Alchemix (launched February 2021) is an innovative, hybrid DeFi (Decentralized Finance) application that allows the formation of yield-backed synthetic assets. With its unique ability to provide collateral that can also generate yield, Alchemix can offer a self-paying loan that has effectively no risk of liquidation.
This product, “Vaults”, is the centerpiece of the Alchemix ecosystem and uses Yearn. finance as a building block for yield on underlying assets like DAI, with support for ETH and others coming soon.
Alchemix was founded by pseudonymous developers led by Scoopy Trooples, the platform was launched in February 2021. The only collateral accepted at launch was Dai, which could be used to mint synthetic alUSD tokens and had a collateralization ratio minimum of 200%. The team has since created a new vault to allow users to deposit ETH and mint alETH tokens with a collateralization ratio minimum of 400%.
There was an incident involving the ETH vault shortly after launch in which users were able to withdraw collateral without repaying their loans, resulting in a loss of 2,200+ ETH. The Alchemix team organized a campaign encouraging users to return the lost ETH in exchange for exclusive NFT and ALCX rewards, eventually recovering more than half of the funds.
Alchemix is committed to decentralization, with plans to utilize fully on-chain governance and convert it into a DAO that is controlled solely by the community. In the future, a portion of the overall yield within the protocol will be diverted to the DAO treasury to pay developers and permanent staff to grow and maintain the protocol.
Alchemix Finance is a future-yield-backed synthetic asset platform and community DAO. The platform provides advances on a user's yield farming through a synthetic token representing a fungible claim on any underlying collateral in the Alchemix protocol.
Alchemix has four main components. Vaults, transmuter, token distribution, and Alchemix Dao. The vault acts as the hub for generating yield advances. It shares similarities with lending platforms such as MakerDAO and AAVE. The transmuter allows users to stake their synthetic assets and, over time, convert them into their base assets.
The platform empowers users to get advances on their yield by minting a synthetic version of their DAI collateral and uses various mechanisms to peg the synthetic token to the deposited asset. The collateral will be to work earning yield in Yearn Finance Network (YFN).
The harvested yield helps pay off the user's debt in the system. A 10% cut is taken from the yield harvest, which goes into the treasury, and Yearn pays Alchemix affiliate fees for adding TVL to its protocol.
After the release of Alchemix V2, the team added multiple collateral types for alUSD, including USDC and USDT, along with the addition of al-Assets, such as alETH and alBTC. The same 10% fee applies to the harvests of these vaults.
Vaults are how users manage their yield advance positions. First, users deposit DAI into the contract. DAI is then deployed by the Alchemix contract to earn yield in the Yearn yvDAI Vault.
Users can mint alUSD up to 50% of the amount of DAI they have deposited (eg. if a user deposits 1000 DAI, they can generate up to 500 alUSD). As yield is harvested from the yvDAI Vault, users will see their alUSD debt decrease, and if they wait long enough, it will be completely paid off by the Alchemix protocol.
In other words, the loan pays itself off. There are many options for users to manage their Vault once it is opened. If at any point user is more than 200% collateralized, they can withdraw DAI or mint alUSD until their vault reaches a 200% collateralization ratio. As the protocol repays users debt, they can withdraw more DAI or mint more alUSD as desired.
Needing to commit to a long lockup time may be unappealing for some DeFi users, or users may have a time when they need to access their underlying collateral, so it is possible for users to settle their Vaults early. Users can repay their alUSD debt using alUSD and/or DAI.
The Alchemist.sol contract treats alUSD and DAI the same, so a 1000 alUSD debt could be paid with 1000 alUSD, 1000 DAI, or any mix of the two. Furthermore, if a user is short of funds to repay the debt, they can liquidate their collateral to pay off their debt. Once a user has 0 alUSD debt remaining, they are free to withdraw all of their deposited collateral, and if they forget to withdraw their collateral, they will be credited alUSD with the generated yield for that period until they withdraw.\
The Alchemix dApp calls a harvest function on a regular basis, which collects the yield generated by all the deposits into the system. The collected yield counts towards the maturation of the Vault and is then transferred into the Transmuter pool. Users can stake alUSD in the Transmuter and their tokens will be converted into the base asset over time as the yield flows in.
