Alchemix (ALCX)

Loans that repay themselves.

Basics

• Based in:
• Started in / Announced on: 6-4-2021
• Mainnet release: 27-2-2021. According to DeFi Safety (24-6-2021): Alchemix was launched in early April 2021. Token was launched May 17th 2021.
• From Yield Farmer (28-2-2021):

"A new protocol centered around “synthetic tokens that represent the future yield of a deposit.”

• From Yield Farmer (28-3-2021):

"The first project of its kind, Alchemix puts borrowers’ deposits to work in DeFi yield opportunities and uses the ensuing earnings to automatically repay these borrowers’ protocol debts.

For instance, Alchemix’s first flagship product is a synthetic derivative dubbed alUSD, which people can mint with DAI. So if you deposit 100 DAI into alUSD’s contract, you can draw out 50 alUSD. Then the underlying DAI deposit is sent to Yearn to earn yields that steadily pay off your debt."

Audits & Exploits

• Bug bounty program can be found here (24-6-2021). Live since March 1st 2021, max reward is 50k. From this tweet thread (29-3-2021): "Taking the planned supply after 3 years as a basis, 5% goes to bug bounties."
• From Yield Farmer (28-3-2021): "has no audits yet"
• Got audited by Certik; and mentioned 8 major risks, all of which are related to centralization (18-5-2021).
• Scored a 44% on DeFi Safety (24-6-2021):

"Certik did a Alchemix audit on May 18th 2021. Alchermix was launched in early April 2021. Token was launched May 17th 2021." With the comment: "Weak docs and testing but OK audits and access control docs"

Bugs/Exploits

• Had an access control issue (6-2024).
• From Blockthreat (29-6-2022):

"Alchemix patched a bug in the collateral calculation."

• From BlockThreat (2-8-2021):

"Alchemix patched a function access control vulnerability after it was responsibly disclosed by Ashiq Amien."

• From Rekt (18-6-2021):

"When the same process [as with aDAI] was implemented with ETH, (minting alETH in return), some users discovered that the protocol assigned them no debt. After being notified that their own users were exploiting them, the Alchemix team reacted quickly, and temporarily paused the minting of new alETH while they worked to find a solution. This reverse-rugpull has left alETH undercollateralized by ~2700 ETH, or ~$6.5M at time of writing; a debt which must now be repaid by Alchemix. The protocol has made a public appeal to their users to return the funds and help repay the debt."

Governance

Admin Keys

• Got audited by Certik; and mentioned 8 major risks, all of which are related to centralization (18-5-2021). It also mentioned there is no timelock.
• From their forum (22-2-2022), post titled Temporary Assignment of v2 Admin Privileges to Dev-Multisig:

"Alchemix DAO has two different multisig accounts that are used to secure the treasury funds, secure administrative functions, and to conduct protocol operations. The operational multisig (0x9e2b6378ee8ad2A4A95Fe481d63CAba8FB0EBBF9) handles various functions, such as payroll, Olympus Pro, and DeFi 2.0 initiatives for the treasury. The treasury timelocked multisig (0x8392F6669292fA56123F71949B52d883aE57e225) holds the ALCX, receives protocol fees, and has admin rights to change certain parameters, and has a 24 hour timelock guarding all function calls.

The security of the timelocked multisig is undoubtedly better as there is a set duration of time where anyone can see a queued transaction, and can sound the alarm if something suspicious is about to happen. However, the timelock adds additional friction to responding to and updating parameters in the contracts.

The Alchemix core team suspects that we might have a need to be agile in the early phase of the v2 deployment, and by having the operational multisig be given admin rights, it will allow us to change parameters expediently during the initial phase post-rollout. It is expected that we will need to increase debt caps, deposit caps, convertible caps, and perhaps other parameters as we scale out the deployment. Therefore, the core team would prefer initially giving the admin rights to the non-timelocked operational multisig for the v2 deployment.

From what we gathered from the call, giving the admin rights to this multisig is something most of the community is fine with as long as it is temporary, and the admin rights are transferred to the timelocked multisig at a later date.

With that in mind, we propose that the operational multisig be given the admin rights to v2 for a period of up to 1 month after the guarded-launch phase is finished. This will allow the core team and community to be able to respond and react much faster to protocol and market conditions, and after parameters have stabilized, we can transfer admin rights to the timelocked multisig for the greater security guarantees it offers."

