AMA with Scoopy Trooples of Alchemix

These are hosted the 2nd and 4th Wednesday each month, so mark your calendars, tune in, and ask questions! ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 🎖 CLAIM YOUR BADGE: https://newsletter.banklesshq.com/p/-guide-2-using-the-bankless-badge ------ BANKLESS SPONSOR TOOLS: 💰 GEMINI | FIAT & CRYPTO EXCHANGE https://bankless.cc/go-gemini 🔀 BALANCER | EXCHANGE & POOL ASSETS https://bankless.cc/balancer 👻 AAVE | LEND & BORROW ASSETS https://bankless.cc/aave 🦄 UNISWAP | DECENTRALIZED FUNDING http://bankless.cc/uniswap ------ 📣 DHARMA | From Dollars to DeFi in a Tap! https://bankless.cc/dharma ------ Resources: What is Alchemix? https://dyor.fi/alcx Scoopy on Twitter https://twitter.com/scupytrooples?s=20 ------ Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures Powered by Restream https://restream.io/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ryan Sean Adams?

  There's so much going on in DeFi today. Sometimes you just need the TLDR explanation. So this is going to be a really fascinating, fantastic conversation. That's why we are doing this Ask Me Anything with Scoopy. So we are going to get to the conversation just a minute. But before we do, we want to thank the sponsors that made this episode possible.

• 0:20David Hoffman?

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• 1:48David Hoffman?

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• 2:34David Hoffman?

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• 2:51David Hoffman?

  All right, guys, we are here with Scoopy Triples, co-founder of the Alchemix platform. And for those that have been around in the DeFi bear market, the Ethereum bear market, you would know, at least on crypto Twitter, you would know Scoopy Triples. And to me, the interesting thing is that Scoopy Triples is pseudo anonymous. We have him here on the show with us, but we are showing his Twitter avatar instead of his face. And this is kind of the power of Ethereum and the power of permissionless decentralized platforms, where you actually don't need to be a known physical human to build something. And so that's how I've known Scoopy Triples is as the pseudo anonymous Twitter engager that turned to DeFi platform builder. And so I actually kind of want to start with that.

• 3:34David Hoffman?

  Scoopy, what was the DeFi bear market like for you as a pseudo anonymous person? And then where did the original inspiration for Alchemix come about from?

• 3:45Speaker 02

  Well, I got into crypto like 2016 with Bitcoin and then Ethereum, and then a million and one ICOs and shitcoins and everything like that, just kind of like everyone else. And I did sell a little here and there near the top, and I was able to do pretty well for myself, but not most of my stash. So I then became an Ethereum community member,

• 4:11Speaker 02

  holding it down 95% or something. Yeah, I actually did buy the dip a bunch around $100. So that was, that was very nice.

• 4:22Speaker 02

  And at the time, in early 2018, I was experimenting with different DApps.

• 4:30Speaker 02

  Um, at the time, uh, I was just doing just purely degenerate. DeFi, uh, not even really DeFi. They weren't even DeFi apps. It was just, you know, money games. Uh, uh, one of them that I really liked and that, uh, kind of inspired me to become a dev was, um, FOMO 3D.

• 4:48Ryan Sean Adams?

  I remember FOMO 3D.

• 4:49David Hoffman?

  Mm hmm. Yeah.

• 4:50Speaker 02

  Um, that one was, I thought it was just like, it kind of blew my mind to like, what was possible? Um, using programmable money. And even though it was a Ponzi game, you know, slash lottery. And very much a zero sum game. Like I was thinking, it just, you know, really piqued my interest like, wow, you can do a lot of stuff. I want to study this, not to, you know, scam people and to make, you know, Ponzi games and stuff like that, but you know, to, to do stuff like, uh. I was following, uh, Maker Dow a lot at the time. Um, was watching or listening to, to podcasts, uh. You know, avidly at that time, uh, shout out to Epicenter.

• 5:30Speaker 02

  Epicenter podcast, uh, they were one of the big ones I, I relied on early to, to learn about, uh, you know. Projects on a more technical level. And I learned about Maker Dow through them. Um. And, you know, so I was like one of the early CDP holders. I think my first, my first number was a hundred and fifty six was, uh, I was the CDP.

• 5:51Ryan Sean Adams?

  Well, that's really.

• 5:53Speaker 02

  Yeah, I got in very early. It was very painful having to transfer ETH to WETH and to PEETH. And putting that into Maker Dow.

• 6:02Ryan Sean Adams?

  It took like, it took like five or six transactions and like, do you remember that old interface scoop?

• 6:08Speaker 02

  Oh, it was awful.

• 6:09Ryan Sean Adams?

  It was.

• 6:10Speaker 02

  That, that took me like a good like day or two just to, to find out how to do a deposit into it. So.

• 6:16Ryan Sean Adams?

  Yeah.

