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DeFi Deep Dive 2: Alchemix
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DeFi Deep Dive 2: Alchemix

A Weekly Series Profiling Protocols Featured on DeFi Llama

DefiLlama
Mar 30, 2021
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DeFi Deep Dive 2: Alchemix
defillama.substack.com

🦙 DeFi Llama tracks over a hundred protocols. How well do you know them all? Each week our staff of llamas perform a deep dive on one of the protocols🦙

For millenia alchemists dreamed of turning ordinary materials into gold. Alchemix has perhaps found the solution: loans that repay themselves.

Twitter avatar for @thetechn0craticthetechnocratic @thetechn0cratic
Might be the best eli5 explanation of @AlchemixFi ive seen yet. Thank you @0xdef1
Image

March 15th 2021

112 Retweets546 Likes

Alchemix allows you to take out a loan that will never be liquidated. They offer loans that automatically repay themselves over time, ensuring you never need to lose your collateral.

They can do this thanks to the emergence of yield farming aggregators like Yearn. Nowadays it’s ridiculously easy to reliably earn a yield on stablecoins within DeFi. Alchemix’s framework puts your collateral to work earning yield, and applies this yield toward repaying your loan. You can exit early, or just sit around and wait for the loan to repay itself.

Minds are being blown as users start to understand the concept. Here are a pair of thoughtful threads describing the implications:

Twitter avatar for @0xRafi0xRafi @0xRafi
1/ $ALCX @AlchemixFi (
alchemix.fi) This one most of you already know, but their product is so unique and there’s so much bullish stuff coming for Alchemix that it still deserves a thread. Because come on, loans that repay themselves! What’s not to love about this?
Image

March 28th 2021

124 Retweets426 Likes
Twitter avatar for @ogibersteinOleg Giberstein @ogiberstein
People are starting to see the incredible value in @AlchemixFi but few understand the full implications. Let's take a look. 1/n

March 27th 2021

10 Retweets31 Likes

All of this allows for innovative trading strategies:

Twitter avatar for @basedkarbondavis 🐺🦊 @basedkarbon
Want to know what’s so special about @AlchemixFi Imagine this: - You can deposit $100k - Borrow $50k - Lose the entire $50k in a rug pull - Not lose the $100k - Loan repays itself - Borrow and lose another $50k

March 26th 2021

45 Retweets514 Likes

As described in the white paper, the Alchemix ecosystem is beautifully structured into four main components: Vaults, Transmuter, Farming, and Treasury:

How Alchemix works

Vaults cover the yield advance. Users can deposit DAI (and eventually others), and receive up to 50% of the DAI back in the form of alUSD that is fungible as a dollar. Alchemix deposits the DAI into Yearn and earns yield, which goes into repaying the loan. Whenever users have a positive balance they can withdraw DAI or mint USD at their discretion. There’s never any risk of the collateral being automatically liquidated, although users have options for voluntarily liquidating their position if they don’t wish to have their funds locked.

Transmuter is responsible for collecting yield generated by all deposits into the system. Users can stake alUSD into transmuter, which acts like a bond to mature into DAI. Although this portion is operation is automated, it does require users to actively make sure their position does not overflow. If a 1000 alUSD position filled to 1050 DAI, other stakers can jump in and claim the surplus.

Farming allows users to earn the ALCX token which provides governance rights and potential future utility. The ALCX token emission is planned to decrease linearly from 22,344 to 2,200 per week, to provide full clarity upfront about the inflation schedule.

Treasury processes the yield, maturing positions in the Vault and sending them to Transmuter. 10% of this is passed to the DAO for further development, the direction of which is dictated by vote of ALCX holders.

The friendly Alchemix offering has generated incredible growth. In a month the protocol has already accumulated nearly a billion dollars in value locked. Have fun transmuting your money!

Twitter avatar for @scupytrooplesscoopy trooples @scupytrooples
It's the one month anniversary of @AlchemixFi And what a month it has been. We have ~800m TVL, ~200m supply of alUSD with a strong liquid peg, and over 200m DAI locked in our contracts. We are blown away and have a lot of people to thank that helped us get here. 👇

March 27th 2021

29 Retweets216 Likes
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DeFi Deep Dive 2: Alchemix
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