Context
alETH currently does not have full backing on mainnet or optimism as a result of the July curve pool exploit and the multichain events of earlier this year. Additionally, the Alchemix treasury currently holds funds recovered from the exploit (alETH and ETH), from the original exploiter, stuck bridgers, and some MEV bots that returned profits.
Curve is gearing up to deploy the recompensation contracts, which will allow affected alETH/ETH LPers to claim their pro-rata share of recovered funds in the form of alETH and wETH. Additionally, they will be able to claim further recompensation in the form of CRV on a 1 year linear vest.
This proposal outlines the necessary steps that the Alchemix DAO and multisig must take in order to ensure the recovered funds are properly distributed, as well as the necessary steps to re-establish the Alchemix AMO and reback alETH on Mainnet and Optimism.
More context::
- Optimism alUSD and alETH rebacking plan: https://snapshot.org/#/alchemixstakers.eth/proposal/0x86db192239099fe50745aadbca168de3e2db0e936c13d06ab49355227e522d07
- [AIP 99] Mainnet alETH Rebacking Plan and Initial alETH/ETH LPer Refund Plan: https://snapshot.org/#/alchemixstakers.eth/proposal/0xadbb418426c596d21a0165246e2937f269634bd8961631765993e6f83c3b0fac
- alETH rebacking discussion: https://forum.alchemix.fi/public/d/437-discussion-aleth-rebacking/9
- alETH stuck bridgers resolution: https://snapshot.org/#/alchemixstakers.eth/proposal/0x91b3e83519dab3dc6f4de1b9c23732d6a390a4cbe014a2cbfd1b3518a30799bb
Step-by-Step Execution Overview
This section is an overview of the major steps that will need to be taken to distribute recovered funds, re-establish the alETH AMO, and reback alETH on Mainnet and Optimism. Some steps do not have to be executed in the order they are written here.
Step 1 - Deployment of vest-split contract - Curve will deploy the alETH vest-split contract (https://github.com/curvefi/vest-split/blob/master/contracts/VestSplitter.vy) with the alETH LPer data (https://github.com/curvefi/vest-split/blob/master/scripts/aleth-reprocessed.csv)
Step 2 - Send test funds to vest-split contract - Curve to send CRV to the vest-split contract. Alchemix to send a test amount of 1 alETH and 1 wETH to the contract. Alchemix and Curve to verify credited claim values are as expected, and execute a claim transaction through the Alchemix multisig.
Step 3 - Send all funds to vest-split contract - Alchemix to wrap all recovered ETH into wETH. Alchemix to send 5050.5 alETH and 7302.33 ETH to the vest-split contract.
Step 4 - Claim AMO recovery - Alchemix to claim all credited alETH and wETH from the vest-split contract to the treasury, as well as any available CRV tokens.
Step 5 - Re-establish the AMO - Convert recovered ETH to frxETH. Re-establish the AMO, with the alETH/frxETH curve pool.
Step 6 - alETH/frxETH incentives - Begin alETH/frxETH liquidity incentives on mainnet.
Step 7 - alETH mainnet rebacking - Calculate remaining shortcoming in alETH rebacking. Begin to sell treasury assets, prioritizing the sale of correlated assets such as sdCRV and CVX, with the intent to rebuild these positions with the 1-year CRV vest. (note in reality this step can/will begin now).
Step 8 - alETH/wETH incentives - Create new alETH/wETH pool on curve (request a whitelist) and provide incentives, but no protocol-owned-liquidity or AMO in this pool.
Step 9 - Re-enable alETH bridge - Re-enable the bridge so that users may now bridge alETH between Arbitrum, Optimism, and Mainnet, subject to the standard liquidity restrictions. At this point, 230 alETH representing the bridger clawback will be bridged to mainnet and deposited to the mainnet AMO.
Step 10 - alETH Optimism rebacking - Move liquidity from yearn staking to alETH/ETH velodrome staking and reclassify the protocol owned alETH/ETH Velodrome liquidity as an Optimism AMO. At this point, the velodrome v2 staking position is the Optimism alETH AMO. alETH can be withdrawn and burned from this position to rebalance the pool. This staking position will later be migrated to a separate AMO multisig, and later AMO contracts once velodrome enables single-sided withdrawals/deposits.
Step 11 - Re-evaluate - After these steps have been executed, we expect that alETH is almost entirely rebacked on mainnet and Optimism (full rebacking may take more time depending on available liquidity to sell the necessary assets). From here the DAO should evaluate incentives going to alETH pools, the re-enabling of the transmuters, target alETH prices for the AMO, and any other considerations that came up during the execution of these steps.
Step-Specific Details
The following details additional necessary for the execution of the above steps, where applicable.