• Admin Controls can be found here. From DeFi Safety (24-6-2021):

"a) Transmuter was described as upgraded in their docs. This is the only reference to upgradability. 10%

b) There are MultiSig capabilities defined, but no direct references for who the signators are in their GitBooks and Whitepaper. 15% (NOTE: the multisig signatores are indicated in the audit but not in their docs)

c) No capabilities for change in the contracts is described in any of their documentation.

Score: 10%+15%=25%

Pause Control mentioned, with no further details or testing."

DAO

• From their blog (1-4-2021):

"The token will move beyond simply being the memetic “valueless governance token” and will actually become a claim on protocol revenue. ALCX will be unique in that just by staking it, you can earn a diversified portfolio. The more TVL in Alchemix, the better this becomes. If you want to earn a cash flow, you will have to participate in the governance of the AlchemixDAO. From the moment a user stakes ALCX into the DAO, they will begin accruing Voting Points (VP), which are a non-transferable value held in the contract’s state. The longer a user stakes, and the more ALCX they have staked, the more VP they will accrue. When there is a vote, users can choose to use any amount of their voting points that they desire. So when there is a vote where they truly care about the outcome, they can use as many of their VP as they would like, and if there is a vote that they only care a little about, they can choose to use fewer. This is our interpretation of conviction voting, where you get to put more weight into the things you care about. The catch here is that when users engage in using their VP, they will begin earning a cash flow. The more VP a user uses, the more their cash flow reward weight is boosted in the system, much like how the Curve protocol boosts rewards for veCRV stakers. It pays more to participate. For AlchemixDAO to work the way we envision, it must be built on layer 2. We don’t know which layer 2 we will develop this on just yet."

Treasury

• From this tweet thread (29-3-2021):

"Taking the planned supply after 3 years as a basis, 15% of supply goes to the DAO treasury."

• From their blog (1-4-2021):

"When we harvest the yield, we take a 10% cut which goes to the treasury."

Token

Token Allocation

• From Messari (22-5-2022):

"Alchemix had an initial pre-mine of 478,612 ALCX tokens, which was estimated to be 20% of the total ALCX tokens in circulation after 3 years based on the token's emissions schedule. All pre-mine tokens were sent to the treasury, with 358,959 tokens allocated for use at the discretion of the community and 119,653 tokens reserved for bug bounties. At launch, 32,000 ALCX tokens from the pre-mine were allocated to liquidity pools.

The original script to mint the pre-mine ALCX tokens was accidentally run twice, so 957,224 tokens were initially created. The excess 478,612 tokens were sent to a burner address in order to not impact the plan laid out by the team originally."

• The initial premine allocation (10-5-2021):

1. 20% Alchemix DAO Premine (5% reserve)
2. 16% Private Staking/LP Pools for Founders
3. 64% Public Staking/LP Pools

• From this tweet thread (29-3-2021):

"The supply of $ALCX is not capped, but the supply emission curve is well defined. Taking the planned supply after 3 years as a basis, 15% of supply goes to the DAO treasury, 5% for bug bounties reserves and 80% for staking and liquidity farming."

• From their docs (1-2021):

"At the three year point, there will be approximately 4.5% annual inflation of supply, and it will gradually decrease over time."

Utility

• From EthHub (2-3-2021):

"Along with the protocol comes the governance token, ALCX, that you can stake as part of a pool 2 - you can also yield farm using stablecoins to earn ALCX."

• From their blog (1-4-2021):

"The token will move beyond simply being the memetic “valueless governance token” and will actually become a claim on protocol revenue. ALCX will be unique in that just by staking it, you can earn a diversified portfolio. The more TVL in Alchemix, the better this becomes. If you want to earn a cash flow, you will have to participate in the governance of the AlchemixDAO."

Technology

• Whitepaper can be found here (6-4-2021.
• Code can be viewed here.

Implementations

• Built on: Ethereum, yEarn and Curve (1-4-2021). Alchemix turned to (15-6-2021) Saddle for its alETH pool. The announcement attracted a lot of negative attention and even turned Curve to propose not giving them CRV rewards through one of Alchemix's strategies.

How it works

• From Daily Gwei (1-4-2021):

"Has a product that basically allows users to deposit DAI (the principal) into the yDAI Yearn vault, generate/borrow up to 50% of the principal amount as alUSD and then the protocol automatically pays down the debt using the yield generated by the yDAI vault. Additionally, users can then deposit this alUSD into a Curve pool to earn ALCX rewards and swap fees."

