Alchemix Q4 2023 Report summary
This is a summary of the Alchemix Q4 2023 report, which can be found in full in the Alchemix GitBook.
This report provides relevant data for Q4 2023, 1st October 2023 to 31st December 2023.
The fourth quarter of 2023 brought many developments into the crypto space and into the Alchemix world, including the following:
Alchemix has continued to show resilience and commitment to users following the Curve exploit. The Curve alETH LP reimbursement contracts are now live, and affected LPs can now claim their reimbursement.
This quarter saw significant progress in rebuilding trust with deposits stabilizing and the total value of deposits rising healthily. In addition, alETH LP incentives to encourage liquidity provision on Mainnet pools and the alETH transmuter have both been restarted.
Due to the Curve exploit Alchemix’s Connext bridge for alETH was temporarily paused and is now operational again. Seamless movement of alETH, alUSD and ALCX between Ethereum Mainnet, Optimism and Arbitrum re-establishes cross-chain functionality and allows greater DeFi opportunities for users.
To foster wider adoption and promote L2 alAsset liquidity, two new pools have been created on prominent L2 protocols RAMSES and Velodrome.
alETH is now fully re-backed. As outlined in AIP-99 and AIP-101 in the Governance section below, this crucial step ensures alETH is adequately collateralized, strengthens its stability and boosts user confidence.
Despite the challenges faced in the fourth quarter of 2023, the value of the Alchemix treasury appreciated considerably and Alchemix generated $1.57 million in revenue. The breakdown of this is shown in the Protocol Revenue section below.
Alchemix maintained a strong commitment to community governance by presenting 6 proposals for the community to vote on. Notably, in October, AIP-99 was passed to authorize a strategy for rebacking alETH and refunding alETH/ETH LPs in the aftermath of the Curve exploit. In December, AIP-101 was passed and outlined some changes in the plan for re-backing alETH.
Given the scale and scope of the Curve exploit and the measures taken to protect user and protocol funds, many of the metrics in this quarter are lower than they could have been had the exploit not happened. For more details, the full post-mortem of the exploit of the alETH-ETH Curve pool is here.
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 January 2024, 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.
Q3 2023 Lookback
Before we dive into the latest updates, the third quarter of 2023 brought interesting developments into the Alchemix world, including the following:
- Curve pools were exploited to the tune of tens of millions of dollars. Among these exploited pools was the alETH-ETH pool.
- As a result of the Curve incident, alETH incentives were halted.
- Alchemix’s new Connext bridges for ALCX and alUSD became operational.
- The protocol earned approximately $1.31 million in revenue for the quarter.
- Added more vaults on Optimism, totalling 8 strategies.
- As a result of the Multichain incident, alUSD became partially unbacked. The necessary transactions were executed and alUSD was again fully backed.
- AIP-95b, the proposal to deploy a bridging solution for Fantom users to recover their ALCX and alUSD passed governance and was deployed shortly after the close of the quarter.
Q4 2023 TL;DR Metrics
At the end of Q4 2023 alUSD (0.9911) and alETH (0.9433) prices had both improved compared to the previous quarter. The significant increase for alETH was due to the recovery of funds lost in the Curve exploit and the rebacking of alETH. The value of the Elixir Contents had increased 57% to $71.89M and the value of the Treasury had increased 9.47% to $9.59M. Global Deposits increased 15.68% to $44.93M.
- 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.
Q4 2023 Data
alAsset Prices
The main challenge for the protocol is to maintain a strong price for the alAssets.
The Alchemix SubGraph is not fully functional at the time of writing this report, so CoinGecko is being used for the above chart. The purple line (left axis) shows the value of alETH relative to ETH.
The price of alETH normalized after the Curve exploit, but it is still below target levels.
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 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 January 1st 2024 the annualized inflation rate of ALCX was 6.75% and the table below shows future emissions.
Projected ALCX Supply Growth Compared to 2024.01.01
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.
Elixir Contents
In Q3 2023, the Elixirs contained $45.78M in USD equivalents. At the close of Q4 2023 USD equivalents had increased to $71.89M.
This quarter the Elixirs grew by $26.11M (+57.03%) as a result of the alETH Elixir being restarted after the Curve exploit, and also the alUSD Elixirs expanding by $2.08M.
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 improving market conditions there was an increase in the value of treasury assets.
At 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. By the end of Q4 2023 the treasury assets were valued at $9.59M and composed of stablecoin assets valued at $0.85M and $8.74M of other assets, which represents a 9.5% increase for the quarter. The above numbers reflect non-ALCX holdings.
Protocol Revenue
The following shows protocol revenue for Q4 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 Velodrome veNFT on Optimism, a RAMSES veNFT on Arbitrum and an 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 Q4 of 2023.
Net Deposits at Quarter End
At the end of Q3 2023 net deposits consisted of Mainnet stablecoins $8.78M, Mainnet ETH $29.89M, and Optimism deposits of $0.17M.
Q4 2023 net deposits consisted of Mainnet stablecoins $6.2M, Mainnet ETH $38.45M, and Optimism deposits of $0.28M.
At the end of Q4 2023, net deposits on Alchemix were $44.93M, an increase of 15.7% on the previous quarter.
Governance
The following are Governance proposals that were voted on in Q4 2023:
- AIP-90 was passed to authorize Alchemix to launch alUSD and alETH Alchemists on Arbitrum.
- AIP-99 was passed to authorize a strategy for rebacking alETH and refunding alETH/ETH LPs.
- AIP-100 was passed and outlined a plan for how to change AMO (Elixir) harvests.
- AIP-101 was passed and outlined some changes in the plan for re-backing alETH.
- AIP-102 was a proposal to seek authorization for Alchemix to reduce deposit caps and was passed.
- AIP-103 sought authorization for Alchemix to make a deposit of 1,500 ALCX into the Fyde protocol and was passed.