• 6:16Speaker 02

  It, it was painful and die at the time was, you know. Just this tiny little thing with what? Maybe 50 million in supply at the time. And everyone thought, you know, it in ETH would die as ETH was dying in 2018 and. I just, you know, doubled down and I was like, you know what? This stuff is the future. This stuff is awesome. You know, just people haven't caught up to it yet. And, um, so.

• 6:39Speaker 02

  After I was inspired by FOMO to become a blockchain dev, you know, an Ethereum dev, I started learning how to code. Before that, I did something else completely different.

• 6:48Ryan Sean Adams?

  No way.

• 6:49Speaker 02

  Yeah.

• 6:50Ryan Sean Adams?

  So crypto and Ethereum is your very first like actual coding programming?

• 6:57Speaker 02

  Yeah, at first I learned web development because they always told, like they said that solidity is similar to JavaScript.

• 7:05Ryan Sean Adams?

  Yep.

• 7:06Speaker 02

  So I did web development, got pretty good at that, started getting some jobs and some gigs doing web two development using React.

• 7:17Speaker 02

  All in the while, you know, I was still like studying solidity here and there. And then my friend that I made along the, over the years in various discords, the CTO of Alchemix, he approached me in June of 2020 is like, hey, I know you can do front end development and I need a front end dev. I got these contracts, you know, for this new DeFi app. Back then we were called CheeseFi.

• 7:44Speaker 02

  And we're just kind of similarly, but not nearly as good as Alchemix. And then so I was building out UIs with him, learning some more solidity. I didn't actually write any of the solidity, but you know, I feel like it's kind of too high stakes for someone with, you know, my experience level to be making this stuff just yet.

• 8:06Speaker 02

  But I did help review the code, make tests for it and, you know, built the front end for it and everything like that. So I've learned a lot of solidity along the way.

• 8:16Speaker 02

  And you know, this was, it was right around like the start of DeFi summer is when we started building this out. And to put that in perspective, there was no urine. We were actually going to build it on top of ITO Finance.

• 8:30Ryan Sean Adams?

  Right.

• 8:32Speaker 02

  You know, which, you know, was an early yield aggregator.

• 8:38Speaker 02

  And then after we went through several iterations, we finally landed on Alchemix. Cheese five wouldn't have worked because we were going to use AMMs to help deliver the the future yield. But then we learned about MEV and sandwich attacks and everything like that. And we're like, oh, no, this could potentially not work because of this. Because, you know, bots could extract all the revenue from the protocol, you know, and, you know, basically damage it. So after a number of iterations, we finally got to the Alchemix system that we have now.

• 9:07David Hoffman?

  So I want to get into specifically Alchemix, and of course, that's the whole entire AMA. But and I do want to start from very from scratch, right? So for those that aren't familiar with the protocol, but first I wanted to ask about your avatar. What's the background on your avatar? And for the the podcast listeners, we are seeing a witch with spectacles and a purple witch hat. And she looks like she's about to like summon a spell or something.

• 9:31Speaker 02

  OK, so this is this is really weird. So like, it's always been like kind of my thing online for my avatars or handles to be like a waifu of some sort.

• 9:42Speaker 02

  Before I had my current one, I had this kind of like this anime character with a wifi logo on it. That was like my old avatar. And then knowing that I was making Alchemix, I came across this other NFT app called Avastars. And I saw this one, this one like which you had like cat whiskers. And I was like, oh, she looks really cool. So I picked her up as an NFT and use that as my profile. And then

• 10:07Speaker 02

  one of my friends and community members in the Alchemix Discord made this piece with me as this, you know, this pretty hot wizard chick. And then there's this other poster on you on Twitter named Ratwell. And Ratwell started like started turning everyone into sofas because the other there's another DeFi user on Twitter named Mune. Who was like a ditto, like this Pokemon character ditto, but also but the avatar is ditto as a couch.

• 10:44Speaker 02

  And then Ratwell turned these these couch characters into a meme. And that's why you see couches all over Twitter now. Because of Mune and Ratwell.

• 10:55Speaker 02

  Yes, that's why I'm a sofa.

• 10:57David Hoffman?

  Shout out Ratwell.

• 10:58Speaker 02

  I've been couch-pilled and seated.

• 11:04David Hoffman?

  All right, so Scoopy, let's, yeah, let's get into Alchemix. So, and as David said, I think we want to start at the highest level of what this thing actually is. So how would you summarize this in sort of the, you know, few sentences? What does Alchemix do?

• 11:23Speaker 02

  Um, Alchemix is a way for you to tokenize your future yield. I mean, that's the simple explanation of it. Um, there is one explanation I really, really, really like. I'm going to pull it up right now. It's actually made by one of our community members. He has a website called D Y O R dot five. And he has a page on it for Alchemix. And this is the way he describes it. And I think this is the best. It says, imagine a bank. You can deposit money and the bank pays you 10 to 15% interest. There's a credit card attached to the account with a credit limit of 50% of the amount you have deposited. There's no interest on the card. There are no monthly payments to make.