When users go to transmute and claim their converted tokens, an equal amount of alUSD tokens will be burned. So if a user has 1200 alUSD staked and 400 DAI has been allocated to their staking position, when they claim this, 400 of their alUSD will be converted into DAI, resulting in a balance of 800 alUSD and 400 DAI for the user. In effect, staked alUSD behaves like a bond, and eventually matures into its base asset.
Depending on the amount of total alUSD staked in the transmuter, this conversion rate may be much higher than the generated yield from the protocol and presents a new DeFi primitive. The transmuter is mostly automated, but it does rely on users to make economic decisions to facilitate its smooth operation. This is mainly because a staking position can be overfilled.
When this happens, it presents an economic opportunity to other alUSD stakers by allowing them to force transmute an overfilled position. If a 1000 alUSD position is filled to 1050 DAI, then the person who forces that position to be transmuted will have the surplus 50 DAI instantly applied to their transmuter position. If the user who force-transmutes is not staking alUSD, then the DAI-overflow will be distributed globally to all stakers. This presents a win-win scenario, with baked-in incentives for cron-jobs and what amounts to gasless conversions for stakers should this happen to their staking position.
Alchemix will offer yield farming to fulfill a number of objectives for the protocol. Farmers will be rewarded ALCX tokens, which will have governance voting rights in the ecosystem. Additional utility for the ALCX token may be added by the community. The core team members are strong believers in the fair launch philosophy, and as such the 60% of ALCX tokens will go to the community.
The DAO will receive 15% of the supply to be controlled by the community. The DAO will receive an additional 5% of the supply of ALCX tokens to be reserved for bug bounties. The rest of the token distribution will be allocated to farming. Yield farming participants will have 60% of the supply allocated to them for staking select tokens and LP tokens.
There will be four incentivized pools. The first one is a simple alUSD pool, where users can stake alUSD and receive ALCX tokens. This is to encourage the minting of alUSD, and gives users a very low barrier to entry to start earning ALCX tokens. The second pool is for alUSD-3CRV pool tokens.
This yield farming pool will incentivize having deep liquidity and a strong peg for alUSD on the popular Curve AMM DEX, thus maximizing its utility as a DeFi primitive in the greater DeFi ecosystem. The third pool is for ALCX/ETH Sushiswap tokens. The purpose of this pool is to bootstrap liquidity for ALCX. The fourth pool is just for simple staking of ALCX, and provides an opportunity for ALCX holders to accumulate more via holding.
ALCX token is an ERC-20 token used to govern and incentivize liquidity for the Alchemix protocol. Its primary use cases are governing the Alchemix decentralized autonomous organization (DAO) and rewarding network participants for providing liquidity.
Currently, ALCX can be staked within the protocol to earn additional ALCX tokens distributed as part of Alchemix's token emissions schedule. With the release of Alchemix V2, it is expected that stakers will begin receiving a share of the yield the protocol generates. In exchange, ALCX stakers risk having their stake slashed in the event of a hack or exploit to help make the protocol whole after a loss.
Alchemix had an initial pre-mine of 478,612 ALCX tokens, which was estimated to be 20% of the total ALCX tokens in circulation after 3 years based on the token's emissions schedule. All pre-mine tokens were sent to the treasury, with 358,959 tokens allocated for use at the discretion of the community and 119,653 tokens reserved for bug bounties. At launch, 32,000 ALCX tokens from the pre-mine were allocated to liquidity pools.
The original script to mint the pre-mine ALCX tokens was accidentally run twice, so 957,224 tokens were initially created. The excess 478,612 tokens were sent to a burner address in order to not impact the plan laid out by the team originally.
The token distribution will be the following:
- The Alchemix DAO will receive a premine of 15% of the projected supply after three years. Usage of these tokens is completely up to the community's discretion.
- The Alchemix DAO will also have an additional reserve of 5% of the projected three-year supply for bug bounties.
- The remaining 80% of the tokens can be obtained by staking certain tokens and liquidity pool tokens in the Staking Pools contract.
- The Alchemix founders, onboarded developers, and community developers who build on Alchemix will have access to an exclusive staking pool, which will receive 20% of the ALCX block reward. This equates to 16% of all emissions.
- Stakers and liquidity providers are eligible to obtain 80% of the ALCX block reward, equating to 64% of all emissions.
