Alchemix (ALCX)

What is Alchemix?

Alchemix is a decentralized finance (DeFi) application built on the Ethereum network that allows users to take out self-repaying loans. These loans are unique because they automatically repay themselves over time, using the yield generated from deposited collateral. Alchemix’s native token, ALCX, plays a central role in the platform, serving as the governance token and providing users with a way to participate in decision-making, staking, and rewards.

Alchemix allows users to deposit DAI, a stablecoin, to mint another synthetic stablecoin called alUSD. This minted alUSD can then be used for borrowing or other purposes. The deposited DAI generates yield through the use of high-yield vaults on Yearn Finance, and the yield is automatically used to pay off the loan over time.

Key Features of Alchemix

1. Self-Repaying Loans:
   • Alchemix’s main feature is the self-repaying loan mechanism. Users deposit DAI into the platform, and in return, they receive alUSD, a synthetic stablecoin. The loan is automatically paid back using the yield generated by the deposited collateral in Yearn Finance vaults. This eliminates the need for liquidation risks typically found in other lending platforms.
2. alUSD Stablecoin:
   • alUSD is a synthetic stablecoin minted from the DAI that users deposit as collateral. It represents a debt position in Alchemix, which is repaid over time through the yield earned by the collateral in high-yield protocols.
3. Capital-Efficient Lending:
   • Alchemix allows users to take out loans against stablecoins without the risk of liquidation, a common feature in traditional lending protocols like Compound or Aave. Instead of being forced to repay loans at once or risk liquidation, the loan is repaid gradually as yield is earned.
4. High-Yield Strategies:
   • Alchemix partners with Yearn Finance to use yield-bearing vaults to grow the collateral. This strategy provides high returns on the initial deposit, allowing the loan to be repaid over time, leveraging the power of DeFi.
5. ALCX Token:
   • The ALCX token is the governance token of the Alchemix platform. ALCX holders can vote on proposals regarding protocol parameters, features, or any changes to the DAO structure. ALCX is also used for staking and providing liquidity.
6. Staking and Rewards:
   • Users can stake ALCX tokens to earn additional rewards. Additionally, by providing liquidity to pools like Saddle alETH or ALCX/ETH v2, users can earn rewards in the form of ALCX tokens.
7. Governance:
   • Alchemix is governed by a decentralized autonomous organization (DAO). ALCX token holders have the ability to vote on governance proposals, which can include decisions about protocol upgrades, changes to risk parameters, and the allocation of treasury funds.

How is Alchemix used?

1. Depositing Collateral (DAI)

Users begin by depositing DAI into Alchemix’s smart contract. This is the collateral for minting alUSD, which is the synthetic asset users borrow from the protocol. The deposit is used to generate yield over time.

2. Minting alUSD

In return for their DAI deposit, users can mint alUSD — a synthetic stablecoin. This minted alUSD can be used for various purposes, such as trading, investing, or simply as a borrowed asset. The minted alUSD is considered a loan, and its repayment is automated through the yield generated from the deposited DAI.

3. Earning Yield (Yearn Vaults)

The deposited DAI is then allocated to Yearn Finance vaults, which are high-yield protocols within the DeFi ecosystem. The yield generated from these vaults is used to repay the alUSD loan over time, meaning that users don’t have to worry about repaying the debt manually.

4. Self-Repaying Loan

The loan (alUSD) is gradually repaid with the yield produced from the collateral. Since the yield from Yearn vaults is consistent, the loan will eventually be paid off fully. As a result, users are able to borrow funds without worrying about forced liquidations or having to manually repay the loan.

5. ALCX Token Usage

• Governance: ALCX holders participate in governance decisions, such as voting on protocol changes or treasury management.
• Staking: ALCX tokens can be staked to earn rewards. This incentivizes users to participate in the ecosystem and helps secure the protocol.
• Rewards: Users can earn ALCX tokens by providing liquidity or participating in other community-driven activities within the Alchemix ecosystem.