• 12:07Speaker 02

  Instead, the interest you earn on your balance pays off any debt you have automatically.

• 12:15Speaker 02

  And I, I think that that just sums it up perfectly in one paragraph about what we're all about and what we can do. Um, you can teleport your future yield into the present in that, you know, while preserving your, uh, your collateral. And that makes it more capital efficient.

• 12:32David Hoffman?

  So the way I I've described this to people is that you get your yield upfront, right? And so you are committing a certain amount of deposits into Alchemix and those deposits are in die form and then they don't always have to be in die form. They can be uh, in, in other assets and I believe in future versions of Alchemix, which is a topic we're going to get into. But you, you deposit your, your die into Alchemix and then you get the future yield payments upfront. Uh, and what that does is that locks a certain amount of die into the Alchemix program or into the Alchemix application. And you commit that die to be there for a certain amount of time, but the yield that you're going to get in the future, you can get immediately.

• 13:12David Hoffman?

  Uh, and so let's talk about why someone would want to do that. What are the use cases for getting your yield upfront? Like, what are people using the Alchemix protocol for today?

• 13:24Speaker 02

  Um, yeah, so, so people are using it for a number of things. Um, some people are using it to yield farm more with it. So they're farming with their future yield. Um, some people are using it to long ETH or other coins. Um, but more interestingly, some people are using it to finance things in their real life. Um, the guy who you just put up his website, Xerxe DeFi, his, um, his dad's boat sank last year in a storm.

• 13:50David Hoffman?

  Boating accident?

• 13:51Speaker 02

  He, yeah, yeah, unironically, a boating accident. Um, and he actually deposited fifty thousand dye into Alchemix, minted twenty-five thousand Al USD, converted that to USDC, put it on Coinbase, uh, sent it to his bank account and then bought a boat for his dad using an Alchemix loan.

• 14:12David Hoffman?

  Now, why wouldn't, so he deposited the dye into Alchemix in the first place? Why did he do that instead of just trading that dye for USDC and sending that into his bank account? What's the advantage of putting the dye in Alchemix first?

• 14:25Speaker 02

  So that, that twenty-five thousand dollar loan that he took out, um, with current rates right now, in about two years, that would be paid off and uh, he would have no debt left over. So it would be a free boat in two years and he could withdraw all of his collateral. So he could preserve his principal and still get to, you know, spend money against it in a very low risk manner. Um, so I actually did a little financial analysis of this, um, with this character named Jerry. This was actually in the, uh, in the bankless, uh, article, uh, that we, we've, uh, put together. And let's say Jerry has a thousand dollars and then, um, his car breaks and it costs five hundred dollars to fix his car.

• 15:07Speaker 02

  Um, if you took a, that loan out in, uh, Al USD using Alchemix, um, that you would have a fixed car and then two years later, he'd have a thousand dollars that he could have freely, uh, you know, access to. Whereas if he paid out of pocket, uh, with his thousand dollars and he has five hundred left over, and then he were to put his five hundred dollars to work in DeFi, um, he would end up having, um, less money overall than he would have used Alchemix.

• 15:36David Hoffman?

  And so the way, the other way that I think about this is that anything that you want to purchase that you, that you are then like on a loan for, so like a house or a car where you get a car loan or a mortgage, if you want to just own that thing outright, you can get an Alchemix loan and get that, get that payment for the entire cost of the whole entire thing upfront. Therefore, you can own the house outright, or you can own the car outright. And the interest payments that you pay are actually just coming from yield in Alchemix. And specifically, Alchemix just plugs right into Urn. Earlier in this podcast, you talked about how Urn wasn't here a year ago, and so you were going to use idle finance or

• 16:18David Hoffman?

  something else. But then now Urn is here, and now we have this yield optimizing engine. And so really, it's just Alchemix is just getting, letting you borrow money collateralized by yield from Urn, built on top of Urn. And so if you ever want to go and buy something, but you want, instead of making the monthly mortgage payments or monthly car payments, instead of making monthly car payments, Alchemix can pay you monthly yield payments to your loan, and you already got the full value of the loan upfront. And so instead of you paying for your car, you're paying your interest rates, the interest rates are paying you, and you just borrowed everything upfront. The only catch is that you have to have the full value of what you are trying to buy upfront in D I terms. And so that you have

• 17:02David Hoffman?

  to, you do have to commit to a certain amount of D I to begin with, right? I don't have any D I, because if I did have D I, I would just sell it for Ether. But if I wanted to buy something, I could, I could keep that D I and then get a dollar loan from Alchemix, so I could buy my thing upfront without having like the bank own my house, or the bank own my car. I can own my house or my car using Alchemix. Anything you want to add on to there?

