DeFi Lender Alchemix Approves ALCX Token Buyback Plan

The new revenue spend model seeks to move Alchemix’s synthetic tokens in line with their underlying assets.

AccessTimeIconFeb 6, 2023 at 3:59 p.m. UTC
Updated May 9, 2023 at 4:07 a.m. UTC
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The decentralized autonomous organization (DAO) behind crypto loans protocol Alchemix Finance on Monday approved a proposal to divert some of the cash bolstering its treasury and yield-farming activities into a token buyback program for its native ALCX.

Alchemix issues what it calls “self-repaying loans” to users that post crypto collateral in return for “alAssets” that are supposed to trade mostly in tandem with their underlying asset. The protocol has said protecting the peg is a top priority; it feels the pain when its synthetic assets falter, as they did during late 2022’s crypto market turmoil.

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  • That has prompted Alchemix, which had its heyday in 2021, to scramble for short-term fixes that could help it woo more users in and increase deposits. The proposal by pseudonymous co-founder Scoopy Trooples seeks to address this by earmarking some of Alchemix’s long-term capital for other means.

    The newly passed governance proposal aims to bolster alAssets by directing Alchemix to spend a third of its yield-farming revenue on buying ALCX tokens.It envisions using these tokens to increase Alchemix’s bribing power over decentralized finance (DeFi) yield markets.

    “For every dollar that we spend in ALCX bribes for the Elixir AMO LP pools, it returns approximately 15% more than we put in,” said the proposal written by Scoopy. “It has turned our greatest expense into a large driver of revenue for the protocol.”

    Scoopy’s proposal posits this setup will boost alAssets by making it more profitable for traders to deposit into Alchemix-linked liquidity pools, prompting more traders to do so. AMOs, or Algorithmic Market Operators, are themselves price support mechanisms from an earlier protocol upgrade.

    It would also increase buying pressure on ALCX, the proposal said. ALCX was trading around $20.30 at press time. It is up nearly 50% in 2023 amid the crypto market rally but remains well off its all-time highs. Alchemix’s total value locked at $57 million, per DeFiLlama.

    If all goes to plan, the proposal sees an increase in Alchemix’s CRV and CVX revenue generated by its alAsset trading pools, currently projected around $300,000 a month. This revenue is what will partly fund the new buyback and bribe program. Previously, Alchemix sent half of its “harvest” to its treasury and staked half into Curve and Convex, but now those levels drop to a third.

    Scoopy’s proposal suggested the new model should generate enough revenue to “cover all expenses and leave the treasury with a moderate surplus.” The treasury currently has $1 million in stablecoins and $2 million in ether against an annual burn as high as $1.2 million.

    After a three-day voting period the proposal passed Monday with 81 wallets participating with their governance tokens. Eighty one percent of voted ALCX moved in favor of the proposal and 18% abstained, with only a fraction against it.

    Scoopy did not respond to a request for comment.


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    Danny Nelson

    Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

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