The DeFi sector has recently seen the launch of a new protocol, Alchemix.
The protocol offers users to deposit DAI and mint alUSD.
alUSD can then be used for trading, farming ALCX token, or transmuting back into DAI.
The project will have other use cases with new dApps, while it currently unlocks future yields.
Alchemix Protocol that allows users to create synthetic tokens representing the future yield of a deposit went live this weekend.
The project’s team announced the launch on Twitter on February 27th.
Alchemix Protocol is live after 6 months of development
Alchemix protocol, which got its name from Alchemical Synthetic Tokens, is a project that aims to unlock the future yields for its users.
The project’s team has spent more than half a year developing the protocol and coming up with ideas and creative solutions, finally completing their work this past Saturday, February 27th.
According to the team, they believe that they managed to create a new DeFi primitive, which is now free to be used even by other developers and protocols, thus creating a universal solution for the DeFi sector.
What does the Alchemix Protocol do?
According to the Alchemix team, their newly-launched protocol allows users to deposit DAI stablecoins, and mint a new token known as alUSD. Users can mint up to 50% of the amount of DAI they deposit, while DAI itself is routed to Yearn vaults, where it starts earning yield from the moment it gets deposited.
Simply put, it is a protocol that makes it easy for users to start earning yield, and automatically pay down the debt that comes from minting DAI via Alchemix. Users then have three options:
- They can leave the deposit to keep earning yield, which can then be drawn down as loan collateral from time to time
- They can use alUSD or DAI to repay their loans early, which lets them withdraw collateral
- They can use a portion of the collateral to repay the loan and withdraw the rest
Meanwhile, alUSD functions as a regular Ethereum-based token that can be traded, stored, sold, and more. After minting their coins, users will also be able to deposit them back into a so-called transmuter. The transmuter will once again convert alUSD back into DAI, or other stablecoins, based on the users’ desires.
The process is not instant — the amount of time needed to convert the tokens back and forth can depend on a number of factors within the project’s ecosystem.
What is next for Alchemix?
According to the project’s team, this is only the first step in their plans. Their next goal will be to create new apps by using the Alchemix ecosystem. In doing so, the team wishes to provide alUSD with new use cases, thus increasing their adoption, usage, and potentially value. However, this will take time, and before the new dApps arrive, users who already have alUSD can spend time participating in Alchemix’s liquidity mining program by using one or more of incentivized token pairs.
The project is overall very simple to navigate and use, but its use cases can be quite valuable in the DeFi ecosystem. As such, Alchemix might even be a starter of a new trend, although it will first need to see how popular its services will be in the highly competitive DeFi sector.