# Staked SPELL

###### tags: `Abracadabra` `sSPELL`

> This hackmd post has been written to give people informations and guidance around staking SPELL.

> This post will cover how staking works, on both Ethereum and other chains.

> A recent proposal was made to introduce mSPELL paying rewards in MIMs, check it out here : [AIP #8](https://forum.abracadabra.money/t/aip-8-an-update-on-abracadabra-fee-distribution-introducing-mspell-staking-pools/3218)

> Thanks to k𝜴 from the discord community, you can see a recap of this post at the bottom of the article. []()

## Context

As there is a lot of people being confused by how SPELL staking works, especially on other chains than Ethereum, I dediced to write this piece to explain it in details for anybody interested.

I will first explain how staking works on the Ethereum mainnet, and then go over how Abracadabra managed to bridge that concept over other chains.

Resources

- [Byebyedai](https://www.byebyedai.money/)
- [Abracadabra documentation](https://docs.abracadabra.money/)
- [Multichain app](https://multichain.org/)
- [Abracadabra Discord](https://discord.gg/ZWbXeqag)

## Why stake SPELL ?

### General informations

SPELL is the governance and revenue sharing token of the Abracadaba lending platform.

**SPELL** is a regular ERC20 token, which address can be found here : [https://etherscan.io/token/0x090185f2135308bad17527004364ebcc2d37e5f6](https://etherscan.io/token/0x090185f2135308bad17527004364ebcc2d37e5f6)

The SPELL token can be staked, you then recieve **sSPELL** as a representation of your staked SPELL amount.

Address : [https://etherscan.io/token/0x26fa3fffb6efe8c1e69103acb4044c26b9a106a9](https://etherscan.io/token/0x26fa3fffb6efe8c1e69103acb4044c26b9a106a9)

*On Ethereum you can (un)stake on the "stake" [page](https://abracadabra.money/spell-stake)*

Once you have sSPELL, this token allows you to participate in governance votes on the [Snapshot page](https://snapshot.org/#/abracadabrabymerlinthemagician.eth), and it gives you access to a share of the Abracadabra revenues.

As Abracadabra is a lending platform, every loan comes with :

- Upfront borrow fee on the borrowed amount
- Interests on the loan
- Liquidation risk

Those 3 parameters are applied to any loan given out on Abracadabra, and are denominated in MIMs ( Magic Internet Money ), the stablecoin of Abracadabra.

You can find an history of the revenues made by Abracadabra on the [analytics page](https://app.powerbi.com/view?r=eyJrIjoiOGFjN2QyMDgtMzRhMy00NDkzLTk2NDctNTBkZTQ0NzQ3ZjJkIiwidCI6IjYyZTU1MTgwLTQzNmQtNDYyZC1hMWIwLTZkMTg2NjRlZDAxNSJ9).

### The ratio

Around once every week, the MIMs generated through the loans taken on Abracadabra are collected by the team.
Those MIMs are then used to buy SPELL on the open market (on-chain or via FTX recently to reduce slippage).

[> Exemple of a 6.3m$ worth SPELL buyback](https://etherscan.io/tx/0xbc0bb23f1407703f374c275eb6c549894dd6039491cf377d3dd611ce7b8d3c0b)

The bought SPELLs are then added to the staking pool for stakers to collect.

The way it works in practice, is that the SPELL/sSPELL ratio grows after each buyback.

Example from the FAQ :
> Lets Imagine only 100 SPELL are staked, for a ratio of 1:1. Then we would have 100 sSPELL (and in the "SPELL pool" 100 sSPELL would be "backing" those 100 SPELL). So, if the team buys 10 SPELL for the sSPELL rewards pool, it basically puts this SPELL into this "backing pool". Thus, 110 SPELL are now backing the sSPELL pool (which still shows 100 sSPELL). If someone gives back his 10 sSPELL, he now receives 11 SPELL (instead of the 10 he put in)

*The sSPELL/SPELL ratio only grows over time after each buyback. (souce [Byebyedai](https://www.byebyedai.money/stats))*

If I had to sum it up with example values :

- User stake 100.000 SPELL
- He recieves 90.000 sSPELL
- *Buyback happens*
- User can unstake his 90.000 sSPELL for 110.000 SPELL

User made 10.000 SPELL profit from staking.

To unstake your sSPELL as SPELL, you can go on the "stake" page, and click the double arrows between the two input fields to switch them from staking to unstaking.

### Coming for a Centralised exchange

SPELL is now available on multiple centralized exchanges like Binance, Coinbase or FTX.

If you bought SPELL there, and want to stake it, you would first need to withdraw them to your personnal wallet ( Metamask or WalletConnect ).

Once you withdrew them, you can stake them on the Abracadabra website like explained before. Don't forget to have some ETH on the wallet to pay for the fees (usually it costs max 50$ to approve + stake).

