Advancing Alchemix with Chainlink
Our self-paying loan protocol on the Ethereum blockchain, is in the process of integrating the widely used Chainlink Price Feeds. Our integration, which already involves the mainnet use of the DAI/USD Chainlink Price Feed, will expand to include the use and support of Chainlink Price Feeds for ALCX, alBTC, alUSD, and alETH. These decentralised price oracles will be referenced on-chain during for minting, liquidation, and/or payback processes of lending and borrowing by Alchemix and/or other DeFi protocols such as Cream Finance, who are looking to add support for Alchemix synthetic tokens.
Chainlink was selected as the go-to oracle solution to secure all of our $1.5B+ in TVL because it offers the most time-tested decentralised oracle solution, which is already securing over ten billion dollars in on-chain assets for leading DeFi protocols. Each Chainlink Price Feed is backed by high-quality data and robust oracle infrastructure, of which has proven to be resilient against a multitude of unexpected situations such as API downtime, flash crash outliers, and data manipulation attacks via flash loans.
Understanding the Alchemix — Chainlink Integration
Alchemix is a self-repaying lending protocol that routes the deposited collateral of users to Yearn vaults, where their earned yield is automatically used to repay their loans. This effectively acts as an advance on a user’s future yield over time, providing users with a way to deploy their assets in a more capital efficient manner.
Currently, users can deposit DAI into Alchemix in order to mint an equivalent amount of Alchemix’s native stablecoin, alUSD, which has a minimum collateralisation ratio of 200%. The DAI is deposited to the Yearn yvDAI Vault, where the yield is harvested from the vault and used to pay down the user’s Alchemix debt. Loans can also be manually repaid using alUSD or DAI, ultimately helping maintain alUSD peg to DAI. We plan to expand the collateral types and currencies offered on Alchemix beyond DAI in the near future, such as additional stablecoin collateral types for alUSD, and for ETH/alETH and BTC/alBTC.
In order to issue loans at fair market values and ensure users are consistently maintaining healthy collateralisation ratios, Alchemix requires price reference data directly on-chain that reflects the most up-to-date global market conditions. Not only do Alchemix smart contracts need accurate data that reflects a price aggregate of all trading environments, but the data needs to be sourced and delivered on-chain in a manner that is manipulation resistant and highly available.
We selected Chainlink Price Feeds as our oracle solution for all lending markets because it provides a multitude of strong data quality and oracle infrastructure assurances that have proven to provide robust protections of user funds. Some of these include:
- High-Quality Data — Chainlink Price Feeds source data from numerous premium data aggregators like BraveNewCoin and Kaiko, leading to price data aggregated from hundreds of exchanges, weighted by volume, and cleaned from outliers and wash trading. This generates accurate global market prices that are resistant to black swan events or centralized exchange failures.
- Secure Node Operators — Chainlink Price Feeds are secured by independent, security-reviewed, and Sybil-resistant oracle nodes run by leading blockchain DevOps teams, data providers, and traditional enterprises. Chainlink nodes have a strong track record for reliability, even during high gas prices and infrastructure outages (e.g., Infura).
- Decentralised Network — Chainlink Price Feeds are decentralised at the data source, oracle node, and oracle network levels, generating strong protections against downtime and tampering by either the data provider or oracle network.
- Economy of Scale — Chainlink Price Feeds benefit from an economy of scale effect, where increasing adoption allows multiple projects to collectively use and fund shared oracle networks to fetch commonly required datasets. This allows DeFi projects to get premium data quality and robust oracle security for a fraction of the total cost.
In addition to using these Chainlink Price Feeds directly within the Alchemix protocol, other DeFi protocols can leverage them to support the use of Alchemix synthetic tokens within their own markets. This is key for getting Alchemix synthetic tokens into various lending and borrowing markets like Aave and C.R.E.A.M, but can easily extend beyond to other DeFi protocols as Alchemix grows in market adoption.
“We’re excited to integrate Chainlink as a core part of the Alchemix infrastructure, ensuring user funds have the most robust oracle mechanism in place for securing their collateral within current and future Alchemix markets,” said Alchemix Co-founder Scoopy Trooples. “This partnership enables us to create a more secure money lego for the DeFi ecosystem, furthering its integration within other DeFi protocols and accelerating the use of Alchemix synthetic tokens as a reliable DeFi asset.”
Chainlink is the most widely used and secure way to power universally connected smart contracts. With Chainlink, developers can connect any blockchain with high-quality data sources from other blockchains as well as real-world data. Managed by a global, decentralised community of hundreds of thousands of people, Chainlink is introducing a fairer model for contracts. Its network currently secures billions of dollars in value for smart contracts across the decentralised finance (DeFi), insurance and gaming ecosystems, among others.
Chainlink is trusted by hundreds of organisations to deliver definitive truth via secure, reliable data feeds. To learn more, visit chain.link, subscribe to the Chainlink newsletter, and follow @chainlink on Twitter.
Alchemix Finance is a future-yield backed synthetic asset platform and community DAO, managing over $1 billion of value. The platform gives you advances on your yield via a synthetic token that represents a fungible claim on any underlying collateral in the Alchemix protocol. The globally decentralised team is composed of DeFi natives who wish to push innovation in the space forward.