🔍 Introducing MIM
Users can deposit Interest-Bearing Assets on abracadabra, and use those as collaterals to borrow the stable coin MIM but how does MIM work? Abracadabra uses interest-bearing crypto assets as collateral to mint MIM, which can be swapped for other stablecoins. Loan liquidations on Abracadabra differ from other stablecoin/lending protocols, in that each collateralized debt position (CDP) is unique and has its own liquidation price. When the liquidation price for an individual CDP is crossed, a liquidator can buy the position by paying off any outstanding MIM.
Since MIM is a USD pegged stable coin, it needs to remain pegged to the USD. The mechanics used rely on arbitrage, keeping it simple. This can happen in several ways:
📍 Users that hold debt, in MIM, might notice that MIM is trading on some market below 1 USD and decide to buy some MIM at this discount to repay some of their debt. This purchase of MIM will have a price rising effect relative to their volume.
📍 Users that hold components (valid collateral), might notice that MIM is trading on some market above 1 USD and decide to open a position and sell the MIM borrowed to put to use elsewhere. This transaction will have a price lowering effect relative to their volume.
📍 Users that hold other cryptocurrencies, (stablecoins or not) might see MIM trading differently on two of the above mentioned markets and decide to buy MIM on one market where the price is below 1USD and sell on another where the price is either at 1USD or above. This can also happen in reverse.
In most cases, a lot of the Market to Market arbitrage is done by automated bots that constantly monitor pools for opportunities to capitalize on these price differences. This has the benefit of having price pegs being corrected quite rapidly.
MIM presents itself as a stablecoin with high historical volatility and a modest market cap, for this reason it has been classified as a high risk stablecoin, but has shown resilience to various market phases, especially during the bear market.
