Alchemix Request For Comment (ARC) #1: Page 2

Alchemix Request For Comment (ARC) #1

jerre

ButlerAndTheThirdStringers
I'm definitely in favor of your proposol. Furthermore, there is one point I would like to dig a bit deeper into.

If I'm correct the main reason for increasing the collateral ratio to 400% is the loan auto-payback time. A lower ratio would lead to payback times of quite some years.

However, one of the big strengths of Alchemix, is the way in which it is able to boost the yield by accumulating some extra collateral in the transmuter. So actually, it is very interesting for the protocol and for its users to get more DAI, ETH (and BTC later on) in the transmuter. One of the main ways to get more collateral in the transmuter is via liquidations. And since liquidations in Alchemix are actually lossless, nobody suffers from that (AFAIK).

I believe a lower collateral ratio (eg 200%) is therefore more interesting for the protocol and the users. Because it takes longer for a loan to repay itself, impatient borrowers will liquidate more, which in the end seems very positive. Therefore, I tend to agree with Franky

I would be glad to hear your opinions and please let me know in case there are fallacies in my reasoning.

ButlerAndTheThirdStringers

jerre This is a great point!

ZiggyOi

I can't say I'm a fan of the proposed Collateral Ratio of 400%. I look at the ETH vault as a way to leverage my ETH .. similar to MakerDAO or Liquity which have a collateral ratios of 150% and 110% respectively. The debt paydown feature is a bonus in my view.. and the "no liquidation" is another one for sure. It by all means justifies a higher collateral ration. 200% sure, 400% ..... not so sure.

I really like the proposal @ButlerAndTheThirdStringers brought forwarded of a targeted emission rate of 8% on the alETH/ETH staking pool... Having such a high APR on an ETH pool should create a splash and bring some good exposure to the protocol.

If the repayment timeframe is the major factor determining the collateral ratio... maybe we need to improve how the est paydown timeframe is displayed / discovered by users of the protocol. Change the Est date of maturity to a timeframe rather than date and bring in to the forefront (right below loan amount selection)?

I would love to see a slider added to the UI to choose the loan amount, with an estimated payoff timeframe given current APR.... It will help visualize the loan amount and est timeframe of repayment. If a 400% _{5-7 year} is appealing to you, go for it. Prefer a larger loan w/ longer repayment period (200% 10-15 years) -- that's your choice

Sku

With regards to 400% vs 200%.

From the perspective of my own personal greed, I would love 200%. But perhaps starting with 400% to begin with is better, but I believe it should be temporary only, with a view to eventually changing to 200% as and when possible.

A lot of points have been made about this already that I won't repeat.

But what hasn't been said, is that perhaps 400% would make the initial launch "fairer". I expect the 2000 alETH cap to be reached within minutes. I'd much rather have a better chance of being able to get a 400% loan, than miss the boat on 200% loans.

Because 400% is significantly worse than 200%, those first depositors are more likely to be those with a strong conviction and belief in the platform. At 200%, I fear the entire Ethereum ecosystem will be rushing to get a piece of the action. At 400% its more likely to only appeal to those already interested in the protocol, and it would be good to make sure those people are able to take out a loan. It will feel pretty bad for all those that miss the boat.

Just some thoughts.

Gravity

One variable I don’t often read about with respect to Alchemix, is the debt to equity ratio. If a debt takes 10 years to pay down with deposit ‘A’, then rightly the same debt will take 5 years to pay down with a ‘2A’ deposit. (Roughly speaking and assuming a stable yield)

...is crypto about babying each other into yet more nanny state antics, protecting the ape because we think we know better... or crypto is about teaching each other how to become better money managers?

Brave souls venturing into new lands, exploring and experimenting. My vote is to maintain consistency across vaults at 200%, then we can work on messaging re. Implications of over expending.

(The above said, self liquidations are supportive of the ecosystem and still valuable lessons younger managers aught to go through imo)

Reeserj

I have another question:
Just to be clear rolling out alETH is not Alchemix V2 correct?

Franky

Reeserj Correct, alETH should be out soon, but v2 end of summer I believe

dr00shie

I would not be deterred by the long maturation period. This is much less of a concern on appreciating underlying assets classes.

From a purely fiat perspective (which many users will have imho), I would be in favor of liquidating myself in the following circumstance:

Deposit 5 ETH at $4100
Borrow 2.5 ETH at $4100
2-3 years goes by and ETH is worth $10k, I'd have no worries self-liquidating to get back whatever I need at the time, minus what has been repaid.

The main and possibly most underrated feature of Alchemix in my opinion is the ability to self-liquidate.

I am largely in favor of scoopy's proposal but with the standard 200% ratio.

jerre

Quite some people here seem to be afraid to miss out on taking an AlETH loan because of the relatively small debt ceiling. That's definitely a valid concern imo.
Would it be an idea to limit the size of a loan that can be taken out? eg. in case of a collateral ratio of 400%, max 0,5 or 1 AlETH can be borrowed per address. Of course, people would be able to give more collateral than 2 or 4 ETH.

Nobody stops people from using multiple addresses however, that might be quite a hassle to arrange and not worth it. At least it would be much harder for a big whale to take up a big chunk of the available loans.

allyourcat

I'd back the idea of a 200% collateralisation ratio as well. Ultimately, if for Alchemix users, "Your only debt is time", then it really doesn't matter that debts take 10-15 years to pay down.

