Alchemix

Alchemix is a DeFi protocol that allows for the creation of synthetic tokens that represent the future yield of a deposit. Users of the protocol can acquire tokens at no cost by locking collateral in the Alchemix system, allowing them to get access to their future yield immediately.

To start using the Alchemix protocol, users must first deposit DAI, a stablecoin cryptocurrency, into the Alchemix vault. Users may deposit up to 2000 DAI. The Alchemix protocol uses the DAI to begin minting alUSD, a synthetic stablecoin that tokenizes a user's future yield. Alchemix users may borrow up to half the amount of DAI they deposited in alUSD (for example, a deposit of 2000 DAI mints 1000 alUSD). Users may either take the full 50% loan when they first borrow, or have the option to take less up front and borrow more alUSD later until their limit is maxed out. Once borrowed, alUSD may be traded or used however a user wants in the Alchemix ecosystem, including on the apps CoinGecko, Curve, Defipulse, FTX, Paraswap, Rari Capital, SushiSwap, and Zapper.

How the Alchemix protocol works

Once alUSD has been borrowed, the Alchemix formula begins gradually paying back your loan over time. As a user's collateral generates yield, more alUSD becomes available to borrow over time. Alchemix users also have the option to repay their loan earlier with either DAI or alUSD. If one is unable to repay the loan, Alchemix allows users to liquidate their loan, dissolving all of their collateral in the process.

Alchemix users also have the option to transmute alUSD to DAI if they do not like the current market rates of alUSD. Transmuting always gives the user a fixed one-to-one ratio from alUSD to DAI. In the Transmuter, Alchemix users can stake their alUSD to convert steadily back into DAI over time. The process is not instantaneous, as the balance is made up from continual contribution payments, liquidations, and incoming yield.

The Alchemix Transmuter function