This is a summary of the Alchemix Q2 2023 report which can be found in full in the Alchemix GitBook. This report provides relevant data for Q2 2023, 1 April 2023 to 30 June 2023.
The second quarter of 2023 brought many developments into the crypto space and into the Alchemix world, including the following:
In May 2023, Alchemix’s bridge provider, Multichain, announced a Force Majeure affecting its bridging services. This meant that users were unable to bridge assets between different blockchains using Multichain and out of an abundance of caution Alchemix temporarily suspended the bridging contracts for its tokens. In evaluating the fallout of the incident and the risks of continuing to use Multichain as a bridge provider, the Alchemix team decided to change to Connext as the new token bridge provider. Because of how Connext services work, for the foreseeable future, bridging will only be available on Ethereum L2 networks, and not on alternative L1 blockchains such as Fantom Opera, resulting in sunsetting Alchemix’s Fantom Opera operations. Due to the significant security and logistical considerations in implementing a new bridge, developer resources had to be diverted from other projects to work with Connext on the new bridge as a priority and this has delayed other Alchemix developments.
In April 2023, Alchemix added two new strategies: FRAX and frxETH. The frxETH vault proved very popular, rapidly filled to the initial deposit cap, and when the cap was raised it again quickly filled.
In April 2023, Alchemix released the Self-Repaying ENS (SRENS) service. This new and innovative service allows users to perpetually fund payment of ENS renewal fees so their own, or someone else’s ENS renewal will never lapse.
Alchemix had another successful quarter with 5 governance proposals going to a vote and it earned approximately $1.87 million in revenue for Q2 2023.
In Q2 partnership developments, Alphaday launched their Alchemix dashboard. This dashboard is a useful tool that aggregates Alchemix data, news, media and governance matters. Also, the Alchemix treasury received an airdrop from Ramses protocol, securing them as the primary DEX for housing alAsset liquidity when Alchemix is deployed on Arbitrum. In preparation for the launch of veALCX, ALCX liquidity providers on Sushi began migrating to Balancer’s new 80/20 ALCX-ETH pool.
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 July 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.
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.
Q1 2023 Lookback
The first quarter of 2023 brought interesting developments into the Alchemix world, including the following:
The cryptocurrency market experienced a price recovery, with BTC price 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 temporarily affected alAsset prices.
Alchemix moved its ALCX/ETH Sushi protocol-owned liquidity to Balancer.
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 entered an audit process during this time as well.
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%.
Q2 2023 TL;DR Metrics
At the end of Q2 2023 alUSD (0.9963) and alETH (0.9898) prices had both improved compared to the previous quarter. The value of the Elixir Contents had increased 2.2% to $68.68M and the value of the Treasury had decreased 8.3% to $12.05M. Global Deposits increased 19.6% to $59.05M.
The Treasury figures exclude the value of ALCX, the governance token of Alchemix.
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.
Q2 2023 Data
The main challenge for the protocol is to maintain a strong price for the alAssets.
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 July 1st 2023 the annualized inflation rate of ALCX was 15.22% 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 Elixirs slightly expanded by $1.47M (+2.2%) caused by the slight increase in the price of ETH.
In Q1 2023, the Elixirs contained 43.65 million in USD equivalents and 12990 ETH, with a total value of $67.21M. At the close of Q2 2023 these were unchanged at 43.65 million in USD equivalents and 12990 ETH, with a total value of $68.68M.
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 slight worsening of market conditions there was a small decrease in the value of treasury assets.
At 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. By the end of Q2 2023 the treasury assets were valued at $12.05M and composed of stablecoin assets valued at $1.48M and $10.57M of other assets, which represents a 12% decrease for the quarter. The above numbers reflect non-ALCX holdings.
The following shows protocol revenue for Q2 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
This section provides numbers for user activity in the protocol’s v2 contracts. All data is for Q2 of 2023. The large increase in ETH deposits during the quarter was a result of vault cap increases. User deposits reached the vault cap within days of the increase, every time.
Net Deposits at Quarter End
At the end of Q1 2023 net deposits consisted of mainnet stablecoins $13.31M, mainnet ETH $35.6M, Fantom stablecoins $0.09M, and Optimism deposits of $0.38M.
Q2 2023 net deposits consisted of mainnet stablecoins $14.4M, mainnet ETH $44.08M, Fantom stablecoins $0.03M, and Optimism deposits of $0.54M.
At the end of Q2 2023, net deposits on Alchemix were $59.05M, an increase of 19.6% on the previous quarter.
The following are Governance proposals that were voted on in Q2 2023:
AIP-87 was passed to collaborate with Premia Finance, launch a joint options pool product and also a treasury swap of $50k.
AIP-88 was passed to authorize $30k of ALCX for a PancakeSwap trial of two pools and accept an emissions allocation update.
AIP-89 was passed to expand Alchemix-Vesper vault offerings on Mainnet and Optimism.
AIP-91 passed to authorize funding of a simple frontend tool to quickly create an Alchemix position and take a loan back to the chosen asset.
AIP-92 was passed to authorize changing Alchemix’s token bridge provider to Connext, and to authorize winding down Fantom Opera operations.