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MIM Devs Propose Protecting DeFi Lending Platform Using Centralization

The developers of the Abracadabra platform, home of the Magic Internet Money (MIM) and SPELL tokens, have put forward a proposal for a centralized legal entity to take over certain management functions.

The lead developers of the Abracadabra DeFi lending platform have put forward a proposal to install a centralized legal entity to handle certain aspects involved in running the network. More specifically, the proposal lists managing trademarks, intellectual property rights and more efficient handling of server expenses.

The developers point out that the decentralized autonomous organization’s (DAO) current structure relies on community members paying privately for hosting and domain services. This leads to difficulties in defending intellectual property rights, and even a forced migration of the platform’s blog from Medium due to a copyright claim from another project.

Rather than undermining Abracadabra’s decentralized nature, it is claimed that these measures will protect it:

“Despite our commitment to decentralization, we’ve recognized the importance of introducing a certain degree of centralized legal structure. The purpose here is not to disrupt the decentralized nature of Abracadabra; in fact, it’s to protect it. Every crucial decision will continue to be governed by the SPELL token holders as it has always been.”

Indeed, it is the holders of the platform’s SPELL governance token who are being asked to vote on the proposal for a centralized entity. This is to take place over three stages, with the first being a vote to choose the jurisdiction of the new legal entity. The choices put forward by the development team are Malta, Switzerland, Bermuda and Singapore, although token holders also get an option for ‘none of the above’.

The second phase of voting will decide exactly what form the legal entity will take, with options potentially including legal offices, trustees and specialist attorneys. The final voting phase will specify the detailed responsibilities of this new entity.

Abracadabra is a DeFi lending platform which issues loans against collateral made up of interest-bearing tokens (ibTKNs). These tokens are issued by other DeFi networks when tokens are staked for yield farming. For example, if a user stakes USDT they may receive illiquid yUSDT which accrues interest over time.

The user can then use these tokens as collateral for loans denominated in the Magic Internet Money (MIM) stablecoin, which has a dollar peg. These MIM tokens could potentially then be converted into more USDT and re-staked for additional yield.

As we previously Observed, in June 2022 the MIM stablecoin lost its dollar peg due to a reported $12 million of bad debt following the collapse of the Terra ecosystem. There was a second depeg after the FTX fallout, but the protocol was able to remain solvent and regain market trust on both occasions.