So... "loans that pay themselves off" is a great meme but what actually goes on under the hood of @AlchemixFi ?
Weather was gloomy today so I spent my not-so-lovely Saturday afternoon writing a thread👇
Weather was gloomy today so I spent my not-so-lovely Saturday afternoon writing a thread👇
https://twitter.com/thekriskay/status/1380631352316428291
1/
Alchemix is a platform to create synthetic assets backed by yield
In simple terms, the borrower gives up yield on his assets to borrow a certain amount of money today (on Alchemix, you can borrow up to 50% of your collateral value)
Alchemix is a platform to create synthetic assets backed by yield
In simple terms, the borrower gives up yield on his assets to borrow a certain amount of money today (on Alchemix, you can borrow up to 50% of your collateral value)
2/
For example:
If I deposit 1000 DAI today, I can borrow up to 500 alUSD
At today's yields, ~38.5% APY coming from
- Yearn yDAI Vault: 10.9% APY
- Boosted Alchemix Yield: 27.6% APY
my loan will be "repaid" on 2 Feb 2023
For example:
If I deposit 1000 DAI today, I can borrow up to 500 alUSD
At today's yields, ~38.5% APY coming from
- Yearn yDAI Vault: 10.9% APY
- Boosted Alchemix Yield: 27.6% APY
my loan will be "repaid" on 2 Feb 2023
3/
Since yields are variable in DeFi, the estimated date of maturity for my loan will vary as well
Since yields are variable in DeFi, the estimated date of maturity for my loan will vary as well
4/
Where are these yields coming from?
Deposit DAI into Alchemix -> DAI is deposited into @iearnfinance 's yvDAI Vault to earn yield
Where are these yields coming from?
Deposit DAI into Alchemix -> DAI is deposited into @iearnfinance 's yvDAI Vault to earn yield
5/
Eventually, the total amount borrowed will be paid off (assuming the User doesn't mint more alUSD)
The yield generated from the Yearn vault will continue to be credited to the User's account in the form of alUSD, until they withdraw.
Eventually, the total amount borrowed will be paid off (assuming the User doesn't mint more alUSD)
The yield generated from the Yearn vault will continue to be credited to the User's account in the form of alUSD, until they withdraw.
6/
Once the loan matures, the User is better off depositing his collateral into Yearn directly
Why? Because they only 90% of yield generated flows to "repaying" loans
The other 10% flows to Alchemix DAO Treasury, controlled by $ALCX holders
Once the loan matures, the User is better off depositing his collateral into Yearn directly
Why? Because they only 90% of yield generated flows to "repaying" loans
The other 10% flows to Alchemix DAO Treasury, controlled by $ALCX holders
7/
So how are loans "repaid"? After all, Yearn's DAI vault yields real cash flows. So where does this go?
They go to the "Transmuter"
So how are loans "repaid"? After all, Yearn's DAI vault yields real cash flows. So where does this go?