• 17:30Speaker 02

  Um, yeah, you would have to have double the amount, let's have like a car costs fifty thousand, you'd have to have a hundred thousand to do this. So it's a little bit capital intensive. But if you do have extra money, um, it it's a fantastic, um, you know, financial tool. Um, it it promotes savings while you can also still, you know, get credit off of your savings. Um, and I think that that's that's quite powerful. I know personally, I'm using it for uh my own uh budget for my house. Um, I have a decent amount of of dye. Um, I'm trying to, I've been slowly cashing out. Um, some of my ETH, I know sacrilege, David.

• 18:08Ryan Sean Adams?

  Last for me.

• 18:08Speaker 02

  But I've been doing some of that. Um, and then. Not all, but I still have most of my stack. But um, but basically I I put in a nice chunk of dye into Alchemix. And, you know, my monthly expenses aren't much. It's maybe two, three thousand dollars at most. Um, and so I'll just draw that much money in Al USD, uh, you know, then. Take it to my Coinbase and and, you know, put it into my bank account. And then at the end of the month, I have like. Much less debts, you know, almost zero debt.

• 18:41Ryan Sean Adams?

  This is cool. Th- this is like a point that you made Scoopy in the uh in the article you wrote us, which it it, you know, some people are still listening to this and they're like, yeah, but guys, you have to have in the in the boat example, boating accident example. Um, you have to have fifty thousand dollars in order to get a loan of twenty five thousand dollars, right? And they're saying, well, that's not really a loan. It's not. And it's true. It's not a a credit type loan. But what you're doing is you don't have to spend the fifty thousand dollars that you've worked so hard to save at all. Essentially, the twenty five thousand dollar loan that you're getting with your fifty thousand dollars that you put into Alchemix.

• 19:20Ryan Sean Adams?

  You're you're taking that from future yield of of wire that you'd receive in in DeFi anyway. And, you know. You're borrowing from the future.

• 19:31Speaker 02

  For free.

• 19:32Ryan Sean Adams?

  The point, yeah, for free. The point that you made in your, in the article is this really encourages users to save first and then borrow against their collateral. So it's very different than the consumer debt model that we're used to in the US, which is like, yeah, how much credit can I get? How much like debt can I get in? This is like you save your money and then you never have to spend it because you can just pull yield that you'd make otherwise into the future. That was a really interesting insight to me because this kind of construct, struck, this kind of money Lego, this kind of loan, if we're going to call it a loan, is not available anywhere in traditional finance. This is like DeFi native

• 20:15Ryan Sean Adams?

  stuff, the ability to get a self-paying loan that pulls yield from the future.

• 20:22Speaker 02

  Yeah, I think the closest analog in the traditional finance world is if you had like an investment property and then you had like, you know, tenants paying rent to you and then you would take out like a home equity mortgage or a home equity line of credit.

• 20:39Speaker 02

  I think that would probably be the closest analog to what Alchemix offers in the traditional finance world. So, you know, your tenants will be paying off your, your mortgage for you and then you could use your house as collateral to, you know, borrow money.

• 20:52Ryan Sean Adams?

  And generally houses as collateral are pretty safe, but we've seen episodes in history where a house collateral is actually kind of perhaps dangerous. And I think the beautiful thing about Alchemix is it's dollar-denominated collateral with a dollar-denominated loan. And so the liquidation risk is zero, perhaps? Because you don't have any price risk.

• 21:14Speaker 02

  You can't get liquidated. It's not built into this system. You can, you can repay your debt using your collateral. That's under the liquidate tab, but you can't liquidate anyone else and nobody else can liquidate you.

• 21:25Ryan Sean Adams?

  Right. So let's talk about, let's talk about the risk. Make sure we understand it. So all of this yield, as David mentioned, is coming from places in DeFi like Wire, right? And, you know, Wire is doing really well from a yield perspective on, on stable coins. I don't, I don't know what percentage is today, but like, say, double digits, right? 10 to 14% or so. So that means you can pay off a, a loan relatively quickly. But what happens, Scoopy, like, let's talk about risk one. If DeFi yields evaporate for stable coins and they go down to like, you know, 2%, 3%. Does that just like lengthen the time it takes to pay off the loan? Or what's the effect of that?

• 22:09Speaker 02

  Yeah. So the only effect that would have is that your loan repayment time would lengthen.

• 22:18Speaker 02

  What we could do to keep loan repayment times shorter is that we could adjust the collateralization ratio.

• 22:26Speaker 02

  So imagine instead of having it be 200%, we could change it to be like 300 or 400%. So it would be $400 of dive, you know, you know, backing $100 worth of out USD. And that, that could be used to, to make the, the, you know, the principal higher versus the amount of debt. So that would make the loan repayment more reasonable. But I, I don't know if we're gonna get down to 3% to 5% on urine, honestly speaking. Um, I just, I mean, I think that with the rate of innovation in DeFi and how, you know, the, the lending markets are evolving and how, you know, there, there could be new protocols spinning up with new tokens. That can offer new sources of yield and things like that. I just don't see it getting below 5%.

• 23:11Ryan Sean Adams?

  Right. Agreed.

• 23:12Speaker 02

  Anytime soon.

• 23:13Ryan Sean Adams?

