This is a summary of the Alchemix Q3 2023 report, which can be found in full in the Alchemix GitBook. This report provides relevant data for Q3 2023, 1st July 2023 to 30th September 2023.
The third quarter of 2023 brought many developments into the crypto space and into the Alchemix world, including the following:
On July 30th 2023 a hacker exploited a vulnerability that was found in some of the contracts in the Curve Finance protocol, stealing tens of millions of dollars worth of cryptocurrency. Despite some funds being rescued minutes before the exploit hit, the alETH-ETH pool was among the pools which were exploited. After a period of negotiations, the exploiter returned all stolen funds, but because of how incomplete the exploit was, arbitrageurs and MEV bots swooped in and caused a permanent loss for the liquidity providers. This permanent loss amounted to 3,856 alETH in aggregate. Two MEV bot operators returned some of their profits, but a large gap remains. Read the full post-mortem of the exploit of the alETH-ETH Curve pool here. As a result of the exploit, Alchemix halted emissions to alETH liquidity pools. Alchemix is currently working with Curve Finance to refund affected users before restarting incentives.
In September 2023, Alchemix launched Connext bridges for ALCX and alUSD. These bridges allow users to move ALCX and alUSD tokens between different blockchain networks, such as Ethereum, Optimism and Arbitrum. The launch of the Connext bridges was a significant development for Alchemix, as it makes it easier for a wider group of users to interact with the protocol and opens up new opportunities for Alchemix, such as partnerships with other DeFi protocols on different L2 networks.
Alchemix earned approximately $1.31 million in revenue for the third quarter of 2023, and the breakdown of this is shown in the Protocol Revenue section below.
Alchemix added support for additional Optimism vaults, now totalling 8 strategies.
In May 2023, a cross-chain bridge called Multichain was exploited, resulting in the theft of millions of dollars worth of cryptocurrency. Among the assets stolen was alUSD. As a result of the exploit, alUSD became partially unbacked. This means that the value of alUSD was not fully backed by the underlying assets in the Alchemix protocol. Alchemix has since executed the necessary transactions to fully back alUSD.
Alchemix had another successful quarter with 6 governance proposals going to a vote. In August 2023, Alchemix’s governance community passed AIP-95b, a proposal to deploy a bridging solution for Fantom users to recover their ALCX and alUSD. AIP-95b was deployed shortly after the close of the quarter. This means that Fantom users can now recover their gALCX and alUSD tokens, which were affected by the Multichain exploit.
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 October 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.
Q2 2023 Lookback
Before we dive into the latest updates, the second quarter of 2023 brought interesting developments into the Alchemix world, including the following:
- Alchemix’s bridge provider, Multichain, announced a Force Majeure affecting its bridging services.
- FRAX and frxETH strategies were added in April. A few weeks later, the deposit caps for stETH and rETH were raised by 420.69 ETH, and the deposit cap for frxETH was raised by 320.69 ETH.
- The Self-Repaying ENS (SRENS) service was released.
- The protocol earned approximately $1.8 million in revenue for the quarter. Revenue metrics are now also available on alchemix-stats.com
- Alphaday launched their Alchemix dashboard, in cooperation with
- The treasury received an airdrop from RAMSES, making it the primary DEX for housing alAsset liquidity when the protocol is deployed on Arbitrum.
- The ALCX incentives to the main Sushi ALCX-ETH pool were migrated to Balancer for a new 80/20 ALCX-ETH pool, in preparation for the launch of veALCX.
Q3 2023 TL;DR Metrics
At the end of Q3 2023 alUSD (0.9905) and alETH (~0.7) prices had both declined compared to the previous quarter and the significant drop for alETH was due to the Curve exploit. The value of the Elixir Contents had decreased 33.3% to $45.78M and the value of the Treasury had decreased 27.3% to $8.76M. Global Deposits decreased 34.2% to $38.84M.
- 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 2022. This row shows the state of the aggregate global deposits.
Q3 2023 Data
The main challenge for the protocol is to maintain a strong price for the alAssets.
Curve post mortem — https://alchemixfi.medium.com/curve-exploit-post-mortem-7142e78bc339
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 is 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 October 1st 2023 the annualized inflation rate of ALCX was 10.97% and the table below shows future emissions.
Projected ALCX Supply Growth Compared to 2023.10.01
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 which 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 which 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 contracted by $24.67M (-37%) as a result of the alETH Elixir being halted after the Curve exploit. The alETH Elixir will restart after affected LPs are partially reimbursed and emissions to these pools restart. The alUSD Elixirs remain unchanged.
In Q2 2023, the Elixirs contained 43.65 million in USD equivalents and 12990 ETH, with a total value of $68.68M. At the close of Q3 2023 USD equivalents were unchanged at 43.65 million.
Due to the Curve exploit, the alETH Curve liquidity pool portion of the Elixir is currently empty and this change resulted in an Elixir total value of $45.78M.
For more details the full post-mortem of the exploit of the alETH-ETH Curve pool is here.
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 decrease in the value of treasury assets.
At 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. By the end of Q3 2023 the treasury assets were valued at $8.76M and composed of stablecoin assets valued at $0.51M and $8.25M of other assets, which represents a 27.3% decrease for the quarter. The above numbers reflect non-ALCX holdings.
The following shows protocol revenue for Q3 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, the Optimism Multisig, and revenue earned from harvest fees on Mainnet and Optimism, a RAMSES veNFT on Arbitrum and a newly acquired Aerodrome veNFT on Base. This report does not yet include revenue that may be earned from other sources of income owned by the treasury’s time-lock address. Those revenues are planned to be included in future reports. This report also 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 Q3 of 2023. The notable withdrawal in stablecoin and ETH deposits a third of the way through the quarter is likely due in large part to market uncertainty in the wake of the exploit of Curve pool discussed above.
Net Deposits at Quarter End
At the end of Q2 2023 net deposits consisted of Mainnet stablecoins $14.4M, Mainnet ETH $44.08M, Fantom stablecoins $0.03M, and Optimism deposits of $0.54M.
Q3 2023 net deposits consisted of Mainnet stablecoins $8.78M, Mainnet ETH $29.89M, and Optimism deposits of $0.17M.
At the end of Q3 2023, net deposits on Alchemix were $38.84M, a decrease of 34.2% on the previous quarter.
The following are Governance proposals that were voted on in Q3 2023:
- AIP-93 was passed to authorize investing 50,000 USDC in the Curvance protocol.
- AIP-95a was passed to authorize restoring backing to alUSD only on Optimism and Arbitrum as part of the Multichain response.
- AIP-95b was passed to authorize restoring backing to gALCX and alUSD on Fantom as part of the Multichain response.
- AIP-96 was a vote on how to resolve the issue of bridgers having lost alETH in the wake of the Curve exploit, with the winning option being Option 4 — Reimburse spent ETH + 10% bounty.
- AIP-97 was passed to authorize the resumption of the paused alETH Alchemist and to redirect alETH Alchemist repayments, self-liquidations and harvests to the Elixir as part of the Curve exploit response.
- AIP-98 was passed to provide funding for the Multi-Tenant veDAO Launchpad.