Alchemix Financial released a prelude to their DAO, and the blockchain community is abuzz. The founder of Daily Gwei, Anthony Sassano, recommended Alchemix Finance on Twitter today, saying,
- “By harnessing the throughput of layer 2 solutions, AlchemixDAO will be inclusive of all Ethereans — without sacrificing our ethos of decentralization first. @AlchemixFi is one of my favorite DeFi projects for a reason.“
THORChain, a decentralized cross-chain liquidity protocol, is of a similar opinion as per their tweet that says,
- “Alchemix is magic, $ALCX,” and further adding, “Scheming how it can be replicated on THORChain.“
So why is Alchemix making noise in the blockchain community?
The Inner Workings Of AlchemixDao
Alchemix team believes it can innovate and improve upon the currently available DAO frameworks to provide value to $ALCX holders, solving voter apathy and the freeloader issues. Currently, DAOs are used to coordinate capital, signal community sentiment, and build consensus on improving existing protocols.
The platform empowers users to get advances on their yield by minting a synthetic version of their DAI collateral and uses various mechanisms to peg the synthetic token to the deposited asset. The collateral will be to work earning yield in yearn.finance.
The harvested yield helps pay off the user’s debt in the system. A 10% cut is taken from the yield harvest, which goes into the treasury, and Yearn pays Alchemix affiliate fees for adding TVL to its protocol.
With the release of Alchemix V2 later this year, the team plans to add multiple collateral types for alUSD, including USDC and USDT, along with the addition of al-Assets, such as alETH and alBTC. The same 10% fee applies to the harvests of these vaults.
$ALCX Token Holders To Earn More By Participating More
When a user stakes ALCX on the AlchemixDAO, they gain a cash flow with a diverse set of stablecoins, ETH, wBTC, and other tokens currently stated to be a closely guarded secret. The $ALCX token will grow beyond just a governance token and become a claim on protocol revenue.
This feature creates uniqueness for the $ALCX token holders. They will now be able to earn a diversified portfolio by staking these tokens, aligning the token holders with the platform’s goal: to increase the futility of assets in a low-risk manner. More TVL in ALchemix, the better this gets.
Earning a cash flow is possible by participating in the governance of the AlchemixDAO. The user will begin accruing Voting Points (VP) from the moment the $ALCX is staked in the DAO. The VP is a non-transferable value held in the contract’s state. As stated in Alchemix’s blog post,
“The longer a user stakes and the more ALCX they have staked, the more VP they will accrue.“
Users can choose to use any amount of their VPs when there is a vote, and they genuinely care about the outcome. Users can use fewer points if they care only a little about the vote. This will apply weight to the things that are important to the community.
The cash flow reward weight is boosted in the system based on the amount of VPs the users engage. For this to work out as well as the team envisions, it must be built on layer 2. While there is no decision made on which layer will be developed, the team is optimistic about dApps converging on the most suitable one during the development of ALcehmixDao.
Solving The Freeloader Problem
Stakers of the $ALCX tokens will become defenders of the protocol. While the scenario is unlikely, if Alcemix or one of its underlying yield strategies are exposed to exploitations, then $ALCX stakers will have to do their part in bringing the protocol back to form.
ALCX stakers will have a percentage of their ALCX slashed in the event of a protocol loss. This percentage is yet to be decided. The slashed tokens will be auctioned off to raise funds and make depositors whole again. The team states,
“There are two sides to every coin, and in order to get a claim to that cash flow, you must be the last line of defense to the protocol should it come to that. Brave defenders will be rewarded.”
The team also promises that they will do everything in their power to make sure the protocol exploitation never happens.
Alchemix Finance is a future-yield-backed synthetic asset platform and community DAO. The platform provides advances on a user’s yield farming through a synthetic token representing a fungible claim on any underlying collateral in the Alchemix protocol.
Alchemix has four main components. Vaults, transmuter, token distribution, and Alchemix Dao. The vault acts as the hub for generating yield advances. It shares similarities with lending platforms such as MakerDAO and AAVE. The transmuter allows users to stake their synthetic assets and, over time, convert them into their base assets.