  What other risks do we have here? So we don't have the collateralization risk, but what else do we have here?

• 23:18Speaker 02

  The other risk, uh, there's a couple of other risks. So one of them is, um, you know, a composability risk. We're, we're building with urine and urine is building on top of other things. Like, so the, the YV dive vault isn't just one strategy. I think it's eight strategies now. And some of that die goes to pool together. Some of it goes to curve. Some of it goes to compound. Um. Some of it goes to the iron bank. Um. I don't even know where all those sources of yield is uh from it because they've added a few strategies since I last checked. Um. And if any one of those sources were to be hacked. That would then trickle down to urine vaults and then alchemics users.

• 23:57Speaker 02

  Um. So that is one risk right there. Another risk is that right now we're only uh using dye as a collateral for alchemics. Um. And so if dies peg were to break. Then that would have a bad effect on alchemics as well. Um. Version two will rectify that and we're gonna take basically any viable stablecoin with. You know, decent on-chain yield as a collateral type for alchemics. So, you know, USDC. Tether. SUSD uh. It looks like this new liquidity protocol with their LUSD is also a very attractive candidate. Um. So there won't be a shortage of uh, you know, stablecoin collaterals that we can add. Um. So we'll be able to diversify our risk in that uh in that aspect. Um.

• 24:43Speaker 02

  The other risk. Is that.

• 24:48Speaker 02

  Say the yields go down. And. The price of the alchemics token just. Tanks like we're talking like double digit, you know, as opposed to being like four digit right now. Um. Then there wouldn't be a whole lot of incentive to pull your uh your tokens and and curve. So then that might um. Cause uh the peg to suffer. And if the peg is is broken. And yields on chain have gone down significantly. Then the other um pegging mechanism, the the transmuter might not be able to keep up. And and guarantee uh a peg of one dollar for LUSD. In that case, LUSD essentially becomes a bond.

• 25:32Speaker 02

  Which will be able to mature to one dollar over time using that yield from your.

• 25:38David Hoffman?

  Like, so let's go.

• 25:39Speaker 02

  That's the absolute worst case scenario is, is things like that happening.

• 25:44David Hoffman?

  Let's talk about that transmuter and specifically Al USD because that's a very critical component of the Alchemix protocol that makes everything function. So can you, can you walk us through Al USD and the transmuter?

• 25:57Speaker 02

  Yeah, so anytime Al USD debt is repaid in the form of dye, it goes to the, the transmuter. And that could be from harvesting yield from urine, or if a user repays their Al USD debt using dye, all this goes through the transmuter. There was a very popular degenerate strategy that, that we, we, we observed people using, where they would deposit dye, max mint Al USD, then liquidate their, their collateral. So imagine you put in like 100,000 dye, mint 50,000 Al USD, then you would liquidate your collateral, paying down your $50,000 debt.

• 26:40Speaker 02

  Then the person would then withdraw the rest of their dye, then put it into the curve pool. And then they would be able to put in 50% Al USD, 50% dye into the curve pool, then farm with that. And every single time people did that, that dye was going to the transmuter backing Al USD.

• 26:59David Hoffman?

  And, and what's the function of the transmuter? Why does Alchemix need the transmuter to work?

• 27:04Speaker 02

  So the transmuter is a way to guarantee that you can always get one dye for your, for one Al USD. So in the event that, that the peg breaks, you could, and then Alchemix becomes like a bond, you stake your Al USD in the transmuter and over time that will mature. So where you can convert it completely to, to dye, one to one.

• 27:31David Hoffman?

  And so that's actually the mechanism because Al USD is a synthetic USD coin produced by Alchemix. And the way that Al USD actually maintains its peg is by being able to be traded for one dye, but not, but there's a, there's a bottleneck, right? There's not everyone can go and trade Al USD. There's a, there's a restriction, which is actually something I'm not totally familiar with. So maybe you could help me articulate why this bottleneck exists and how the size of that bottleneck can flex smaller to wider.

• 28:03Speaker 02

  Yeah, so in Alchemix, we say that your only debt is time. So imagine you take out an Alchemix loan, it takes two years to pay out. That that yield that we harvest, you know, or that that yield that you get from the future, isn't completely accounted for until, you know, all your debt has been repaid by the system. Um, and so like even if we didn't have yield farming incentives and things like that, there would still be a nominal price for Al USD. Because it would mature at at least double the rate of the year in interest. Because everything's collateralized 200%.

• 28:38Ryan Sean Adams?

  Right.

• 28:39Speaker 02

  So imagine, you know, the the peg breaks horribly. You can now buy Al USD off the market for 50 cents. You know, you know, hey, in two years, this 50 cents is going to be worth $1. That sounds like a really good deal, then people will start buying it off the market. You know, it'll find its own little equilibrium. Um, but I don't think we're going to have to worry about that. Um, Al USD and the the Curve Pool will actually be going on to curve dot phi, the actual official site. Um, in a few weeks, a couple of weeks after our audit clears, that's our last hurdle. Everything else, there's a number of requirements to get on to uh to curve dot phi. And we check all of the boxes except for the audit.