The debt ceiling of 2000 alETH on the other hand I would agree is necessary to maintain the initial integrity of the protocol and mitigate the risk of getting rekt.

At the same time, convincing the broader world about the integrity of the alETH/ETH peg is also critical. That said, alETH (like alUSD) would simply turn into a long-dated bond with notional of 1 ETH financed by interest flows if the peg goes. That in itself isn't the end of the world - it's not great marketing for a peg to break but functionally no one's going to be out of pocket since the debtor/creditor are the same person (in different times).

So I'd be in favour of pushing up the alETH/ETH rewards allocation too. I'm staking in the ALCX/ETH SLP pool and as rightly pointed out above, the aim is to also get some exposure to ETH. BUT the main purpose of the entire exercise is to support ALCX as a protocol and get exposure to ALCX - and as such, even if the 2000 alETH mintable ceiling gets hit and I don't get a chance to borrow alETH by staking ETH to try and get into the alETH/ETH pool, as an ALCX holder the benefits come to me anyway from the protocol's overall success.

Happy either way to be honest - but bottom line is I'd much rather see 200% collateralisation ratios than 400%, everything else no strong views in either direction.

DeFi-Spartan

I am an ALCX maxi since day 1.
But, 400% over collateralization? Who would be willing to use that....
"Repaying debts by itself" is attractive, but 400% is not practical at all.

Check the following tweet. When I saw this on Twitter, I thought it's brilliant. We may be able to issue alUSD with ETH or WBTC as collateral without having over-collateralization.

https://twitter.com/Ryugunsun/status/1381434928131346435?s=20

I DYOR WHITE before. Its underlying tech is developed by solid devs (HEGIC devs). We may need to fork it rather than using WHITE because the protection fee seems high. But, before releasing alETH with 400% collateralization (which is not attractive at all), we should think about other strategies throroughtly. Please no rush to release.

jasonh

Alchemix team should constantly explore was to increase the yield for payingback the ETH collateral.

What if alchemix somehow farmed staking rewards from staked eth? Yields are expected to rise after the merge.

jamesk

scoopy it would be good if we could chooae the best "flavour" of ETH available (meaning the highest APY). It would be very attractive to newcomers

KW710

jamesk stETH collateral would be sick

thenursegreg

I strongly prefer 200% collaterlization ratio. I love Alchemix but probably would not use the platform if we went with 400%. I would be using Alchemix to maintain long term ETH exposure but free up capital to safe ape into other positions. If I could only get 25% of the value of my ETH, it's not worth it - I can get 50% elsewhere. Since I believe in the long term appreciation of the asset, I'd rather take 50% without self-repayment vs. 25% with self-repayment.

bceth

I love the general direction that this AIP is heading towards.

I'm in favor of starting with 400% as a conservative ratio to start with (short-term) and then a quick transition to 200/300% if all checks out. Psychologically, 10-15 years may seem daunting to some, even though they can always liquidate early (there's a beauty in knowing your loan will be paid off 100% in X timeframe).

Would be in favor of exploring the stETH/sETH option for double the yields even if that means a delay of a few weeks (but I would like to better understand the technical challenges/risks of doing this). Double the amount of yield would help mitigate the long payback times in the first comment.

I like the Adept percentages, although I think alETH/ETH LP can be increased by a percent or two from the alUSD3CRV LP. I think the amount decremented from the ALCX/ETH and ALCX pools is appropriate, but should not be decreased further. With the alUSD farm going away, do those staked in that pool have to unstake immediately or can they wait until gas prices come down to unstake at a later time?

BeNu

I side more with the 200% ratio camp after thinking about it. People will always have the option of borrowing less if they want a shorter payback. It's not very ETH efficient to only be able to borrow 25%, and 5 years vs 10 years will feel almost the same in crypto terms. There could be a disclaimer or dashboard that shows repayment times for % borrowed perhaps. The other advantage is people can easily self liquid-ape right into the alETH/ETH pool at max efficiency. It favors the smaller/mid size borrower who what to minimize gas costs.

I'm ok with the distributions. I am going to run some numbers on the alETH pool to see how the rewards look just to make myself comfortable. If we are going to juice it more I vote to pull another % from the single-stake pool rather than the CRV pool. The al asset pegs are the moat for the protocol IMO.

Thelionshire

I like the proposal overall, but share concerns about the low ceiling and missing out. One whale could take the entire cap. Since the collateralization will be 400%, could the ceiling be raised? More eth in the vault gives Alchemix more revenue, and allows more people to mint alETH. Just a thought.

jbisson9

I'm curious, what tools are used to simulate growth in pools, transmuter, AUM etc? I think it would be helpful to see an economic model before making a decision. Happy to help develop one if none exists. As a user of the system, ie down payment for house thanks to Alchemix, I understand that a 400% C-Ratio may sound long but if it ultimately improves the economics then I'm all for it.

exhuman

In my opinion, it is better to start safely and then successively, if everything will be fine, increase the limits and ease the restrictions. In my opinion, one of SNX's success points was their vigorous over-collateralization of the sUSD. After all, it was even 1000% SNX collateral to be able to mint sUSD - let's take a good lesson from that. I believe that DeFi systems need security before we can talk about the maturity of these markets. We will not reach maturity by starting with risky games.

ALCX is a perpetum mobile of france and let's keep it that way.

I fully support scoopy ARC) #1 proposal but if I can change one thing it would be taking -1% from alUSD3CRV LP and add it to the alETH/ETH LP changing it from 5 ->6%

hjqcan

Agree

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