The pattern of the ALCX token distribution attributes more importance to those who contribute to the Alchemix protocol. The token distribution also ensures that no one from the development team will accumulate enough tokens to control the protocol while on the other hand it rewards them for their work and encourages them to continue working on the protocol.
Date: February 2021 Type: Launch
The ALCX pre-mine is completed and alUSD vaults are launched on the Alchemix platform, allowing users to deposit Dai in order to take out a loan in the alUSD synthetic stable coin.
Date : June 2021 Type : Product Launch
The alETH vault went live with a guarded launch in June 2021. The vault was removed shortly after when a bug in the contract allowed users to withdraw their collateral without repaying their loans resulting in a loss of 2,200+ ETH but has since been redeployed.
Date : December 2021 Type : Protocol Upgrade
Alchemix V2 will create the DAO, introduce new asset vaults, such as BTC, allow stakers to capture a share of protocol revenue, and provide users customizable sources of yield. An official release date has not been released, however, V2 is expected to launch before the end of Q4 2021.
CMS, Alameda Research, and Immutable Capital led a $4.9 million funding round for the decentralized finance (DeFi) lending protocol Alchemix.
Alchemix sold the protocol's native ALCX tokens to investors for $700 each. As a reward for their contributions, the proceeds were distributed to the protocol's founders. Since this was the protocol's first round of fundraising, Alchemix noted that all previous testing had been done for free.
CMS, Alameda Science, Immutable Capital, Nascent, Protoscale Capital, LedgerPrime, eGirl Capital, Fisher8 Capital, Orthogonal Capital, and one person, whose name was not given, were the investors in order of investment size.
According to the protocol, the funding round was used for audits, consultants, recruiting, marketing, and community activities, as well as allowing the founders to devote full-time to production.
Olympus DAO x Alchemix
Olympus DAO x Alchemix partnership to introduce new OHM reserve bonds utilizing the alUSD-3crv pool LP tokens. Olympus is entering a new phase as it seeks to bolster its treasury through partnerships with other protocols. Olympus can leverage its unique bonding mechanism, in which it acquires assets through the sale of OHM, to help partners achieve sustainable liquidity for their most important pairs.
Maintaining a 1:1 alUSD: USD peg is central to the Alchemix Dai vault. To date, the peg has remained strong due to a combination of robust liquidity, market incentives, and a backstop in the form of the Transmuter, which ensures that alUSD can be redeemed 1:1 for DAI. Much of the ~$400 million in liquidity in the curve pool is attributable to liquidity mining incentives, with the pool earning 2900 ALCX per week.
By creating OHM bonds that would allow Olympus to acquire alUSD-3crv LP tokens, Alchemix can reduce its reliance on liquidity incentives and ensure that substantial liquidity remains locked in the Olympus treasury. Furthermore, these bonds can serve as a test run for other LP assets in the future including alUSD/OHM, ALCX/OHM, alETH/ETH, etc.
Benefits for Alchemix:
- alUSD-3crv liquidity “locked” in the Olympus treasury, forming a liquidity floor
- Reduce pool reliance on liquidity mining incentives
- Free up ALCX for other pool incentives
- Olympus will never sell ALCX tokens earned through staking; while Olympus will maintain the tokens for governance, they can be viewed as “burned” from a market perspective
Benefits for Olympus:
- Increase and diversify treasury assets
- A new form of productive backing
- Treasury earns ALCX and Curve rewards in addition to swap fees
- Proof of concept
Alchemix x Chainlink
Alchemix has integrated Chainlink keepers into its ecosystem to allow for even more seamless services on its DeFi platform, the Chainlink team shared in a release with CryptoSlate.
Alchemix routes user deposited collateral into Yearn vaults—on-chain yield aggregation strategies that chase the highest returns across the DeFi ecosystem. The returns generated are then used to repay user debt. As a result, users are effectively provided an advance on their future yield, increasing capital efficiency and resulting in a new “money LEGO” available for use in other smart contract applications.
Now, by using Chainlink Keepers, Alchemix is now truly set-and-forget, meaning a user can take out a DeFi loan, earn a DeFi yield, and pay the DeFI loan back over time with their yield without any manual input.
The Chainlink team has also sponsored the launch of a new Chainlink Price Feed for Alchemix native token ALCX and stablecoin alUSD to support their adoption as collateral across the DeFi ecosystem.