• 29:23Speaker 02

  Um, so once we get on there, then we'll be eligible for the the gauges. So that'll be another source of on-chain yield um for the Al USD tokens, aside from the ALCF tokens. And uh, we are working with other partners as well to, you know, make Al USD more integrated into other DeFi apps to to help take care of the demand side for it.

• 29:44Ryan Sean Adams?

  So Scoopy, I just want to quickly summarize this, and I think a a user interface might sort of help me uh explain this for folks. And then fit fit in a a question that's come in specifically about Al USD. Do you see my screen here?

• 29:56Speaker 02

  Yeah.

• 29:57Ryan Sean Adams?

  Right, so I go to the vault, I can hit deposit, I've got some dye in my wallet, so I could deposit, uh, we'll say about six hundred and eighty-eight dye, uh, into the wallet. Um, and then I'm able to get half of that as a loan, up to half of that as a loan, is that correct?

• 30:17Speaker 02

  Yeah, you would be able to borrow three hundred and forty-four Al USD.

• 30:22Ryan Sean Adams?

  Okay.

• 30:22Speaker 02

  If you put in six hundred and eighty-eight dye.

• 30:23Ryan Sean Adams?

  Okay, and so I'm getting Al USD, I'm not getting dye, and then once I have the Al USD, then I then go to like Curve and I swap it for some other stablecoin, is that what I'm doing?

• 30:34Speaker 02

  Yes, you can do that.

• 30:36Ryan Sean Adams?

  Okay, alright, so, and then, uh, let's go to the repayment process, so if I want to repay this loan, my six hundred and eighty-eight dollars that, that I put in, um, or actually, uh, half of that, that I'm actually borrowing, I have to actually have, uh, Al USD and repay that amount, and can I do that at any point in time?

• 30:58Speaker 02

  Yeah, you can actually repay in Al USD or dye, so if you click on the little box where it says Al USD there, it will go to dye, or you can do both at the same time, if you hit the little plus button there.

• 31:07Ryan Sean Adams?

  Oh, very cool.

• 31:08Speaker 02

  Yeah, and so you can pay with, with both.

• 31:11Ryan Sean Adams?

  And what's this liquidate button?

• 31:13Speaker 02

  Yeah, so I talked about that briefly a second ago, um, so you can use your dye that you have as your collateral to repay your Al USD debt.

• 31:24Ryan Sean Adams?

  Ah, okay, I see, in the event you want to sort of instantly close your loan, you just take that dye and repay the Al USD debt, okay?

• 31:31Speaker 02

  Our thinking for this feature is like, what if, you know, somebody came in, borrowed Al USD, um, and then, you know, saw this new Andre token, uh, launch, uh, but it turns out it actually wasn't an Andre token, it was just somebody spoofing it was Andre, and that person got robbed and lost all their, their money.

• 31:50Ryan Sean Adams?

  Right.

• 31:50Speaker 02

  And then, then something else comes up in life, and they're like, oh man, I, I really need access to this collateral. And so, you know, instead of having to wait, uh, you know, until their, you know, their debt is completely repaid, they could, you know, repay their debt using their collateral and get out of the system.

• 32:07Ryan Sean Adams?

  Okay, okay. All that makes sense. I understand it. I, hopefully listeners, viewers, understand what's going on here, but this gets me to the question. This was a question that was actually tagged at the end of the post, but I think maybe a lot of people have it. So the question from somebody was, is Al USD supposed to be pegged around a dollar? I think the answer to that is yes. If so, why is it fluctuating so much? It's currently at eighty-three cents to the dollar. I'm not sure when this post is made. I'm not sure what it is right now, but can you explain the fluctuation?

• 32:36Speaker 02

  So that's not actually the real price of Al USD. I'm, I'm guessing they went to CoinMarketCap or CoinGecko, which is referencing this highly illiquid Uniswap pool.

• 32:46Ryan Sean Adams?

  Oh.

• 32:47Speaker 02

  Five thousand dollars in it. So like any little buy will send the price, you know, easily fluctuate it like well over a dollar or well under a dollar.

• 32:57Speaker 02

  The, the actual price of Al USD right now is, last time I checked, it was, um, point nine nine nine die. One Al USD goes point nine nine nine die. And I think it would be one to one if it wasn't for the point four percent, point zero four percent fee that Curve charges.

• 33:17Ryan Sean Adams?

  I see. So, so then can you explain a little bit? May, maybe you've partially explained it. I think you have, but, um, just put a fine tip on what the currency risk is. When, when you, when you have something like Al USD and you have to repay in Al USD, what sort of currency risk is somebody taking on there?

