fans” to attend Maccabi Tel Aviv’s match against Aston Villa next month.
Supporters of the Israeli side have been told they are not allowed to attend November’s game in Birmingham after a decision by Birmingham’s Safety Advisory Group (SAG).
The group – made up of local stakeholders, including representatives from the council, police and event organisers – said the decision was due to a high risk of violence based on “current intelligence and previous incidents”.
Politics live: MPs react to Maccabi Tel Aviv fan ban
The decision has been criticised across the political spectrum, with Sir Keir Starmer describing it as a “wrong decision” while Tory opposition leader Kemi Badenoch called it a “national disgrace”.
In a statement on Friday night, a government spokesperson said: “No one should be stopped from watching a football game simply because of who they are.
“The government is working with policing and other partners to do everything in our power to ensure this game can safely go ahead, with all fans present.
“We are exploring what additional resources and support are required so all fans can attend.”
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Birmingham residents react to the Maccabi fan ban
Meanwhile, Home Secretary Shabana Mahmood said: “Antisemitism is a stain on our society that shames us all. Every football fan, whoever they are, should be able to watch their team in safety.
“This government is doing everything in our power to ensure all fans can safely attend the game.”
The prime minister’s spokesman previously said Sir Keir would “do everything in his power to give Jewish communities the security they deserve”.
Read more:
Why are fans banned – and has this happened before?
How this raises questions about one of the UK’s biggest cities
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Badenoch: Fan ban a ‘national disgrace’
The Home Office offered to provide more police for the event, while Culture Secretary Lisa Nandy and Communities Secretary Steve Reed also intervened.
However, senior police insisted the ban was necessary and cited clashes and hate crime offences committed when the Israeli team travelled to Amsterdam to play Ajax last year.
The Aston Villa vs Maccabi Tel Aviv match – set to take place on Thursday 6 November – is a Europa League fixture.
UEFA, which runs the tournament, had urged UK authorities to ensure away fans could attend.
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