Alchemix Q1 2023 Report summary

10 min readMay 11, 2023

This is a summary of the Alchemix Q1 2023 report which can be found in full in the Alchemix GitBook. This report provides relevant data for Q1 2023, 1 January 2023 to 31 March 2023.

The first quarter of 2023 brought many developments into the crypto space and into the Alchemix world, including the following:

In the first quarter of 2023 the cryptocurrency market experienced a recovery, with both Bitcoin (BTC) and Ether (ETH) seeing a price recovery. BTC was up by over 70% while ETH saw a gain of more than 50%. However, during this time, there was an incident involving Silicon Valley Bank that temporarily impaired USDC and Dai as people feared that they were no longer backed 1:1 with USD, and this affected alAsset prices.

Amidst these events, Alchemix made several moves to strengthen its position. The platform moved its ALCX/ETH Sushi liquidity to Balancer. Additionally, Alchemix started buying AURA to give Alchemix voting-power in the protocol. The Alchemix community also voted on 14 governance proposals during this period, resulting in FLUX being the name for the new token that will be part of the eventual veALCX system. veALCX stakers will be able to vote on bi-weekly gauges that direct ALCX emissions to various alAsset liquidity pool incentivization methods, as well as approve or deny governance proposals for new gauges. veALCX entered an audit process during this time as well. It is worth noting that despite external factors such as the Silicon Valley Bank incident mentioned earlier, Alchemix continued to operate within parameters, and in Q1 the value of the treasury increased by over 80%.

This document is not investment advice, nor should anything herein be construed as solicitation to buy or invest. This is solely for informational purposes only. The discussions in this document represent a good-faith effort to effectively summarize the information that is contained in the corresponding Quarterly Report, the disclaimer of which, including, but not limited to, discussion about forward-looking statements, also applies to this document. The numbers that are being provided below, as of 1 April 2023, as well as other information disclosed in this document, are unaudited. In an effort to effectively summarize the data, this document may contain conjectures or guesses that are the authors’ alone, and do not represent any official positions, feelings or statements of the Alchemix protocol itself.

Introduction

Established in February 2021, Alchemix is a DeFi lending protocol that offers Self-Repaying loans without the risk of forced liquidations. Alchemix’s value proposition is that it enables its users to access tokenized value against their deposits, while those deposits harness the power of DeFi to automatically pay down a borrower’s loan balance over time. Conceived as a new tool for people to take advantage of the time value of money, Alchemix is tested and audited and then deployed on-chain using smart contracts to provide security, transparency, immutability, and uncensorable access to all.

Q4 2022 Lookback

The fourth quarter of 2022 brought interesting developments into the Alchemix world, including the following:

The FTX exchange and Alameda Research collapsed in early November, with fallout throughout the entire crypto space, including Alchemix and its alAssets.
Launch of Alchemix Vesper vaults on Mainnet.
12 governance proposals went to a vote in the quarter.
Alchemix published an update on the progress of the development of veALCX and the DAO.
Launch of alUSD/alETH Uniswap v3 Pool with Arrakis.
Alchemix has purchased carbon credits through KlimaDAO to offset historic emissions caused by the protocol.
Price support for Alchemix tokens was added to DefiLlama.
In collaboration with Multifarm, Treasury and Elixir dashboards were added to alchemix-stats.com.
Because of the FTX fallout that spread to USDT, certain transactions involving USDT were temporarily paused on Alchemix.
Beefy added the alETH/ETH liquidity pool.
v1 vaults were officially deprecated.

Q1 2023 TL;DR Metrics

Despite continuing volatility caused by market disruptions, at the end of Q1 2023 alUSD (0.9941) and alETH (0.9804) prices had improved slightly or remained stable compared to the previous quarter. The value of Elixir Contents had decreased 4.5% to $67.21M and the value of the Treasury had increased 84.3% to $13.69M. Global Deposits increased 59.4% to $49.38M.

The Treasury figures exclude the value of ALCX, the governance token of Alchemix. Q4 numbers have also been restated to reflect this fact, as previously the ALCX portion of ALCX/ETH LP tokens was included.
This row only shows v2 metrics, as v1 had been sunset as of October 1st. This row shows the state of the aggregate global deposits.

Q1 2023 Data

alAsset Prices

The main challenge for the protocol is to maintain a strong price for the alAssets.

Silicon Valley Bank USDC Event

The Silicon Valley Bank incident in March 2023 led to a run on the bank and its collapse. Circle and other companies that participate in the issuance of the USDC token kept a large amount of cash deposits at SVB. The panic that led to SVB’s collapse also caused the wider crypto markets to lose confidence in the USDC token, leading to a USDC selloff. The price of USDC eventually recovered due to guarantees made by the FDIC, but there was a great deal of turmoil in the interim, including news that other banks could collapse or were in the process of collapsing. Because alUSD is backed by stablecoins, including USDC, the contagion effect from the SVB news caused the price of alUSD to drop as well, the effects of which can be seen in the chart above. As the price of USDC recovered, so did the price of alUSD.

It is important to note on the alUSD price chart above that very little movement is visible, as the chart compares alUSD to Dai. However, given that USDC and Dai deteriorated in price, so did alUSD.

alAsset Utility

The image below shows the tools and protocols used within the Alchemix ecosystem, many of which provide direct use-cases for alAssets.

Specific integrations and partners are discussed in the full report.

ALCX Governance Token

The governance token of the Alchemix protocol is ALCX. It allows users to influence protocol direction by voting on submitted proposals.

A portion of ALCX emissions are currently being redirected to the treasury, effectively reducing the amount of new ALCX that enters circulation.

