Abracadabra proposal seeks orderly shutdown of MIM and protocol as effective backing falls below 4%

News Editor

2026-09-30 02:50:33

A governance proposal on Abracadabra’s forum calls for an orderly wind-down of the MIM stablecoin and the broader Abracadabra protocol after what it describes as a series of attacks left the system undercollateralized with no viable route back to its peg. The proposal says total collateral backing MIM debt stands at about $1.2 million, including roughly $300,000 in the Arbitrum WETH Cauldron, leaving around $900,000 that can actually be used to repay MIM. Against nearly $22 million in MIM circulating outside protocol-controlled addresses, that implies about $21 million in bad debt and an effective collateral ratio below 4%. Under the plan, collateral would be withdrawn from Cauldrons where possible, swapped into ETH, and distributed through a Merkl contract on a pro rata basis to borrowers and MIM holders. Borrowers would receive the value of their posted collateral after deducting MIM debt, while MIM holders would share the remaining assets based on their balances at the time of the snapshot. The proposal currently estimates a recovery value of about $0.04 per MIM. It also flags about $1 million in collateral in Stargate USDC and USDT Cauldrons as being at risk after the LayerZero V1 relayer deprecation notice requiring withdrawals by Dec. 15. Voting is set to end on Oct. 1, with 99.48% of votes currently in favor.

Abracadabra community members have put forward a governance proposal to wind down the MIM stablecoin and the Abracadabra protocol in an orderly process, according to the project’s governance page cited by BlockBeats on Sept. 30.

The proposal says MIM is now undercollateralized after a series of attacks and that there is no workable path to restore its peg. On that basis, it calls for a gradual liquidation of the protocol and distribution of remaining assets.

Collateral and bad debt

The document puts the total collateral supporting MIM debt at about $1.2 million. Of that amount, roughly $300,000 sits in the Arbitrum WETH Cauldron, leaving about $900,000 in collateral that can actually be used to repay MIM.

At the same time, MIM circulating outside protocol-controlled addresses is close to $22 million. That leaves the protocol with about $21 million in bad debt and puts MIM’s effective collateral ratio below 4%.

How the assets would be distributed

Under the proposal, the protocol would try to withdraw collateral from each Cauldron where possible and convert it into ETH. The proceeds would then be distributed through a Merkl contract to borrowers and MIM holders on a proportional basis.

Borrowers would receive the value of their deposited collateral after subtracting their MIM debt. MIM holders would split the remaining assets according to their MIM balances at the time of the snapshot. The current estimate values each MIM at about $0.04 in recoverable assets.

Additional risk tied to LayerZero V1

The proposal also points to a recent deprecation notice for the LayerZero V1 relayer, which requires funds to be withdrawn before Dec. 15. That puts about $1 million in collateral in the Stargate USDC and USDT Cauldrons at risk, according to the document.

Snapshot and vote timeline

The plan calls for a snapshot of MIM balances and Cauldron and DegenBox positions after Oct. 15, 2026. Once collateral conversion is complete, the protocol would deploy the Merkl contract and open redemptions.

The governance vote is scheduled to end on Oct. 1. At the time cited in the report, 99.48% of votes were in favor.

This article was originally published by Bit.Fan. For more cryptocurrency news and market insights, visit www.bit.fan.

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