Original much funnier title that didn't fit: Why I switched all of my single stake ALCX to Continuous Bonding and (maybe) you should too
Also funny (but lessy funny than mine) title by Dixie: "How I learned to stop worrying and love the bond"
Summary
This article serves as an explanation of how you can outperform the single stake ALCX pool with an actively managed bonding strategy.
Introduction
Olympus Pro bonds for Alchemix have been incredibly valuable to the Alchemix DAO already - over $1m USD in protocol-owned liquidity, and all we gave up were tokens that would have been given away anyway! I think many in the community are beginning to understand what bonds can do for the Alchemix DAO, but are not aware of what bonds can do for YOU.
Many users seem to primarily bond if they are looking to buy ALCX, and want a discount. That’s great, but how often is the average user buying ALCX? Many of us are comfy in our ALCX positions or are only occasionally buying ALCX. So where else does demand for bonding come from?
Let me introduce you to Continuous Bonding. It’s not something I invented - many Ohmies use this exact strategy (though I have no idea what they call it). There is a lot of crossover between ALCX and OHM, however, I think much of the ALCX community is unaware of this strategy because many of us just (3,3) or (9,9) our OHM. I actually first heard of this strategy when it was mentioned in the Goodwill Yunting podcast, but I had no idea what it meant. The Ohm guys mentioned that some users are continuously bonding - my reaction to that was “wow, some people are just constantly buying OHM??”. Only when I started playing with ALCX bonds did I realize that is NOT what (most) people are doing. Let's go through how you can user your ALCX to bond for more ALCX.
Continuous Bonding: The Basics
To understand continuous bonding, let’s first understand how you can bond for ALCX with ALCX:
- See a tasty bond discount.
- Unstake your ALCX from app.alchemix.fi/farms
- Convert ALCX to ALCX/ETH SLP (Easiest way is using the https://zapper.fi/invest Pool function, you can do it in 1 transaction.
- Bond your SLP for ALCX at https://pro.olympusdao.finance/#/bond
(NOT a tasty bond discount).
- After 7 days take your bonded ALCX, which if done right outperformed single stake, and put it back in single stake.
Pretty neat right? There are gas costs to consider, but with enough ALCX and a big enough bond discount, it’s very worth it! And the amount of ALCX necessary or bond discount % required may not be as large as you think.
But, this strategy is only for a one-time bond. Where Continuous Bonding comes in is step 5 above. Instead of re-entering single stake, you look for an opportunity to bond again. For example, let’s say after 3.5 days you have 50% of your bonded ALCX vested and available to withdraw, and you see a tasty bond discount. You can withdraw this partial amount of ALCX, repeat steps 3 and 4 above, and bond again! You can do this for as long as you want! So, assuming you have already bonded once and that bond is currently vesting, here are the steps you can loop for Continuous Bonding:
- When you see a tasty bond discount, claim the available ALCX from your partially vested bond position
- Convert ALCX to ALCX/ETH SLP with Zapper.fi
- Bond your SLP for ALCX
That's it! At least, that's it in theory. But in reality, there are some complexities - the obvious one being "but gas fees!" and "how do I know if the bond discount is right for me? (don't talk to your doctor)".
Continous Bonding - The Spreadsheet
So in theory bonding sounds cool, but it's pointless if you don't outperform single stake. So to ensure outperformance, you need to consider the following variables:
- Current bond discount
- Gas cost to claim, zap, and bond.
- How much ALCX you have available to bond
- The maximum amount of ALCX you can bond in one transaction
- The current APR of the single-stake pool
Thankfully for you, I've built a spreadsheet to handle this! To user the spreadsheet, input the current amount of ALCX you have available to bond, the price of ALCX and the bond discount (from https://pro.olympusdao.finance/#/bond), the single stake ALCX APR (https://app.alchemix.fi/farms), and the expected gas fees (I like https://www.blocknative.com/gas-estimator). The calculator will then display how much bonus ALCX and bonus APR you get relative to single stake, with gas fees included in this estimation.
Play with the various numbers in the spreadsheet and see how it changes! For example, with 50 ALCX, a 3% bond discount (which pops up somewhat often), and 100 GWEI gas (also common), you will get double the APR as you would in single stake!)
and that's the power of levera... I mean bonding
I'm an ALCX shrimp. Why should I care about this?
Continuous bonding is a great strategy for users that are willing to use a more involved strategy to outperform single stake ALCX. I imagine some SLPers may switch over to this strategy as well. This means if you are a shrimp in the ALCX only or the ALCX SLP pools, there will be less TVL in those pools, and therefore more APR for you! Plus, the more bonding occurs, the more LP the protocol owns, the more ALCX the protocol gets from staking that LP, the less sell pressure there is on the ALCX token.