As shown on the chart, the initial high token issuance rate decreases in a linear fashion, dropping to the baseline 2200 tokens emitted per week at the 3-year mark. At this date, annual inflation will be ~4.7%, very slowly decreasing in perpetuity.

ALCX emissions are used to support the strategic goals of the protocol.

The protocol is still incentivizing single-sided staking, ALCX liquidity, and alAsset liquidity by using ALCX emissions. However, it has begun the transition to using emissions for the purpose of accumulating strategic assets. As at April 1st 2023 the annualized inflation rate of ALCX was 19.97% and the table below shows future emissions.

Alchemix System Components

Three main components work in tandem to provide the functionality for the Alchemix system. These are the Alchemists, Transmuters and the Elixirs (AMOs).

User deposits are held by the Alchemist contracts. The Elixir and Transmuter contracts also hold a significant amount of funds that are responsible for providing a backstop for alAsset redemption. The Transmuters redeem alAssets for their underlying collateral pairs 1:1, but do this slowly, over a longer period of time.

The Elixirs, on the other hand, own a portion of the main alAsset liquidity pools and can take action to ensure that trades in their respective liquidity pools can be fulfilled at a reasonable level that is determined by governance. The Elixirs also provide a large portion of protocol revenue by farming the liquidity pool tokens.

Excess funds are being deployed in the Transmuters or in the Elixirs to provide price stability and to earn additional protocol revenue.

This quarter the Elixir contracted by $3.14M (-4.5%).

Elixir Contents

In Q4 2022, the Elixir contained just under 49 million in USD equivalents and 17066 ETH, with a total value of $70.35M. At the close of Q1 2023 these had decreased to 43.65 million in USD equivalents and 12990 ETH, with a total value of $67.21M.

Treasury

A Treasury dashboard that highlights revenues and expenses, as well as assets and liabilities, can be found at https://alchemix-stats.com.

As a result of the general recovery in market conditions and increase in Elixir revenues, there has been strong growth in the value of treasury assets. An appreciation of the treasury’s holdings of the Velodrome Finance token was responsible for an increase of $1.19M.

At the end of Q4 2022 the treasury assets were valued at $7.43M and composed of stablecoin assets valued at $0.73M and $6.7M of other assets. By the end of Q1 2023 the treasury assets were valued at $13.69M and composed of stablecoin assets valued at $1.3M and $12.39M of other assets, which represents an 84.3% increase for the quarter. The above numbers reflect non-ALCX holdings.

Protocol Revenue

The following shows protocol revenue for Q1 2023. The revenue is denominated in the USD value of the tokens earned at the time that the tokens were claimed. Included is revenue earned by the protocol’s three Elixirs (alUSD-FRAXBP, alUSD-3CRV, alETH-ETH), the Mainnet Developer Multisig, Optimism Multisig, and revenue earned from harvest fees on Mainnet, Fantom, and Optimism. This report does not include tokens whose total revenue was less than $1,000 for the quarter.

Deposits and User Metrics v2

The large increase in both stablecoins as well as ETH at the start of the quarter was the result of v1 funds being moved into the v2 contracts. The large drop at the end of the quarter was a result of the USDC depeg event that caused depositors to exit Dai, as well as their strategies denominated in Dai (Alchemix yvDai vault included).

Net Deposits at Quarter End

At the end of Q4 2022 net deposits consisted of mainnet stablecoins $13.81M, mainnet ETH $16.54M, Fantom stablecoins $0.14M, and Optimism deposits of $0.48M.

Q1 2023 net deposits consisted of mainnet stablecoins $13.31M, mainnet ETH $35.6M, Fantom stablecoins $0.09M, and Optimism deposits of $0.38M.

At the end of Q1 2023, net deposits on Alchemix were $49.38M, an increase of 59.4% on the previous quarter.

Governance

The following are Governance proposals that were voted on in Q1 2023:

AIP-75 was passed to initiate $50k in bribes for the L2D4 pool on Arbitrum in the Saddle protocol.
AIP-76 was passed to initiate a new alAsset, alOHM, and a staking strategy with incentives backed by the OHM token.
AIP-78 was passed to partner with Blueberry to create custom Alchemix strategies.
AIP-79 was passed to partner with Revest to create an ERC-4626 vault Transmuter looping strategy to make transmuter yield more accessible and predictable.
AIP-80 was passed to split the Elixir AMO revenue into equal thirds for re-locking, treasury funding, and ALCX buyback and bribes.
AIP-81 was passed to approve $25k for the first round of the Alchemix Grants Program through Gitcoin Grants 2.0.
Community Vote: New Token Name This proposal was to choose the name of the new token that would be deployed with veALCX. In a close vote “FLUX” was the winner.
AIP-82 A was passed to approve migrating the protocol owned ALCX/ETH liquidity and incentives from Sushi to Balancer.
AIP-82 B was passed to approve selling 50% of Alchemix’s TOKE holdings to purchase AURA and to lock it and vote for the ALCX/ETH Balancer pool.
AIP-83 was passed to slightly alter and expand the original Alpha Vaults proposal to allow the core team to launch any strategies as alpha vaults with limited parameters without individual governance approval.
AIP-84 was passed to pre-authorize a grant from Alchemix to retroactively support development costs of Alchemix Leveraged Vaults.
AIP-85 was passed to authorize $50k of discretionary funds in ALCX from the Alchemix treasury to be granted to the Bizgov subDAO to run some liquidity pilot programs.
AIP-86 A was passed to authorize the addition of frxETH as a strategy for the alETH Alchemist.
AIP-86 B was passed to authorize and plan expanding the deposit caps for ETH liquid staking derivative tokens (e.g., wstETH, rETH, sfrxETH).