Can Alchemix, which launched services on Arbitrum, seize the market with its new gameplay?

Recently, Alchemix officially announced the launch of its services on the Arbitrum network as part of its multi-chain expansion strategy.
According to the information released by the official source, during the initial launch phase on Arbitrum, Alchemix has imposed limits on deposit amounts, specifically: the USDC deposit limit is set at $100,000, while the stETH deposit limit is set at 200 ETH. This restrictive measure can be seen as a cautious start aimed at ensuring the stable operation of the platform and the safety of user funds.

In addition, Alchemix has demonstrated its plans for future development by announcing the addition of jUSDC as part of its services in the near future. The realization of this plan is pending the completion of the jUSDC contract upgrade by JonesDAO. This indicates that Alchemix is not only focused on the quality and stability of its existing services but is also actively exploring new partnerships and asset types to provide more diversified DeFi services.
This article will systematically outline the operational mechanisms of Alchemix and interpret how this decentralized over-collateralized lending platform continues to advance in the decentralized finance sector.

With Multiple Mechanism Innovations, Alchemix Enhances Platform Security and Efficiency

Alchemix Finance is a synthetic asset protocol and community DAO supported by future yields. The protocol provides various liquidity mining strategies through synthetic tokens. These tokens represent the fungible claims on the underlying collateral within the Alchemix protocol, which must be claimed by the depositors of that collateral. Alchemix currently offers alUSD for collateralized borrowing partially pegged to the US dollar, as well as alETH for ETH-collateralized borrowing.
Alchemix marks an innovation in the decentralized finance (DeFi) world by offering an over-collateralized lending service through a platform based on Yearn's financial technology. The uniqueness of this platform lies in the fact that users' over-collateralized funds are not merely stored statically but are passively invested in DeFi protocols like Yearn, with the profits used to automatically repay borrowers' debts and interest. This means that as long as the collateralized assets generate sufficient returns, users' positions can avoid liquidation, thereby reducing investment risk to some extent.
Alchemix's lending mechanism requires users to maintain a collateralization ratio of 200%, meaning if a user stakes $100 worth of DAI on the platform, they can borrow $50 worth of alUSD. This 1:1 stablecoin value ratio provides users with a safety cushion, maintaining the stability of borrowing value during market fluctuations. Users can flexibly adjust their borrowing ratios by increasing collateral or repaying debt, maintaining liquidity and flexibility of funds.

Alchemix mitigates the risks of extreme market volatility through its unique debt repayment mechanism. By directly pegging its stablecoin alUSD to DAI, Alchemix frees itself from the dependency on the US dollar value found in traditional financial systems, achieving a more stable and self-sufficient economic model. This strategy not only provides users with a more stable borrowing environment but also contributes a new solution to the stability of the DeFi sector.
One of Alchemix's core functions is its automated debt repayment system. After users deposit DAI, the platform provides an equivalent amount of alUSD to users in the form of liquidity mining. This portion of alUSD represents the user's loan and is also a marker of future yields. Subsequently, the deposited DAI is invested in platforms like Yearn, with most of the profits generated used to repay users' debts. This model not only provides users with an automated debt management method but also greatly increases the efficiency of fund utilization.
Through this innovative lending and automatic debt repayment mechanism, Alchemix offers users a new way to manage funds, allowing them to enjoy the high yields brought by DeFi while effectively managing and reducing borrowing risks.

Introducing the Innovative Transmuter Mechanism, Alchemix Ensures Stable Value of Stablecoins

Alchemix has introduced an innovative concept called Transmuter, which is the core feature that distinguishes it from other DeFi protocols. This mechanism allows for 0 slippage 1:1 equivalent exchanges of all assets through the Transmuter, maintaining a stable ratio between DAI and alUSD. This not only simplifies asset management but also provides users with a safe deposit environment without worrying about market fluctuations.
Alchemix achieves a series of advantages through its Transmuter mechanism:

1. Elimination of Liquidation Risk: Since DAI and alUSD maintain a stable 1:1 ratio, the value of users' collateral assets within the protocol remains stable, theoretically eliminating liquidation risk;
2. Free Repayment Operations: The 1:1 peg between DAI and alUSD allows users to directly repay using collateral assets, increasing repayment flexibility and eliminating lock-up periods;
3. Stability of Asset Value: Alchemix introduces Chainlink oracles to guard against extreme market conditions, ensuring that the 1:1 exchange rate between DAI and alUSD is unaffected by market fluctuations.
   The operation of Transmuter is based on several key steps:
4. The DAI deposited by users is used as collateral and invested in platforms like Yearn to generate yields. A portion of these yields is automatically used to repay users' debts through Transmuter;
5. If users have not borrowed alUSD, the yields (DAI) provided by Transmuter will increase users' borrowing capacity;
6. alUSD holders can also participate in the Transmuter mechanism by exchanging DAI to burn alUSD, thereby maintaining the stable ratio between DAI and alUSD.

Transmuter also provides a unique mechanism that allows users to quickly exchange when their positions generate additional DAI, thereby accelerating the exchange process between DAI and alUSD and ensuring the stability of the ratio between the two. This design not only enhances the liquidity of funds but also improves the overall efficiency of the protocol and user experience.
In summary, Alchemix offers a flexible and secure lending platform through the Transmuter mechanism, with its automated debt repayment and market volatility prevention mechanisms significantly addressing the challenges faced by traditional lending. This innovative alchemy not only enhances the stability of the DeFi ecosystem but also provides users with more control and security.

The New V2 Version Officially Launched, Alchemix's Further Market Performance Attracts Attention

Market demand urges the continuous evolution of Alchemix, and its V2 version introduces a series of new features aimed at enhancing the project's diversity and liquidity. One of the significant improvements in the V2 version is the expansion of the types of stablecoins that can be used as collateral, including USDT and USDC, which significantly deepens the liquidity of alUSD. Additionally, V2 introduces new synthetic assets such as alETH and alBTC, allowing users to leverage BTC and ETH in the DeFi ecosystem with lower risk while ensuring that the underlying collateral is protected from liquidation risk.
The core mechanism of Alchemix—repaying current debts with future yields—has been further developed in V2. This model allows users to mint al-tokens, instantly releasing future appreciation yields, thus creating a new type of lending experience. This practice is referred to as a "future checkbook," where the interest generated from users' deposits is automatically used to repay debts, enabling the possibility of prepaying future income.
Alchemix provides the community with opportunities to participate in project governance and share profits through its governance token $ALCX. The distribution mechanism of ALCX is designed with long-term incentives and project sustainability in mind, including pre-mined tokens and phased releases through DeFi protocols. Notably, the Alchemix team chose not to conduct early financing but instead distributed tokens by adding an ALCX/ETH SLP pool on SushiSwap, ensuring the initial scarcity of ALCX circulation and increasing demand for it.
Alchemix's token economic strategy has led to low circulation and high demand for ALCX in the short term, promoting an increase in token prices. High demand not only drives up token prices but also enhances the attractiveness of the staking pool, allowing participants to enjoy higher annual percentage yields (APY), which in turn promotes more participation and investment, creating a positive feedback loop.
Overall, Alchemix V2 not only enhances the platform's functionality and flexibility but also provides users with new financial management tools and investment opportunities through its unique lending model and token economic strategy, further driving innovation and development in the DeFi ecosystem.