Self-repaying Loans with Alchemix: What You Need to Know
auto-repay, 0 liquidation & 0 interest lending
There is a myriad of lending platforms that have recently hit the market, offering vast incentives. From points programs to speculative airdrops for projects on new chains, the list goes on. In the noise, it can be easy to forget tried and true protocols offering real yield and use case.
Alchemix is a lending platform that has been around since early 2021, which may be considered a long time in the crypto space. The market has a simple and attractive use case; autorepaying, 0-interest, and no-liquidation loans.
In today’s edition, we’ll go over what makes Alchemix attractive, some new features coming to the protocol, $ALCX tokenomics, and more.
Stay alert in the markets ⬇
Background on Alchemix
Alchemix provides self-repaying loans, made possible via its future-yield-backed synthetic assets. These are basically tokens that represent a loaned asset + the yield it accrues. This infrastructure enables self-Paying, interest-Free, non-Liquidating Loans, which is the core premise of the protocol and what separates it from other lending platforms.
The protocol, which has instancs on Ethereum mainnet, Optimism, and Arbitrum, has 4 primary components; Alchemists, the Transmuter, Elixir AMO, and alAssets.
Alchemists serve as the smart contract hub for generating yield & yield advances. Users deposit yield-bearing assets into the Alchemist. They can then borrow alUSD or alETH at a 50% max LTV. Yield is harvested to increase borrowing power or pay debt.
The Transmuter allows users to stake their synthetic alAssets (alETH & alUSD ) for conversion into their corresponding base assets at a 1:1 ratio over time. Transmuting exists mostly as an arbitrage function, allowing people to buy alAssets below the 1:1 ratio.
The Elixir AMO (Algorithmic Market Operator) manages the surplus of alAssets. Liquidity deposits in the pools increase the price of alAssets and earn yield, responsible for: rebalancing the liquidity pool, yield generation, and revenue streams.
alAssets are synthetic debt assets within the Alchemix protocol that represent a user’s future yield. -alAssets can be used to utilize the actual asset (ETH or USD) -alAssets can be acquired to repay loans early or converted into the underlying assets overtime.
Using Alchemix
The 3 main things that users can do on Alchemix are:
Deposit Assets: Users can deposit via the Vaults page. The Vaults page will display the list of all available vaults where users can deposit any of their currently supported collateral assets.
Earn Yield: The deposited assets start generating yield within the protocol, similar to earning interest in a traditional bank. Each vault listed will show the collateral assets you can deposit and the current APY.
Borrow: Users can borrow an amount up to the acceptable collateralization ratio. They’ll receive a synthetic alAsset representing the borrowed asset + future yield. There is no upfront fee, no interest payments, and automatic repayment over time.
$ALCX Tokenomics
ALCX is the governance token of Alchemix, with its initial supply and emissions distributed among developers, DAO, & broader community.
Governance of Alchemix Finance is overseen by the DAO, which holds the liquid governance token, $ALCX. Currently, the Alchemix DAO operates through a developer multisig, which holds certain administrative powers. Signal collection for governance decisions occurs through the Snapshot app, which allows $ALCX token holders to express their preferences, a key use case of the token.
An initial supply of 478,612 ALCX was minted as a pre-mine. Alchemix calculated that there would be 2,393,060 ALCX in circulation after 3 years. At the end of the 3 years, a fixed 2200 ALCX will be emitted weekly.
$veALCX Tokenomics
In addition to ALCX, veALCX was introduced on May 20, 2022, but will be released in 2024. veALCX is a governance model for Alchemix that is still in progress and will be based on the 80/20 liquidity model by Balancer (80% ALCX, 20% ETH).
veALCX stakers will receive yield in $ALCX subject to the same locking terms as their veALCX BPT token. Users can claim their $ALCX rewards immediately at any time, but in doing so they will need to take a 50% penalty, which will be redistributed to other veALCX lockers.
It is also possible for users to immediately compound rewards into their locked veALCX position with no penalty, as long as they bring their own $ETH to pair with $ALCX.
veALCX is currently intended to soon replace the current gALCX tokenomics model, meaning gALCX APR would be reduced to 0% when veALCX launches.
Users can also purchase FLUX (more on this below) or use their accrued FLUX to fully unlock their veALCX position early, claiming both the underlying BPT and the $ALCX that gets unlocked. FLUX is an additional veALCX ecosystem token which is still being rolled out. It will be used to boost voting power and make it possible for users to unlock their positions early or sell it on the open market.
Important Links
Become a Premium member to unlock all our research & reports including access to our members-only discord server
Join thousands of sharp crypto investors & traders by becoming a Premium Member & gain an edge in the markets. For just $116.58/month you’ll get:
Premium access to the entire Revelo Intel platform
Market Intel - actionable investment reports
Industry Intel - highlighting important narratives/ trends
Sector Overviews - 90-day Reports with data and insights on key sectors
Launch Alpha - Weekly report highlighting new projects
Airdrop Guides - Reports on airdrop opportunities
Members Only Discord server
Project Snapshots - Monthly protocol-specific performance reports
Project Breakdowns & Timelines - Deep dive 50+ page protocol-specific reports
Notes - Summaries of your favorite podcasts & AMAs