• General
  • Alchemix x OlympusDAO Partnership: alUSD-3crv Bonds

Summary:
OlympusDAO x Alchemix partnership to introduce new OHM reserve bonds utilizing the alUSD-3crv pool LP tokens.

Abstract:
Olympus is entering a new phase as it seeks to bolster its treasury through partnerships with other protocols. Olympus can leverage its unique bonding mechanism, in which it acquires assets through the sale of OHM, to help partners achieve sustainable liquidity for their most important pairs.
Maintaining a 1:1 alUSD:USD peg is central to the Alchemix Dai vault. To date, the peg has remained strong due to a combination of robust liquidity, market incentives and a backstop in the form the Transmuter, which ensures that alUSD can be redeemed 1:1 for DAI. Much of the ~$400 million in liquidity in the curve pool is attributable to liquidity mining incentives, with the pool earning 2900 ALCX per week.
By creating OHM bonds that would allow Olympus to acquire alUSD-3crv LP tokens, Alchemix can reduce its reliance on liquidity incentives and ensure that substantial liquidity remains locked in the Olympus treasury. Furthermore, these bonds can serve as a test run for other LP assets in the future including alUSD/OHM, ALCX/OHM, alETH/ETH, etc.

Benefits for Alchemix:

  • alUSD-3crv liquidity “locked” in the Olympus treasury, forming a liquidity floor
  • Reduce pool reliance on liquidity mining incentives
  • Free up ALCX for other pool incentives
  • Olympus will never sell ALCX tokens earned through staking; while Olympus will maintain the tokens for governance, they can be viewed as “burned” from a market perspective

Benefits for Olympus:

  • Increase and diversify treasury assets
  • New form of productive backing
  • Treasury earns ALCX and Curve rewards in addition to swap fees
  • Proof of concept

Mechanics:
Liquidity providers to the alUSD-3crv pool sell their LP tokens to Olympus in exchange for OHM that vests linearly over 5 days. The trade is attractive when these “bonds” offer a substantial discount on the market price of OHM. As rewards are claimed, they can either be staked to earn more OHM or sold (perhaps to for a now larger LP position).
The Olympus treasury holds the LP tokens and uses the underlying value to back the minting of OHM. The treasury will never sell or breakup the LP position unless price of OHM falls below intrinsic.

Considerations for Alchemix:

  • OHM Price falling below 1 Dai, however unlikely, could result in LP position being removed

Considerations for Olympus:

  • 3crv contains centralized stablecoins – USDT and USDC
  • alUSD falling below peg for sustained period would result in loss for the treasury
JaLa changed the title to OIP-10 - Alchemix x OlympusDAO Partnership: alUSD-3crv Bonds .

All for this. More of these strong
partnerships = better for Olympus

Amazing collaboration with Alchemix crew! Thank you to all who made this possible! So happy to see Olympus working together with the best in the business and opening doors to new opportunities. Exciting times ahead for Ohmies!

This is an awesome idea. I think both protocols are going places.

This is a great proposal. But should be capped as the treasury should limit exposure on centralised stable coins (FRAX is 90%+ USDC) alUSD is 100% backed by DAI (which is 40%+ backed by USDC deposits)

if possible a partnership with Synthetic for sUSD is more of a decentralised option

    been looking forward to this for a long time

    Very good proposal Jala , im all for it , two great projects , essential for the whole industry , great achievement

    In agreement!

    Alchemix gives us future opportunity to have an alOHM vault which I would appreciate.

    Great proposal! The Alchemix community seems aligned to ours and is one of the most promising in DeFi atm. I think both would benefit from more composability and both a strengthened treasury for OHM and buy pressure for Alchemix is beneficial.

    homme Fair point, however Alchemix is going to introduce other collateral types like USDC and ETH. I suspect they'll cap debt of each collateral type, however there aren't any liquidations in their system in the conventional sense. I'm not that worried as long as there's diversification - the reason why MKR introduced USDC is to have a stable that wouldn't depeg as quickly in case of a major sell-off (like '20 March Black Thursday). While some people got burned because of the cheap CDP liquidations, I also think the crypto industry showed their resilience with their backstop initiative etc.

    sUSD would be another great collateral type to bond against. We should organize a proposal for adding it. Note that it isn't very capital effecient because of the high C-Ratio, however many DeFi users will already have synths or staked SNX because of the rewards, so I'm sure it'd attract capital.

    • tex replied to this.

      I think this is a great idea and it has my support.

      On first discussions with alUSD, I was a bit skeptical about OHM-alUSD bonds if we pursued a Sushiswap pool... but accumulating Curve pool tokens seems to be a really good idea. This is much more natural of a fit for the Treasury-as-a-service idea. The downsides as mentioned are incorporating exposure to centralized stablecoins like USDC/USDT. But it can also be viewed as getting exposure to Curve, since most of its value is in stablecoins.

      sisyphus1337 Agreed on sUSD. I think after reviewing this proposal we should explore the liquidity source that Synthetix most values for sUSD. For my previous proposal I had been thinking along the lines of OHM-DAI bonds for OHM-sUSD SLP tokens. But this proposal makes me think it could be more useful if we accumulated the sUSD-DAI/USDC/USDT pool tokens on Curve. These tokens also accrue 1.9% SNX rewards btw

      fantastic synergy move. Love both projects and it makes sense

      as a delegate of the Titanium Reinforced Graphene Nanotube Composite ADAMANTIUM hands, I am all FOR this proposal. LETS DO IT