• From their blog (1-4-2021):

"Alchemix is a platform that empowers users to get advances on their yield by minting a synthetic version of their collateral up front (currently only DAI), using various mechanisms to peg the synthetic token to the deposited asset. We do this by putting collateral to work earning yield in yearn.finance, with the harvested yield going towards paying off your own debt in the system — essentially we are paying you to borrow. When we harvest the yield, we take a 10% cut which goes to the treasury, and yearn pays us affiliate fees for adding TVL to their protocol. When Alchemix v2 is released later this year, we will add multiple collateral types for alUSD, including USDC and USDT. We will also add more al-Assets, such as alETH and alBTC. Each of these vaults will have the same 10% fee applied to harvests. When a user stakes ALCX into AlchemixDAO, they will get an unrivalled cash flow with a diverse set of stablecoins, ETH, wBTC, and potentially even more tokens (details on that are still a closely guarded secret). The token will move beyond simply being the memetic “valueless governance token” and will actually become a claim on protocol revenue. ALCX will be unique in that just by staking it, you can earn a diversified portfolio. The more TVL in Alchemix, the better this becomes."

Upgrades

• On 15-3-2022, V2 got released:

"v2 allows for any arbitrary number of collateral tokens and yield strategies to choose from. As token adapters are written and audited for v2, we can add an ever increasing selection of yield providers for your deposits on Alchemix.

You can, in effect, create your own yield aggregator from within Alchemix v2 by mixing and matching collateral types and strategies. The sum of your deposits across collaterals and strategies is the basis for how much you can borrow, greatly enhancing UX. Another major difference between v1 and v2 is that v1 was not built with composability - at all. In fact, we prohibited smart contracts from interacting with it, period. v2 was engineered and audited with composability in mind."

Staking

• From their blog (1-4-2021):

"Inspired by the AAVE security module, ALCX stakers in the AlchemixDAO will become defenders of the protocol. In the extremely unlikely scenario of Alchemix or one of its underlying yield strategies being exploited, ALCX stakers will have to do their part to make the protocol whole again. ALCX stakers will have up to a (to be decided) percentage of their ALCX slashed in the event of a protocol loss. This slashed ALCX will be auctioned off in order to raise funds to make depositors whole again."

Liquidity Mining

• From Messari (22-5-2022):

"At launch, 32,000 ALCX tokens from the pre-mine were allocated to liquidity pools."

Oracle Method

• According to the Certik audit (18-5-2021) it only uses Chainlink. They advise to add more oracles.

Roadmap

• Updated roadmap got released (9-10-2021). It includes audits, v2, new strategies and DAO improvements. Old one can be found here (26-5-2021).
• From this tweet thread (29-3-2021):

"Alchemix V2, which is expected to go live within 2 - 4 months will offer more al assets, like $alETH and $alBTC, and will support multi collateral $alUSD ($USDC, $USDT and $sUSD to be supported soon in addition to $DAI)."

Usage

• From Rekt (18-6-2021):

"Alchemix had over $1b TVL at the time of the [alETH] incident."

Competition

• WasabiX was launched as a fork without the founders allocation.

Pros and Cons

Pros

• The team came up with a (minor) new innovation, showing originality and creativity.

Cons

• Has been audited as highly centralized, and when alETH had a bug, the team immediately paused contracts (18-6-2021).

Team, Funding, Partners

Team

• Full team can be found [here].

• From Yield Farmer (28-3-2021):

"Alchemix has been built by an anonymous team"

• Scoopy Trooples; co-founder

Funding

• From Messari (22-5-2022), There were 2 funding rounds:

"The founding team raised $4.9 million selling 7,000 ALCX tokens at a $700 price per token (3-2021) to a group of private investors, who agreed to a 3 Month Lock-Up. This funding was used to compensate the team for their work launching Alchemix.

$3.1 million dollar raise selling 13,778 ALCX tokens at a $225 price per token (3-2021) to bring on a group of strategic investors who agreed to 6 month cliff with 6 month vesting period after the cliff period ends. This funding was used to fund business operations."

• Orion Money; took part in the Private Farming raise of $70M TVL (12-8-2021).

• A bug in their alETH contract created a $6.5m debt for the Alchemix team, When asked how this would effect the development, the founder answered (18-6-2021):

"It all depends on how much our users give back. If we get > 25% of it, our treasury's non-ALCX holdings of approx $4m will be able to cover it. It will mean we will not be able to be as aggressive in hiring and marketing for some time, but we will recover since we have good cash flow. If we have a more tepid response to the voluntary returning program, then we will explore further measures to make it solvent. We have been offered help from many in the space, so we have some solid options."

• From CoinDesk (14-3-2021):

"Completed a $4.9 million funding raise led by CMS, Alameda Research, eGirl Capital and Immutable Capital."

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