Step 1 - Step 4 - Vest-split contract
No additional details necessary.
Step 5 - Re-establish the AMO
The AMO will receive 1585.678 alETH and 2292.673 ETH. The AMO additionally has a supply of alETH that can be redeposited into the pool, which will simultaneously count as additional backing. Therefore, the AMO will deposit 2292.673 ETH and the proportional amount of alETH (>2292.673) necessary to establish the pool at a price point of approximately 0.97 alETH/ETH.
The effect of this is that the AMO will have over-deposited alETH. Until re-evaluated by the DAO, The AMO will maintain an approximate target of 0.97 alETH/ETH to begin, where it will seek to contract the alETH supply so long as alETH is remaining below 0.97 alETH/ETH.
The contraction will result in positive slippage and profit for the DAO. 0.97 is chosen to allow room for alETH to recover to previous prices without AMO interference, while still providing a reasonable “floor” value at which the AMO will seek to contract the supply.
Step 6 - alETH/frxETH incentives
The incentives for frxETH/alETH will be intentionally less than previously in order to allow alETH to find a sustainable base supply. At that point the DAO can seek to increase incentives in a sustainable manner (and will also have the veALCX system to supplement that goal).
The emissions will be 1400 ALCX/week for votium vlCVX bribes. This represents 32% of tail emissions (assuming alUSD will also use 32% of tail emissions), plus an additional 700 ALCX/week. The DAO should re-evaluate all emissions for all liquidity prior to the launch of veALCX.
Step 7 - alETH mainnet rebacking
This step can begin at any point. The DAO will seek to sell as much sdCRV as possible, as well as some CVX, to recover enough ETH to fully back alETH. These funds will be deposited to AMO. sdCRV and CVX are prioritized as they are correlated to CRV - meaning the DAO can easily replace these positions as the recompensation CRV vests and is claimed.
The DAO will seek to reback alETH in less than 1 month. This means if the sdCRV and CVX positions are not enough, the multisig has the discretion to use ETH and other assets from the treasury to reback alETH. Priority will be placed on farmed assets from AMO/POL positions on various networks and dex’s, included Curve, Convex, Aura, Balancer, Velodrome, and Yearn, with the intent being to minimize any impact on base protocol owned liquidity positions or strategic locked positions.
The AMO surplus of 382 alETH is also eligible for use here.
Step 8 - alETH/wETH incentives
The intent of an alETH/wETH pool is to more easily enable use cases such as self-repaying ENS. Additionally, some LPers may not wish to have exposure to frxETH. This pool will have 200 ALCX/week of emissions allocated to bribes.
Step 9 - Re-enable alETH bridge
Re-enabling the bridge allows the market to re-balance the alETH prices between Optimism and mainnet liquidity. Note that the design of L2 alAssets means that liquidity can freely be bridged from Mainnet to any L2, but the bridging of any alAsset from any L2 to Mainnet can never exceed the amount of that alAsset that has been bridged to L2s. This means that there are scenarios where L2 alAssets cannot be bridged to mainnet. See here for more information: https://alchemix-finance.gitbook.io/user-docs/components/layer-2-alchemix
Step 10 - alETH Optimism rebacking
The alETH Optimism rebacking plan is executed in the same manner as alUSD, with more information available here: https://snapshot.org/#/alchemixstakers.eth/proposal/0x86db192239099fe50745aadbca168de3e2db0e936c13d06ab49355227e522d07
Effectively, the AMO acts as a “delayed burn” mechanism. Should the market dictate that the supply of alETH on Optimism need to shrink, the AMO will withdraw and burn alETH on Optimism. In the meantime, it will earn revenue from the Velodrome pool. Lastly, if the multichain funds are ever recovered, the AMO will no longer be necessary and can be converted to protocol-owned liquidity.
Note only funds within velodrome staking pools are considered AMO funds. The DAO will also have some protocol-owned liquidity staked in yearn, which will not be considered AMO funds.
Step 11 - Re-evaluate
There are many steps to this plan, and not all of them may be executed exactly as intended if any unforeseen circumstances arise. Additionally, the landscape of alAssets and the market may look very different after the execution of this proposal compared to prior to the Multichain and Curve events. Lastly, Alchemix is reaching its tail emissions state in the coming months and is gearing up to launch veALCX. All of this is to say that the steps above simply get Alchemix “back on track”, and once that is achieved, the DAO should re-evaluate all aspects of Alchemix including emission distribution, treasury allocation, runway, etc, and ensure Alchemix is positioned properly to fully support future product releases and for all potential future market conditions.
Voting
Voting options are simple For, Against, Abstain.
A “For” vote means you want Alchemix to execute the above steps.
An “Against” vote means you do not want Alchemix to execute these steps, or you want some of the steps to be revised.
