Summary:

In the last couple of weeks, the transmuter has seen increased usage and alUSD has spent non-negligible time 0.2% or more below peg, which is the target minimum. This is due to multiple emissions reductions, the market crash, and the dampening of bribe efficiency. This proposal aims reverse a portion of the AIP 32 adjustments by sending some emissions from tALCX stakers back to alUSD Votium incentives (which are commonly referred to as “bribes” but will refer to as incentives in this proposal), and authorizes the DAO to rollover ALCX rewards earned from DAO-owned CVX into the ALCX rewards pool for the next epoch

Background:

How Alchemix DAO allocates its disinflationary emissions budget has evolved considerably since the inception of the protocol. We have been transitioning towards increasing the sustainability of the project in various ways. One such way is securing permanent protocol owned liquidity (POL). Via Olympus Pro, so far Alchemix DAO has acquired $3.55m of the ETH/ALCX SLP tokens (5.8% of the total liquidity), 582 wETH (0.39% of alETHCRV liquidity), 2.14m DAI (0.6% of alUSD3CRV pool liquidity), and 95,307 CVX. The DAO has also been actively acquiring Tokemak through a dao-to-dao token swap for the reactor event, tALCX extra incentives, and depositing DAO treasury ALCX for tALCX. We now have 120,173 TOKE, making us among the larger holders of TOKE, period. An earlier AIP had us borrow MIM to buy 69k CVX (nice), bringing our current total to 170,540 CVX. Both TOKE and CVX are forms of tokenized liquidity, allowing the protocol to affect other protocol’s rewards systems to direct incentives, and thus liquidity, towards our ecosystem.

We are off to a fantastic start in securing the long term future of Alchemix. In order to accommodate these DAO initiatives, emissions were lowered considerably for liquidity mining. We have also transitioned to Votium as a platform for our alUSD3CRV, alETHCRV, and d3CRV liquidity rewards. This is a highly unpredictable market with some weeks ALCX being up at the right time and thus great rewards would go into the LP, and other weeks where ALCX is down and incentives decrease considerably. Competition is also rising, with major players Frax and Luna dominating the incentives, so the multiplier Alchemix receives from using their platform is also highly variable, usually ranging between 2-3x as of late. The DAO cut emissions going to liquidity mining by roughly half over the course of our first year in the face of disinflationary emissions, however, the current allotment to Votium incentives is occasionally not quite enough relative to other stable LP pools, with alUSD3CRV’s APRs being noticeably lower than other decentralized stablecoins periodically.

Proposal:

In order to ensure that we can continue to retain our current LPs and attract more to grow the protocol, more emissions should be allocated to the alUSD3CRV pool rewards on Votium. Out of consideration to our stakers and LPs, this emissions adjustment will be minimally disruptive. In AIP-32, the emissions weight for the tALCX pool was increased from 10% to 15% of the total emissions. This attracted some liquidity, but not as much as expected. This is reflected in the relative staking APRs, with ALCX at 35.68%, and tALCX at 56.36%. Some rewards should be reallocated from this pool towards alUSD3CRV on Votium.

If the tALCX pool were to reduce its emissions from 15% to 12% of the total, the APR would drop to 45.1%. Those in the tALCX pool will still have a higher APR and won’t feel forced to move their tokens around. Doing so would increase emissions going towards bribes by 766 ALCX tokens per round of voting. The protocol already spends approximately 4000 ALCX on Votium every two weeks, with approximately 2000 ALCX going to alUSD3CRV, 1500 going to alETHCRV, and 500 going to d3CRV. This would boost emissions going towards alUSD3CRV by 38%. This should have a noticeable effect on maintaining healthy liquidity on markets. It must also be noted that the Transmuter has been utilized more often lately than months prior, losing around 5% of its reserves. It’s done a fantastic job being a stabilizing force, however, maintaining the deep pool in it is vitally important for Alchemix going forward in our v2.

The introduction to this proposal focused on the efforts of our various efforts towards sustainability. The DAO owns 170,540 CVX tokens with which we vote for our pools, which we also incentivise with ALCX. After each vote, get ALCX rewards for voting for our own pools, which is effectively a rebate on the Votium incentives. The previous rebate was 440 ALCX with 140k CVX voting, and we now have over 170k CVX. If we had 170k CVX at the time, the rebate would have been 534 ALCX. Also, with increased Votium incentives, we can expect the size of ALCX rebates will increase even further. Furthermore, the DAO will continue to acquire more CVX, which will also increase the size of ALCX rebates. Thus, in order to maintain, and eventually grow the amount of incentives going to the pool, we should recycle the ALCX rebates back into Votium incentives. These should be split proportionally by their relative weights against each other so all curve LP positions are benefitted by our growing holdings of CVX.

Recap:

In order to help bolster the alUSD peg, change the following subset of emissions weightings:

tALCX: Current 15% → 12% (-3%)
alUSD3CRV Votium incentives (bribes): Current 7% -> 10% (+3%)

Roll over Votium ALCX rebates into Votium’s next epoch.

A vote “for” authorizes these changes
A vote “against” rejects these changes