** Tips, Tricks, and Additional Considerations**
There are lot of complexities to bonding that could be optimized far beyond what my modest spreadsheet provides. Here are some things to consider.
Tips and Tricks
- When you bond, you spend gas in ETH. However, you get the gas back in the bonus ALCX. If you do not want to be converting your ALCX to ETH over time, then I recommend that you occasionally sell some of your ALCX for ETH (before zapping into the SLP). You could do this every time you bond, or every 1 in X times to save a bit on gas.
- I recommend spending a couple days just watching https://pro.olympusdao.finance/#/bond to see how the bond discounts move over time, what's a "common" bond discount, what's a "rare" bond discount, how often they get slurped, etc. This will give you a better initial feel of what you should aim for before you hop in.
- When I first started bonding, I was often bonding again after only a few days had passed. However, I quickly realized this meant I was never bonding my entire position, and one of the best ways to make bonding worth it is to bond larger amounts of ALCX. So even if you see a discount that is technically "worth it", I believe it is more "worth it" to wait until you have more ALCX available, and look for a bond then. For ex, if you observe https://pro.olympusdao.finance/#/bond per item 2 above, and realize that 3% discounts are pretty common, and you can be fairly profitable with a 2.5% discount, then maybe you wait until day 5 of 7 to start looking for new bonds.
- The goal here is to outperform single stake, so in that regard definitely aim to outperform it significantly so that the bonding effort is worth it! Ie, there's no point in doing this if you're only getting an additional 1% APR on top of single stake.
- If your position is fully bonded after 7 days and you haven't re-bonded, you now have unproductive ALCX on your hands that you either need to single stake, or wait for the right bond discount. That's why I recommend looking for new bonds at day 5 (or at least, not at the end of day 7).
- Sometimes bonds sell out - so far this has only happened once, and they were just "out" for a couple days, so it didn't affect much (bonding is still likely worth it even if you have to sit on unproductive ALCX for a day or two). Increased bond demand (from this article maybe?) could cause more sellouts.
- Bonding means you don't have access to all your ALCX - this is only an issue if you think you may sell a large chunk of your ALCX position in the coming week.
- This spreadsheet does not consider compounding. I will say it matters far less often than Ohm, due to the much lower ALCX APRs. FOr example, Ohmies will often stake their vested OHM every rebase (8 hours) to capture ohm (3,3) staking AND bonding. Hoewver, with much lower ALCX aprs I didn't think it was worth trying to do the math on this approach - at least not for this article.
What happens if my bond gets slurped when I'm going through the transaction?
Let's take this transaction by transaction:
- Bond gets slurped after claiming a partially bonded position - Your ALCX was doing nothing before you claimed it, so let it continue doing nothing. Wait for a new bond to pop up, claim any new ALCX that has vested in that time, then bond the full position. You have only wasted gas on one additional claim transaction, which is relatively cheap.
- Bond gets slurped after zapping in - You are now exposed to IL with your SLP token. I would consider zapping back to ALCX only if you were relying on a rather large bond discount.
- Bond gets slurped while bonding - I believe this would cause a failed transaction. Same consideration as item 2, where you either need to have exposure to IL or zap back to ALCX only.
- Bond gets slurped withdrawing from ALCX single stake - consider how "rare" of a bond you were targeting, and how quickly you think it will pop up again (this is why it's important to observe, so you have the information to make these decisions). Either re-stake the ALCX or wait for a bond to pop up.
Why am I writing this article?
First off, I enjoy contributing to the DAO and defi education. But, while writing this the thought obviously crossed my mind that releasing this article may make my bonding strategy more profitable. So why release it now, or at least why not wait a bit? Well, a few reasons:
- If more people start bonding due to this strategy, it will result in the DAO obtaining liquidity even faster than it is now, which can result in the DAO soaking up ALCX tokens even faster (from staking its LP positions), which will result in ALCX moon. So in short, this will pump my bags.
- I believe that understanding this strategy is important to understand the current governance discussion around shifting a LOT of the ALCX emissions to bonding. So even though we will have more users bonding, we will also have more bonds available, so I don't think I'll get diluted too much!
So in summary this is a net benefit to ALCX single stakers, a potential new strategy for SLPers and single stakers to consider, a huge benefit to the DAO, a short term self-sabotage, and a long term pumpage of my bags.
