Alchemix Protocol - self repaying overcollateralized loans

in LeoFinancelast year (edited)

This is probably my first post ever about a project outside of Hive, and surely the first on LeoFinance. I'm not much into financials, and have been in the space for the tech and the community before that became a meme. But recently I found this DeFi project, which is the first one ever with a real use case for me, and I'm too excited about it to not share.

Alchemix logo

The concept is pretty simple. Alchemix allows you to earn boosted interest from yearn and at the same time take out a loan of up to 50% of the deposited amount. The borrowed amount gets automatically repaid with the interest your full collateral is earning, and there is no risk of liquidation whatsoever. You practically get immediate access to future yield, which allows for a range of use cases.
You can buy a boat, invest into a risky new coin, or just cover your living expenses - all without having to touch your principal. All of it stays safely in the yearn vault, constantly earning interest on the full amount and paying back your debt. Or use it for your emergency fund, instead of having it in the bank where it just keeps losing value because of inflation.

Interest rates vary depending on market conditions, but even in this bear market they haven't dropped below 5% yet. At the top they got close to 40%! So worst case, if you borrowed the maximum amount possible and interest stays that low, it would take 10 years until you can get back the full deposited amount. It's of course always possible to repay your debt early, or withdraw the remaining amount (collateral - outstanding debt).

For now it supports DAI and ETH, v2 with more assets and different options to choose where the interest comes from is in the works and should be released during Q3.
You can borrow up to 50% of your DAI, or up to 25% on ETH. For security reasons there is a cap on total loans, which will be gradually raised. If it's not possible (or you don't need) to take out a loan right away, the interest you earn gives you the right to mint these tokens in the future.

There's also a governance token (ALCX), which will earn a fraction of all generated interest in the future when the DAO is released, but for now it's only good for yield farming and under enormous sell pressure. I'm not going deeper into that, if you're interested in investing into the platform you should do more research yourself anyways.

If you want to have a deep dive, I recommend the following 3-part series on medium to start:

Posted Using LeoFinance Beta


It's an interesting concept. My my how programmable money is changing the game of living. Barely the tip of the iceberg too...

I read this paper a couple of months ago of a concept in the same broad category:

New Crypto-Secured Lending System with a Two-Way Collateral Function

Just realised where I've seen your account name before: the HiveInvite project?

Interesting, a loan on a short basically. Way too risky for my taste, but now I wonder why that doesn't exist yet.

Yes, I made hiveinvite back when there was no onboarding option besides steemit. There are better alternatives these days I think.

Awesome. Wish I would have known about this a few months ago. I bought a car with crypto. A loan would have been better.

With the ability to use your crypto assets to borrow, the key to building wealth becomes holding onto your assets.

No longer do you need to keep dumping in order to fund life.

So excited to see DeFi go mainstream.

PS. It's good to see some of our Hive witnesses popping up in the LeoFinance community.

What are your thoughts on what the team is building here and how LeoFinance is helping onboard and market Hive itself?

Posted Using LeoFinance Beta

the key to building wealth becomes holding onto your assets

That's not new - but easier than ever now!

What are your thoughts on what the team is building here and how LeoFinance is helping onboard and market Hive itself?

Leo to me is a prime example how a hive community can be run and separate itself completely from the underlying platform. The team is doing a great job, and this is the best way to spread hive without getting too technical for the end user.

this is the best way to spread hive without getting too technical for the end user.

This :)

95% of regular people don't care about Hive tech, they care about the app.

Happy to hear some of our witnesses are thinking this way.

Posted Using LeoFinance Beta

Thx for artical. Great info.

Sounds like an interesting concept. So you deposit a collateral that allows you to borrow 50% of the value (with DAI for example) and those 50% are then being paid off with yield farming that is done with your collateral? I'll take a closer look at that.

Exactly. Also, the yield is higher than what you get in yearn, because interest earned and not withdrawn is deposited to yearn too, boosting interest for every Alchemix user.

You can buy a boat

I'm in!

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So you're essentially borrowing back part of your deposit, but only paying the 5% interest rather than the amount you'd pay on a loan from a bank?

You're not paying anything, you receive interest on your deposit no matter how much you borrowed.

 last year (edited) 

it can also technically take forever to get it back if rates become low, right? :D

Edit: Btw i look months ago over it, there was some problems with it i remember and i dont understand also why you need the native token or what the reason is to hold it.

Posted Using LeoFinance Beta

It takes longer to repay the loan when rates drop, of course.

There was an issue when they deployed their ETH contract the first time, which caused all loans to be repaid instantly. It was dubbed "reverse-rugpull", users rugged the protocol.

The native token doesn't have a use case except voting for governance proposals right now. 10% of the earned interest goes to the treasury and will be distributed to stakers in the future.

Thanks, good to know!

These projects make it easier in crypto these days. Thanks for sharing. :)

I keep on earning on deposit and I can also loan upto 50% on Dai which is stable coin. This sounds good to me and even new concept worth looking more into details.

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