• AIP

  • [AIP - 25] Launch alBTC before Alchemix V2, and alBTC launch parameters

Part 1 – Launch alBTC Before Alchemix V2

alBTC is currently the missing piece of the “Big 3” triangle of Alchemix Vaults (alETH, alUSD, alBTC). alETH has proven the ability of the Alchemix team to launch additional alAssets based on yearn vaults. Additionally, WBTC yields on yearn are often higher than those of WETH, meaning alBTC is set up for success. Given V2 is set to be shipped to auditors Nov 1st, and will be released late December at the earliest, there is a window of time where we could soft-launch alBTC to start building liquidity and backing prior to V2 without cutting into V2 development resources. This would likely create some additional work to migrate alBTC from V1 to V2, plus users would need to migrate their collateral, which are both reasons to keep the launch somewhat conservative (similar to alETH).

Per Scoopy, “internally, the team doesn’t have consensus on alBTC using the V1 architecture”. At least one member of the dev team has expressed their desire to make this happen. The engineer portion of the dev team seems relatively against it but open to a vote, per alETHnocratic: “optimistically, it would take 2 dev weeks to launch alBTC (1 dev week === 1 week of work for 1 dev). given that V2 should launch 8 weeks after the audit starts, it would mean launching alBTC on legacy code, only to have it run for 6-7 weeks before a much better, audited, legoable version is available. this is, imo, not worth it, and dev time would be better spent readying things like scalable deployments for even more alchemix systems, modules built on V2, keepers for v2, and the AlchemixDAO. having said that, I am very interested in decentralizing Alchemix as much as possible, so depending on the level of support for this AIP I think we would consider shifting resource priorities.”. Per 0xDerivadALCX: “going with legacy code now doesn't make sense cause people will have to migrate from al v1 products to v2”.

The primary reason to launch alBTC early is to make the V2 alBTC user experience better: V2 is expected to bring a massive TVL as well as overall attention increase to Alchemix. We know that alAsset pools need to slowly ramp up to maintain peg, and if we have to release alBTC and slowly ramp it up when V2 is released, then many users are going to run into the debt cap as their first experience with alBTC. Releasing alBTC early allows us to start the process of establishing the debt cap early and have an initial idea of what the market interest is in alBTC, which will let us raise or maintain the debt cap in advance of the V2 launch.

A vote “for” launching alBTC before V2 does not necessarily mean it would for sure happen, but instead signifies the community’s desire for an early alBTC launch, which will heavily influence the development priority list. For that reason, I believe it’s important to include the note that if alBTC cannot launch more than 4 weeks prior to V2, we instead wait for V2. The primary decision here is if losing some non-V2 development time is worth getting a jump start on alBTC liquidity and debt cap.

Part 2 – alBTC Launch Parameters
I propose the following initial parameters for the launch of alBTC:

Collateralization ratio: 400%
Debt Cap: 100 alBTC

The intent is to get a jump start on establishing a peg and liquidity for alBTC. The high collateralization ratio is to ensure ample alBTC flows to the transmuter, which helps strengthen the peg and increase yields in the system. The 100 alBTC debt ceiling approximately matches the initial 2000 alETH debt ceiling, which ensures the supply doesn’t balloon faster than we can establish an alBTC market. It is also easier to raise the debt cap and lower the collateralization ratio in the future, rather than go the other way. The wbtc vault on yearn has 94m USD in it, and Scoopy believes it would be relatively unaffected with an additional 30-50m, which is about 1000 BTC. A conservative assumption of 10 BTC deposited for each 1 alBTC of outstanding debt (alETH is more like 7:1 right now, note this is possible due to the 1:1 ETH:alETH swap feature) also gets us to the 100 alBTC initial debt cap.

I propose the Alchemix protocol enables a 1:1 one-way WBTC to alBTC swap for users who wish to swap directly into LPing for alBTC, similar to what is available for alETH.

I propose the vault display a warning letting users know they will need to pay gas to migrate their funds in X weeks (X likely = 5-6). (This warning is another reason we may see more like a 10:1 BTC:alBTC debt ratio, as users who 1:1 swap to LP alBTC will not need to modify anything).

I propose that the emissions schedule be modified thus (italics represents a change):
ETH/ALCX: 53% + 5% for tALCX -> 50% + 5% for tALCX
ALCX Only: 18% -> 18%
3CRV/alUSD: 18% -> 18%
alETH/ETH (Saddle): 3% -> 3%
alETH/ETH (Curve): 3% -> 3%
alBTC/BTC (TBD): 0% -> 3%

alBTC will likely be less in-demand than alETH. This is because alBTC requires obtaining WBTC, which is another layer of risk and complexity. Additionally, defi natives tend to denominate more often in ETH, or at least hold less BTC compared to other users. However, BTC is still the largest and most owned coin in the cryptocurrency ecosystem, so there will still be some level of demand. Either way, the goal is to for the alBTC LP to be one of the best yield opportunities on BTC in all of defi, similar to alETH. Therefore, the alBTC/BTC pool is given 3% of the awards – less than alETH, but still a reasonable size to attract liquidity.

The rewards are taken from the ETH/ALCX SLP as that pool is the least critical to vault functionality, currently has deep liquidity with minimal slippage, and it’s possible that more efficient liquidity from the tokemak reactor could replace any liquidity we lose from the reduction. alUSD is already split between bribes and curve rewards, and the alETH debt ceiling is still in its infancy, so it needs all the liquidity it can get to continue growing.

