DeFi space keeps delivering exciting solutions, and it looks like we’re just getting started.
Alchemix Finance is a DeFi protocol introduced in February this year. The team behind the project is anonymous and led by a developer under the pseudonym Scoopy Trooples.
In mid-March, the team announced a successful $ 4.9 million fundraiser from prominent investors. These include CMS, Alameda Research, Immutable Capital, Nascent, Protoscale Capital, LedgerPrime, eGirl Capital, Fisher8 Capital, Orthogonal Capital, and others.
Alchemix is an Ethereum DeFi protocol that enables users to mint synthetic tokens representing the future yield of their deposit.
In short, this means that the protocol will offer users a self-repaying loans with the help of DeFi magic and smart contracts.
How to get a loan?
Using the protocol and taking a loan is straightforward. On the application page https://app.alchemix.fi/vault in the vault tab under “deposit,” you need to select the amount of DAI token you want to deposit. This deposit will then serve as collateral for your loan.
The maximum loan amount can be up to 50% of the total deposit. Currently, the protocol accepts only deposits in DAI stablecoins while it pays out loans in alUSD stablecoins.
Alchemixis’ main innovation is automatic loan repayment system. Once you deposit DAI, Alchemix will send it into the Yearn Finance platform to start collecting yield.
Yearn Finance is a set of protocols running on the Ethereum blockchain that optimizes user crypto earnings by utilizing different DeFi services like Compound, Balancer, Sushiswap, Curve, Aave, and others.
Alchemix will then use that yield for automatic repayment until the loan is fully repaid.
Once your deposit has repaid your loan, you will be able to withdraw your deposit, and thus the cycle is complete. Your deposit has paid off your loan.
A whole process takes place within the vault, where you can track your loan status in real-time. You can withdraw the deposit gradually over time, or you can make a complete withdrawal at the end.
Another handy feature is the ability to close your debt position at any point by paying the remaining debt. You can repay the debt in DAI or in alUSD stablecoins.
The loan repayment period directly depends on the APY (Annual Percentage Yield) on the deposit (managed by Yearn Finance). APY is variable, and it relies on the market conditions.
For a better overview of the repayment dynamics, you can use the repayment calculator.
The example below shows a $15,000 loan with a $30,000 deposit. A 29.4% APY ensures loan repayment within 621 days.
Check this short explainer video
Alchemix (ALCX) is an ERC20 token on the Ethereum blockchain. It is a governance token that allows users to vote on proposals to develop the Alchemix protocol further.
Here – check one such voting example.
An increasing number of DeFi protocols has used ALCX token. Just recently, the Ruler protocol enabled loans in DAI tokens collateralized by the ALCX token. More details here.
As for the liquidity, today the most ALCX trading activity takes place on Sushiswap.
In addition to purchasing ALCX tokens at exchanges, you can earn them on the farms on the Alchemix platform.
Learn more about the token on the Coingecko website, the whitepaper, and the documents.
alUSD (ERC20) is a yield-backed synthetic stablecoin native to the Alchemix platform.
At this point, the Alchemix platform pays all loans in alUSD.
You can convert alUSD token into DAI at a 1:1 ratio in a part of the platform called Transmuter.
There are two conversion types to choose from; a standard one that will convert alUSD to DAI during a period (depending on the system conditions) and fast conversion with a slightly less favorable rate.
Although, as shown on Coingecko, the Uniswap alUSD-ETH pair has almost no liquidity, you can always use the CRV Swaps platform and easily swap alUSD with another stablecoin.
Or you can use the Paraswap exchange and swap alUSD tokens for other cryptocurrencies.
The rapid growth of TVL
Since the platform’s launch this February, Alchemix reached more than $ 1.1 billion in TVL – (Total Value Locked) – an impressive result in such a short period.
Alchemix quickly overtook well-known protocols such as 1Inch, dYdX, KeeperDAO, and others. High TVL and a good TVL/ Market Cap ratio speak in favor of the project.
How to access the Alchemix aplication
To interact with the platform, you need to visit their website, with a previously installed Metamask wallet on your browser. You can reach the contracts directly via the https://vfat.tools/alcx/ tool. This will also require a Metamask connection.
There haven’t been any audits until now, but a few days ago, on April 19, Alchemix posted a tweet stating the beginning of an audit by Certik. Results are expected in three weeks.
In the pipeline
On their Medium blog post Alchemix introduced DAO, a Decentralized Autonomous Organization scheduled to launch together with the Alchemix V2 by the end of the year. Alchemix DAO will manage the funds collected by the protocol via the ALCX token.
Alchemix keeps 10% of the realized yield from users’ deposits and earns referral fees from Yearn platform. The blog post brings details on the voting mechanism for the ALCX token owners.
It is also important to note that the new version of the protocol will implement an L2 solution to resolve the high gas issue on the Ethereum network.
With clever use of the existing DeFi mechanisms, Alchemix turned things around and made it possible for users to get their yield in advance instead of waiting for it for months.
Integration with the powerful Yearn Finance, L2 implementation, audit, and a DAO launch – all of this will contribute to Alchemix becoming one of the key players in the Ethereum DeFi ecosystem.
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