They go to the "Transmuter"
8/
Think about the Transmuter as a well that continuously gets filled with 90% of all the vault yields
On the @AlchemixFi Platform, 1 alUSD will always be treated as 1 DAI
So, owners of alUSD can deposit alUSD into Transmuter to receive the equivalent amounts of DAI
Think about the Transmuter as a well that continuously gets filled with 90% of all the vault yields
On the @AlchemixFi Platform, 1 alUSD will always be treated as 1 DAI
So, owners of alUSD can deposit alUSD into Transmuter to receive the equivalent amounts of DAI
9/
The alUSD deposited into the Transmuter in exchange for DAI (generated from yield) is then burned
If the Transmuter is empty, then owners of alUSD will wait till it is refilled before they can exchange that for DAI
The alUSD deposited into the Transmuter in exchange for DAI (generated from yield) is then burned
If the Transmuter is empty, then owners of alUSD will wait till it is refilled before they can exchange that for DAI
10/
Now, you should better understand the mechanisms which contributes to maintaining alUSD's peg:
1. Transmute function
2. Vaults pegging alUSD and DAI as 1:1 (only useful for users - and not all users want to repay their loans directly anyway)
Now, you should better understand the mechanisms which contributes to maintaining alUSD's peg:
1. Transmute function
2. Vaults pegging alUSD and DAI as 1:1 (only useful for users - and not all users want to repay their loans directly anyway)
11/
I see alUSD as a zero-coupon bond
If Transmuter is full, then maturity date = 0 and alUSD = $1
If Transmuter is empty, then maturity date != 0 and alUSD should discount (perhaps discounted by 'risk-free' rate ^ time to maturity
I see alUSD as a zero-coupon bond
If Transmuter is full, then maturity date = 0 and alUSD = $1
If Transmuter is empty, then maturity date != 0 and alUSD should discount (perhaps discounted by 'risk-free' rate ^ time to maturity
12/
Currently the well that is the Transmuter has way more DAI than people want to redeem for alUSD, so alUSD is worth $1
Currently the well that is the Transmuter has way more DAI than people want to redeem for alUSD, so alUSD is worth $1
13/
The more interesting event I am hoping watch play out is if/when the Transmuter is empty and when alUSD stakers have to wait for future yield before they can swap their alUSD for DAI
Will alUSD hold its peg or not?
The more interesting event I am hoping watch play out is if/when the Transmuter is empty and when alUSD stakers have to wait for future yield before they can swap their alUSD for DAI
Will alUSD hold its peg or not?
14/
Now we get to tokenomics:
How are $ALCX tokens distributed?
- 60% to community
- 15% to DAO (controlled by ALCX holders)
- 5% reserved for bug bounties (managed by DAO)
- 20% exclusive mining pool for dev team (incentivizes onboarding of new devs into Alchemix Ecosystem)
Now we get to tokenomics:
How are $ALCX tokens distributed?
- 60% to community
- 15% to DAO (controlled by ALCX holders)
- 5% reserved for bug bounties (managed by DAO)
- 20% exclusive mining pool for dev team (incentivizes onboarding of new devs into Alchemix Ecosystem)
15/
$ALCX Farming (allegedly modelled closely after @synthetix_io ):
- Week 1: 22,344 $ALCX
- Reduced by 130 ALCX per week for three years
- After three year mark, flat emission of 2200 $ALCX per week
$ALCX Farming (allegedly modelled closely after @synthetix_io ):
- Week 1: 22,344 $ALCX
- Reduced by 130 ALCX per week for three years
- After three year mark, flat emission of 2200 $ALCX per week
16/
Benefits of $ALCX emission schedule:
- Inflation is decreased progressively until three year mark, then slowly pushed to zero
- Weekly reduction prevents a collapse of rewards - farmers should barely notice the differences week to week ("boiling frog"?)
Benefits of $ALCX emission schedule:
- Inflation is decreased progressively until three year mark, then slowly pushed to zero
- Weekly reduction prevents a collapse of rewards - farmers should barely notice the differences week to week ("boiling frog"?)
17/
Currently, the use case for @AlchemixFi is limited to bringing future consumption forward.
Though I don't understand why you would want to lock up $50k of stablecoins to buy a $25k boat and only see that $50k in ~3 years (or more if yields fall).
Currently, the use case for @AlchemixFi is limited to bringing future consumption forward.
Though I don't understand why you would want to lock up $50k of stablecoins to buy a $25k boat and only see that $50k in ~3 years (or more if yields fall).
End/
The real success of @AlchemixFi will depend on how well it can get its al-Tokens integrated across the DeFi ecosystem
The real success of @AlchemixFi will depend on how well it can get its al-Tokens integrated across the DeFi ecosystem
P.S. regarding alUSD: yes I know there are incentivized pooling pairs on AMMs, but if DeFi is to the be the future of 🇫🇷 these unicorn bucks aren't sustainable. I'm only exploring the "real" mechanics in the system
@scupytrooples and team please let me know if I got anything wrong here!
• • •
Missing some Tweet in this thread? You can try to
force a refresh