**Options (please vote in the poll below so we can gather an initial idea of response to this AIP). If total Option 1 + Option 2 > Option 3, then whichever of option 1 and 2 passes will be enacted.

Option 1: You are signaling your desire for alBTC to launch 4 weeks before V2 and after nov 1st, and agree with the proposed launch parameters.
Option 2: You are signaling your desire for alBTC to launch 4 weeks before V2 and after nov 1st, but disagree with launch parameters and would like to propose an alternative (comment below).
Option 3: Disagree that alBTC should launch before V2 and would instead like to wait for V2 (and figure out launch parameters then).**

Choose your Option (see above)

This poll has ended.

0xDerivadev in your opinion is establishing an alBTC market prior to BTC not necessary at all, or do you agree it's beneficial but not worth the duplicated effort?

    Dev-bias here but putting out alBTC before v2 will severely cut down on our resources and push v2 release further behind. So while an alBTC vault could be constructed with the v1 structure I'm opposed to doing so considering all the points already mentioned with regards to migration and code safety.

    Edit: superb use of poll mechanics tho!

      n4n0 Please clarify, I was under the impression that V2 ships to audit Nov 1st, at which point it's mostly in the auditor's hands and no longer needs dev resources (though that optimistically assumes no fixes are needed). Technocratic's reply seemed to confirm as much - the list of things it would take away from does not include V2.

      • n4n0 replied to this.

          ov3rkoalafied That might be true for solidity side, but it also needs a frontend. I'm just smelling a rushed UI with possible untested flaws that I'd personally not wanna release. Because as the Nintendo-man said "A rushed game is forever bad" or something like that.

            What's the timeline on V2? If V2 is expected Q4 or early Q1, is adding alBTC going to be that much value add to the protocol's long-term value? Seems like this a nice-to-have release and not a must-have, and it makes me weary that not everyone on the core team is onboard. We've been patient these past few months waiting for V2 so why rush a product release when we're probably close to a V2 release (I think?).

              This might be the 1st governance proposal that I would vote against.
              Perhaps I'm completely wrong, but this situation kinda reminds of the time where the managers want to rush release something new so that they can hit their EoY goals/increase revenue/ show to the higher ups that things are progressing, while the engineers actually disagree: They know that there is little point in doing so and taking extra risk for just a few weeks and it will probably further push back the release of v2, where all effort is currently in.

              I'm glad there was a conversation about this. Thanks ov3rkoalafied for putting this together.

              There clearly is some near term value to an early alBTC release. However the tradeoffs don't seem worth it:

              1) v2 + DAO is what we expect to be the basis of the long term value, so any inhibition to progress on that is very expensive when you compound it over a year +
              2) the community cost of a rushed product going awry is extremely high (our existing claim to a novel rug derivative is plenty in my book...)
              3) the cost (and psychological toll) of developers working on something they are not comfortable with is also very high

              If this were simply an early release of a v2 feature, that would be more appetizing. But if this takes meaningful dev resources, increases pressure on devs, and will be scrapped in v2, the answer is a pretty clear "no" to me.

              Audits can take a while (and then some fixes will prob need to be made post-audit) and its quite possible the timeline of the V2 ends up being longer than anyone wants as a result through normal testing and audit related delays.

              Because of that, I am in support of launching alBTC before V2 personally, I think it will help bring more TVL and liquidity to alchemix sooner and it will allow for the liquidity to be built up and the market proved out.

              Maybe we can use v2 code to a select group of people just using solidity directly to start the vault. Like an alpha version

              Really awesome to see the creative thinking and constructive discussion on this one.

              Sounds like we have more to lose, and not much to gain my introducing alBTC with only a few weeks/months lead on v2. I don't like the extra complexity and risk it introduced no a v1 -> v2 migration. We've waited this long (only long in crypto time) for alBTC. My vote is to stick with the patient approach at this point.

              If we had this discussion a few months ago, it might have made sense to bring in the big three ahead of v2. Or if we were looking at another 6 months plus until v2, it would be worth considering this step of stepping stone upgrade.

              As an aside, I'm also under the impression that alETH is performing very differently than alUSD -- it's easier for people to make a 2:1 calculation on stablecoin value. A 4:1 on a volatile asset is a bit harder to know how to leverage. I'm guessing more integrations with things like spell, curve, ohm, toke, etc is what's really going to help drive alassets.

              Please don't rush this! Project may not be able to suffer another incident like alETH.

              Voted against it.

              alBTC would be useful when demand for BTC goes up, probably almost exclusively for hodler's of BTC products. As we have the merge, potential flippening and such at our doorstep, demand for BTC pegged assets is not really up there yet (like during a halving event). Maybe look to add this next summer/fall if BTC is popular again and has demand? (Honestly with current DeFi scene, I don't see a use case for alBTC at all)

              Anyways, we have a much cooler product to focus on. The age of L2's and Sidechain interaction is beginning, but right on its heels is the age of stable coins. We should shore up what alchemix's core product is, something which is about to be in very high demand. Self-paying currency creation events.

              I have no idea what roadmap is, but IMO alUSD accepting variable collateral for alUSD needs to be our next strategic focus. With follow ups being expanding to roll-ups/sidechains (if we even want that), or some other way to bring value and stability to the stablecoin ecosystem.

              I see very little upside to an early launch of alBTC relative to the potential risks, when considering how short-lived the entire thing will be. I don't think it's worth it.

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