• Proposal

  • [OIP-126] Self-Repaying OHM: Alchemix alOHM Launch Support

Summary

Support Alchemix in launching a self-repaying OHM product (alOHM) by 1) providing them with $50k in liquidity incentivization support per quarter for a total of two quarters, and 2) adding 150k protocol-owned OHM into the Balancer alOHM/OHM pool to help bootstrap liquidity.

Background

Alchemix is a future-yield-backed synthetic asset protocol that gives users advances on various yield strategies via a synthetic token. The Alchemix loans are self-repaying, interest-free and non-liquidating. Today, Alchemix offers various strategies to borrow against select USD-pegged stablecoins (alUSD) and ETH (alETH).

Alchemix’s focus over the last months has been to expand cross-chain and to deploy new yield strategies for the existing alAssets. In parallel, the Alchemix and Olympus teams have also been exploring the creation of a new alAsset and to launch alOHM as the next product. This self-repaying OHM loan product has been frequently requested by both communities in the past, and with this proposal (and the parallel proposal on the Alchemix forum here) we offer both communities the opportunity to make this a reality.

For Olympus, alOHM represents a novel use case that adds further utility to the token. Ohmies will be able to take out liquidation and interest free loans, enjoy similar Alchemix strategies for alOHM as for alUSD and alETH, as well as LP the alOHM/OHM pool. From the protocol's perspective, it is invaluable for other protocols to build on top of the OHM monetary layer and so we want to support the (first) teams doing so.

As a piece of background information, the feasibility of creating new alAssets for Alchemix depends on various factors, such as demand, a sustainable yield source, and a clear path towards profitability. The major expense for Alchemix to launch a new product is the creation and incentivization of a new liquidity pool for the synthetic asset.

As such, this proposal focuses on support for bootstrapping alOHM liquidity that will make the product become sustainable over time (and able to operate independently without direct Olympus support after the bootstrapping period).

alOHM details

The alOHM vault will launch with the following parameters:

  • Accepted collateral: OHM, gOHM
  • Deposit cap: 1,000,000 OHM
  • LTV%: 50%

At launch, it will have a single yield strategy which uses the OHM ARR for the self-repaying loan. In the future, if additional yield sources are available that Alchemix supports, these could potentially be added as well.

In terms of an alOHM/OHM liquidity pool, both teams have agreed that Balancer is the preferred choice. Not only would alOHM/OHM route directly into the existing OHM/DAI and OHM/ETH pools, Balancer/Aura currently also offers a more favourable incentivization/bribe multiplier than competitors.

For more details on the vault workings and specifications, please visit the parallel proposal on the Alchemix forum here.

Olympus support

In order to make this product feasible to deploy for Alchemix, and to help bootstrap the launch, Alchemix has requested Olympus’s support for the following two things.

First, Olympus would help co-incentivize the liquidity pool during the initial bootstrapping period. More specifically, this would be support in the form of $50k per quarter for a total of two (2) quarters. Alchemix will combine these funds with up to 500 ALCX/week to incentivize/bribe the pool in order to attract liquidity.

Second, Olympus would deploy 150k protocol-owned OHM into the Balancer alOHM/OHM pool to help bootstrap liquidity at the start. These funds would be sourced from previously inverse-bonded OHM. By creating the LP token, Olympus would be earning trading fees as well as BAL/AURA rewards (assuming the gauge vote for the pool passes, and after staking the LP tokens).

Note that for Alchemix the launch of alOHM is dependent on support during the bootstrapping period and that without it the product is likely not feasible to be deployed at this time.

Poll

Considering the holiday period this OIP will remain on the forum until the first week of January. Afterwards, it will be added to Snapshot for a final vote.

Approve bootstrapping support for launching a self-repaying OHM product

    Hell yes! I personally love Alchemix, and having OHM as another option on Alchemix is simply a great idea.

    Obviously, our liquidity will need to be quite deep to ensure any depegs of alOHM to OHM are minimal, so the Transmuter can catch up when necessary, but I think that this will be quite a safe way to go about it.

    Honestly, it seems like this may even keep OHM itself more stable too, since it could disincentivize similar activity to what we saw during the (9, 9) hype (and subsequent crash), by providing a more stable, simple, non-liquidatable alternative.

    I strongly support this initiative.

    12 days later

    This is great. Big fan of Alchemix and this seems like an obvious integration to do.

    The only question that pops up in my mind is: What if we reduce the ARR again? Or even get rid of it completely. What would that mean for people that have deposited their OHM into Alchemix?

    For this propsal.

      I am supportive of bootstrapping - I believe Alchemix has a very novel product !

      It has been a long time coming for this. I am excited for this type of partnership with Alchemix given Alchemix's long standing success of their platform and of the type of services they provide. Additionally, this type of integration will bring additional utility for the OHM token. Therefore, I am pro this proposal.

      To echo Yellas question, we will need to be flexible when it comes to the where/when/how the loan is repaid as the reward framework changes.

      Yella For Alchemix to function it needs to have a liquid, up-only yield source. Today the only OHM yield source that fits that category is the ARR. So the product would still function with a lower ARR, but it wouldnt function without the ARR - unless, of course, there is another yield source that the vault can plug into.

          0xFelix thanks for the proposal felix and for the detailed explanation. It's nice to see that there are ways for the partnership to adapt to a variety of yield opportunities. Looking forward to this integration!!

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