The Alchemix dev team is nearly complete with the expansion to add an alETH vault, transmuter, and farm. This document is Scoopy’s vision for how to launch alETH, but comments/suggestions for improvement are encouraged.
Alchemix Vault Parameters: Collateral Ratio: 400%
Current yvWETH yields are 3-4%. A 200% collateralization ratio would mean loan repayment times of up to 10-15 years. At 400%, this would be lowered to 5-7 years. Still a long time, but much more reasonable than the alternative. If ETH yields increase in general, or are boosted via the transmuter, this value could be revisited.
alETH Debt Cap: 2000 alETH
It is important to distinguish that this is NOT a supply cap for alETH, but rather the maximum amount of alETH that can be minted via debt. The supply can expand when people repay their loans using ETH, much like how alUSD has a 360m supply with only a 100m debt cap. By setting the supply cap on the lower side, we can take a conservative approach, limiting the system’s alETH debt to not exceed 2000 alETH. This limit can be increased at a later time if it makes sense to do so.
Eth to alETH direct Purchases
The v1 contract already has a roundabout way of trading DAI for alUSD 1:1 via the liquidate function. We can add a convert ETH to alETH function, which executes the trade 1:1 ETH for alETH, sending the ETH to the transmuter. In doing so, it will boost yields in the same way that the DAI transmuter does.
Farms: Adept mode
Adept mode is the next evolution from mage -> sage -> adept
Adept 58% (-2)
Adept 19% (-1)
Adept 18% (+0)
Adept 0% (-2)
Adept 5% (+5)
I propose we add 5% of weekly rewards to the alETH LP pool. Some quick calculations show that the alUSD-only pool at 2% attracts around $70m in liquidity. Normalized to 5%, that is $175m in expected liquidity. Assuming an ETH price of $4000, that would mean a pool worth 43,750 ETH, which would be roughly split between ETH and alETH. If only 2k alETH and 2k ETH can enter this pool without liquidations or direct trading for alETH to ETH (4k eth total), then yields for stakers would be considerably high. Such yields will attract more stakers into the curve pool until it normalizes along with much of the rest of DeFi yields. The end result is that there will be a tremendously beneficial ratio between Alchemix vault ETH deposits and transmuter ETH deposits, which will boost yield considerably for debt repayments.
We’d take some rewards from the Sushi and ALCX-only pools to fund the alETH/ETH pool, but only slightly so as to not disturb the stakers in the protocol and their expectations. The alUSD-only pool was only ever intended to be a limited pool, so cutting it altogether and redistributing it to the alETH/ETH pool seems reasonable now, especially considering the ~$600m of liquidity in the alUSD curve pool.
This post is an open call for the community to comment on this launch plan for alETH. Input from the community is super important and we will take feedback seriously. Please indicate your sentiment of this plan and make suggestions for changes. Based on that feedback, I will create an AIP to send to snapshot to make the initial parameters of alETH official.