## Staking on other chains than Ethereum

### The sSPELL/SPELL pools

We all know Ethereum fees can be a big turn off for people who want to interact with DeFi, but we also know that Ethereum remains the safest and most battle-tested smart-contracts chain to this date. SPELL staking probably wont move to any other chain anytime soon, so how can we offer users to stake on lower fees chains ?

The solution is simple : sSPELL/SPELL trading pools.

A trading pool will allow the exchange (swap) between 2 tokens, at a rate determined by the amount of tokens in the pool. If there is 10 ETH and 100 USDC in a pool, 1 ETH = 10 USDC, simple.

This works the same for sSPELL/SPELL. If there is 1200 SPELL and 1000 sSPELL in a trading pool, then the ratio is 1.2 SPELL/sSPELL.

The pool where the liquidity is the deepest for this are :

- **SpiritSwap** pool on Fantom : [Link](https://swap.spiritswap.finance/#/exchange/swap/SPELL/sSPELL)
- **Uniswap** pool on Arbitrum : [Link](https://app.uniswap.org/#/swap?chain=arbitrum&inputCurrency=0x3e6648c5a70a150a88bce65f4ad4d506fe15d2af&outputCurrency=0xf7428ffcb2581a2804998efbb036a43255c8a8d3)
- **SushiSwap** pool on Avalanche : [Link](https://app.sushi.com/swap?inputCurrency=0xce1bffbd5374dac86a2893119683f4911a2f7814&outputCurrency=0x3ee97d514bbef95a2f110e6b9b73824719030f7a)

Note that those reference pools are subject to change, feel free to come ask in the [Abracadabra Discord](https://discord.gg/ZWbXeqag) if you face any issue.

Where does those sSPELL come from you'll ask me ?

To achieve this, SPELL was staked on Ethereum for sSPELL, and then the sSPELL was bridged to other chains via the [Multichain](https://multichain.org/) app.

**It is strongly advised to check the different rates before doing your swap so you take best advantage of the difference. See more on this in the "Arbitrage" section.**

### Coming for a Centralized exchange

If you bought SPELL on a centralized exchange and want to stake them for cheap on a low fees chain like Fantom, Arbitrum or Avalanche, there is a chance you can withdraw there directly.

If the exchange you bought SPELL on allows you to withdraw directly to Fantom or Avalanche or Arbitrum, then you can just withdraw to your wallet and buy sSPELL with SPELL with the method described before.

**Be careful to select the right network when withdrawing from the exchange or your tokens will be lost !**

As far as I am aware, those are the chains available to withdraw to :

- Binance => Ethereum, Arbitrum, Avalanche, Fantom
- Coinbase => Ethereum
- Coinbase pro => Buy AVAX, send AVAX to Avalanche wallet, and buy SPELL with it
- FTX => Ethereum, Arbitrum

## Maintaining the ratio via arbitrage

> **This section is for more advanced users, you don't need to know this in order to stake SPELL.**

As the sSPELL/SPELL ratio on other chains come from a trading pool, it varies as much as the amount of tokens in the pool varies.

It's not rare to see the sSPELL/SPELL ratio on other chains being lower or higher than the Ethereum ratio, which serves as a reference.


*sSPELL/SPELL ratio on all the chains at time of writing ([Source Byebyedai](https://www.byebyedai.money/stats))*

The goal being to bring the ratios as close as possible to the Ethereum ratio, users can use a technique called arbitrage to do so.

Arbitrage consists of making profits by taking advantage of the price difference of the same asset on two different places.

This would result in the following values with a start of 100.000 SPELL :

- Swap 100.000 SPELL for 83.132 sSPELL on Avalanche | **100.000 * (1/1.2029)**
- Bridge 83.132 sSPELL to Ethereum
- Unstake 83.132 sSPELL for 102.186 SPELL | **83.132 * 1.2292**
- User made 2.186 SPELL profit

**Fees are not included in those examples ! Check on Multichain before to be sure the arbitrage is profitable after fees are deducted.**

> This technique can be applied between any chains, not only towards Ethereum. If their is a difference between the ratio on two chains, an arbitrage is possible and healthy for the ecosystem.

When a buyback is done on Ethereum, arbitragers will take advantage of the difference between the newly grown ratio on Ethereum and the lower ratios on other chains, therefore bringing it all to balance around the Ethereum ratio.

So if you bought sSPELL at a ratio X on Fantom for example, after the buyback you'll be able to sell them for more SPELL just like if you were unstaking on Ethereum.

## Conclusion

I hope this post will help anyone with questions relative to SPELL staking, especially relative to staking on other chains.

If you have more questions please feel free to come and ask them in the Abracadabra Discord, mods will be happy to answer you !

:mage: :handshake: :frog:

Clonescody

#### Recap made by k𝜴