Alchemix Protocol - self repaying overcollateralized loans

@pharesim
4 mo (edited)
2 Min Read
457 words

This is probably my first post ever about a project outside of Hive, and surely the first on LeoFinance. I'm not much into financials, and have been in the space for the tech and the community before that became a meme. But recently I found this DeFi project, which is the first one ever with a real use case for me, and I'm too excited about it to not share.

Alchemix logo

The concept is pretty simple. Alchemix allows you to earn boosted interest from yearn and at the same time take out a loan of up to 50% of the deposited amount. The borrowed amount gets automatically repaid with the interest your full collateral is earning, and there is no risk of liquidation whatsoever. You practically get immediate access to future yield, which allows for a range of use cases.
You can buy a boat, invest into a risky new coin, or just cover your living expenses - all without having to touch your principal. All of it stays safely in the yearn vault, constantly earning interest on the full amount and paying back your debt. Or use it for your emergency fund, instead of having it in the bank where it just keeps losing value because of inflation.

Interest rates vary depending on market conditions, but even in this bear market they haven't dropped below 5% yet. At the top they got close to 40%! So worst case, if you borrowed the maximum amount possible and interest stays that low, it would take 10 years until you can get back the full deposited amount. It's of course always possible to repay your debt early, or withdraw the remaining amount (collateral - outstanding debt).

For now it supports DAI and ETH, v2 with more assets and different options to choose where the interest comes from is in the works and should be released during Q3.
You can borrow up to 50% of your DAI, or up to 25% on ETH. For security reasons there is a cap on total loans, which will be gradually raised. If it's not possible (or you don't need) to take out a loan right away, the interest you earn gives you the right to mint these tokens in the future.

There's also a governance token (ALCX), which will earn a fraction of all generated interest in the future when the DAO is released, but for now it's only good for yield farming and under enormous sell pressure. I'm not going deeper into that, if you're interested in investing into the platform you should do more research yourself anyways.

If you want to have a deep dive, I recommend the following 3-part series on medium to start:
https://medium.com/yunt-capital/alchemix-in-depth-ca781f26746a

Posted Using LeoFinance Beta