• 33:35Speaker 02

  So, I mean, I think this is with any decentralized stablecoin that somebody could, uh, be taking on pegging risk. So let's say that you are an LP in the Curve pool. And um you know, there's just massive amounts of people selling Al USD. Um and then it would cause an imbalance in the pool, leading to the the price of Al USD dropping. And this would be impermanent loss, right? Um, the cool thing about Alchemix is if you were to actually take out your coins in a balanced manner, let's say you put like a hundred thousand dollars into the the curve pool. And then it gets de-pegged and things like that. If you were to withdraw in a balanced manner,

• 34:21Speaker 02

  you would have maybe slightly less than like a hundred thousand dollars in total value, you'd be withdrawing from it. But you'd have, if you were then to put all that extra Al USD that's allocated to you now, and then you put that in the transmuter, then you would actually come out ahead. So there's would be no impermanent loss. You just have to wait a little while to come out ahead.

• 34:44David Hoffman?

  And so this is this feature and among other features in Alchemix is why I'm particularly interested in Alchemix. Because it seems to be a very risk managed position. Um, because not only do you have a natural hedge with the transmuter and exposure to Al USD, but also you never ac- actually can really get out over your ski tips with like leverage, right? And so I I'm in the middle of writing an article, which I think perhaps might come out of the the bankless newsletter next week. We'll we'll see. But I gotta ask Lucas for permission on that one. Um, but I I I illustrate uh like an exit strategy is what I'm calling it where I collateralize my ether, because I'm in in the never sell gang. I collateralize my ether in MakerDAO,

• 35:28David Hoffman?

  borrow die against that ether, put that die in Alchemix to borrow Al USD against that die, send the Al USD into Curve, swap it out for USDC, send that USD to my bank account and ball out, right? Like then the cash out at the top of the market, I get to have the value of my ether actually in my bank account, maybe I buy a house, I don't know, who knows? Um, but the point is, is that if that and that's that's risk because I have ether in MakerDAO and I have a loan backed against uh against my ether. If Ether gets cut in half, I have a safety net because all of the dye that I borrowed from MakerDAO is still in Alchemix. And so if I got out over my ski tips and I took

• 36:13David Hoffman?

  out too much leverage, I can just take my principal and just give it right back to MakerDAO and Alchemix takes care of the rest. Now, if I also took out the maximum risky position in Alchemix, which I borrowed, you know, the maximum, which is 50%, then I immediately can only actually get 50% of what I borrowed from MakerDAO and put only 50% back. But paying back 50% of your borrowed funds is actually a pretty healthy amount when it comes to repaying your debts. And so overall with Alchemix and the hedge against the currency risk, as well as not actually losing control of your principal, I think is an overall

• 36:55David Hoffman?

  a very risk managed position. And while we are in the world of DeFi, we are used to just like, you know, 100x degener long aping. Alchemix is actually, I feel like a sigh of relief when it comes to DeFi apps that actually allow people to take on reduced risk rather than more risk. Scoopy, you want to add anything to that?

• 37:17Speaker 02

  Yeah, I definitely agree with all your points there. And good thing you're sitting down, because we're going to simplify that strategy for you a lot, because

• 37:29David Hoffman?

  Is this the alpha?

• 37:31Speaker 02

  This is one little bit of alpha I can leak here. So after we get our audit back, we are going to launch a limited beta of Al-ETH, which will take ETH as a collateral and allow you to mint Al-ETH against it. So that will, when that goes live, that'll be sometime in May is what we're planning for. It might take a little bit longer, not entirely sure. But yeah, we're going to try to, you know, get that going and set up some nice liquid markets for Al-ETH as well. And so your cash out strategy will be a lot

• 38:14Speaker 02

  easier. You just put your ETH into Alchemix, borrow Al-ETH, and then do stuff with your Al-ETH instead.

• 38:21David Hoffman?

  Big fan of that.

• 38:21Ryan Sean Adams?

  That, yeah, that's cool. Cause so that in that model, David, you get to keep all of your ETH. It's like that. That's massively more simple for an exit, for an, for an exit strategy.

• 38:32Speaker 02

  You can either, you know, yield farm with that and make even more, or you can, you know, sell it for, you know, die and then put it in Alchemix.

• 38:42Speaker 02

  And start that whole loop again. You could do that. Um, so we're excited about that. I also noticed something. I want to touch a point about what you said about kind of like risk management. Alchemix actually lets you be incredibly risky if you want to be. We're actually partnering with a newly launched app, DeFi app. They're still in beta right now. They're called Margin Swap. And they're going to allow for 5X leverage trading and they're going to be routing through Sushi Swap and, and UniSwap. And, um, right now, ALCX is one of the supported assets in it.

• 39:23Speaker 02

  Along with other blue chips. It's nice to be included among them. But we're going to be getting AlUSD on there as well. So imagine you can fund a leveraged position using debt that repays itself. So you can go, you know, 5X leverage on, on, you know, some UniSwap gem. And if it gets rugged or you get liquidated, oh, no big deal.

• 39:47Speaker 02

  You know, you're going to get your money back in, in two years.

