Yo ALCX fam. I’m not sure how much the team has discussed the idea of using some of the transmuter DAI for farming, but I had an idea that I think could be both safe and capital efficient. I understand in the short term this might not be possible with the current transmuter, but I think working through ideas on how this could work might give the team insight moving forward on how to best proceed. I also know nothing about coding, so the technical aspect is lost on me. I believe State has come up with a nifty idea on how unwinding the transmuter to do something like this might be possible as well.
Right now, we have over $110 million in the transmuter, which is great for safety, the peg, and having a strong backstop, yet that’s a lot of money to have sitting idle for the entirety of the protocol. As I understand, this $112 million is backed 1:1 to DAI as it was liquidated from DAI to alUSD. If we were to use some of this DAI—I propose [(amount in vault)*0.45] aka 45% the amount in yearns vault—we would be able to use around $30 mil of DAI in the transmuter for farming. This number allows alUSD to continue to be overcollateralized, as the vault is 2:1 DAI to alUSD, covering for the now .55:1 DAI to alUSD in the transmuter—overall making the peg 1.05:1 in house. Even if the worst were to happen and we lost all the DAI put to farming, we would still have a greater than 1:1 peg for alUSD, ensuring safety for our users.
As the amount of DAI in the transmuter and vaults increases, I would propose repeating this formula for every $50mil DAI added. In terms of farming, for maximum safety, a protocol like AAVE or the likes would work best (I would suggest COMP as well, but I know they have oracle issues). This would diversify us away from Yearn, avoiding being overexposed to their vaults, while still having this important capital in a safe yet strong yield earning protocol.
Alchemix might consider dividing up the earnings of this farming in two ways:
50% to the DAO for Devs/contributors salaries, bug bounties, etc. Personally, I like the idea of using this for salaries. These earnings would provide staff a stablecoin salary to additionally reward and incentivize top talent. This type of salary would also be easy for our devs/contributors to use without having to worry about selling ALCX and creating FUD. Our devs have created a protocol with $500mil TVL in less than two weeks. They shouldn’t have to choose between selling their ALCX and working a day job. This wouldn’t have to be all or even most of their salaries but earnings kept in DAI for this purpose. Long term, this strategy would create a sustainable path for paying devs and contributors that stays competitive by naturally increasing with Alchemix’s growth.
50% to buy back ALCX to add to the treasury. This would both increase the treasury size and add a deflationary aspect to the token without reducing user’s rewards for farming, increasing the price and scarcity of the token in the long run.
I consider this to be pretty risk-averse overall, but I’m interested to hear other’s thoughts on this are. Shout out to State for working through these ideas with me.
Legal Disclaimer (As I don’t know what the laws are like in my country for DAOs) This is not a governance proposal or act of governance, merely an invitation for a discussion on a forum.