Alchemix Protocol allows for the creation of synthetic tokens that represent the future yield of a deposit. After spending over 6 months on ideation and development, the Alchemix team believes that they’ve created a new DeFi primitive that can be freely used by other protocols and developers in the space.
What does it do?
Alchemix V1 will enable users to deposit DAI stablecoins and mint “alUSD” up to 50% of the deposited amount of DAI. DAI deposited into the Alchemix smart contracts are then routed to Yearn vaults where they can start earning yield immediately. This yield can then start to automatically pay down the debt incurred from minting DAI using Alchemix.
The team describes 3 examples of how users might manage their open loan with Alchemix below:
Option 1: leave their deposit to continually earn yield, allowing them to periodically draw down their loan collateral.
Option 2: repay the loan early using alUSD or DAI, allowing them to withdraw their collateral.
Option 3: liquidate their loan using part of their collateral to repay the loan and allow them to withdraw whatever is remaining.
alUSD is a normal ERC-20 token and will be tradeable. Once users have minted their alUSD they also have the option of depositing alUSD back into the “transmuter” which can convert alUSD back into DAI and even other stablecoins. This process can take a varying amount of time, depending on various factors within the Alchemix ecosystem.
The team also plans to build out other applications within the Alchemix ecosystem that will make use of the new alUSD. Before new applications for alUSD are built out, early users can first participate in Alchmix’s liquidity mining program. The incentivized token pairs are listed in the tweet below.