• 39:50Ryan Sean Adams?

  You get to hedge your downside. You get to, you get to, you get to gamble, I guess, on UniSwap gems with the, the yield that you've just brought forward into the future.

• 40:00Speaker 02

  Yeah, you can do that with 5X leverage using Margin Swap. So I think that's, that's something that's been very appealing. They're a new DAP though, so I do want to give them a shout out. Um, and I think they're, they're very much an under the radar gem at this point, but I'm excited that, uh, for what they're doing.

• 40:19David Hoffman?

  Well, Scooby, there's so much more to talk about because there's Alchemix V2, which I think perhaps you hinted at, but I want to dive into Alchemix V2 in, in more detail and the future, future assets being added to Alchemix as well. And there are even more mental models I want to share about Alchemix because this thing is just a mental model, just treasure trove. There's so many things to talk about. Um, and so we're going to get into all of those things. But first, a moment to talk about some of these fantastic sponsors that make this show possible.

• 40:47David Hoffman?

  Bankless is proud to be supported by Uniswap. Uniswap is a new paradigm in asset exchange infrastructure. Instead of a cumbersome order book system where trades are matched with other humans, Uniswap is an autonomous piece of software on Ethereum, which is what Ryan and I call a money robot. No human counterparties or centralized intermediaries, just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. Something brand new in the Uniswap ecosystem is the Uniswap Grants Program is now accepting applications for grants. We have been saying this for a while and we'll say it again. DAOs have money and they are in need of labor. If you think that you have something to contribute to the Uniswap DAO, apply for a grant to Uniswap.

• 41:31David Hoffman?

  Just look at the size of the Uniswap treasury. It's almost $3 billion. This mountain of capital is looking for labor. Do you have something of value to contribute to the Uniswap DAO? No matter how big or small your idea is, you can apply for a uni-grant at unigrants.org and help steer Uniswap in the direction that you think it should go. That's exactly what we did to get Uniswap to be a sponsor for Bankless and you can do the same for your project. Thank you, Uniswap, for sponsoring Bankless. Gemini is the world's most trusted cryptocurrency exchange. I've been a customer of Gemini since I first got into crypto in 2017 and it's been my main exchange of choice to make my crypto buys and sells. Gemini is available in all 50 states and in over 50 countries worldwide

• 42:15David Hoffman?

  and on Gemini there are markets for over 30 various different crypto assets, including many of the hot DeFi tokens and it's one of the few exchanges that has liquid DAI markets. Gemini just launched their Earn program where you can earn up to 7.4% interest on 26 various crypto assets. If you're tired of paying fees in DeFi or you don't want to worry about DeFi exploits but you still want to earn interest on your crypto assets, Gemini Earn is the product for you. Another product I'm stoked to get my hands on is the Gemini Crypto Back Credit Card, which gives you 3% cash back on all of your purchases but paid to you in your preferred crypto asset. When I get my Gemini credit card, I'm going to make sure that I get my cash back in E. So whenever I buy something, I get a little bit of ETH bonus back to me at the same

• 43:00David Hoffman?

  time. You can open up a free account in under three minutes at Gemini.com/goBanklist. And if you trade more than $100 within the first 30 days after signup, you'll be gifted a free $15 Bitcoin bonus. Check them out at Gemini.com/goBanklist.

• 43:18David Hoffman?

  All right, guys, we are back with Scoopy Triples. Again, the most fun name to say in all of crypto Twitter. And Scoopy has promised us some alpha. And so Scoopy, I would like my alpha, please. If you could please tell us what this alpha is. I'm really excited to hear about it.

• 43:34Speaker 02

  All right. You know, I've been quite, we've been quite secretive about V2 up until this point. So we're going to reveal some details, not all of them, but some details about what we have in store for V2 exclusively to Bankless today and all the Bankless listeners. We have a little teaser trailer prepared for this by our awesome artist and graphics designer Snape. So if you can just play this real quick.

• 44:04David Hoffman?

  Here we go.

• 44:33Speaker 02

  Okay.

• 44:34David Hoffman?

  Wow, that is awesome.

• 44:36Speaker 02

  Yeah, so for version two, we're going to be adding more collateral types, R T S, that we're going to be launching Al ETH, possibly sometime in May. Version two will also will be bringing Al BTC to the table, which will take, you know, wrapped Bitcoin as its collateral type. But version two, let me get into that, is a massive upgrade over version one. One of the key things that we have in version two is the fact that Al assets will become multi-collateral. So Al USD right now is only backed by DAI.

• 45:17Speaker 02

  Version two will be backed by any viable stablecoin. So, you know, USDC, USDT, etc.

• 45:27Speaker 02

  And the cool thing is, is that, you know, when you are creating your position in Alchemix, you can say, hey, I want to deposit 10,000 DAI, 5,000 SUSD, 20,000 USDC, 5,000 Tether. And then it'll basically just add up all of that total. In aggregate, aggregate forms, let's say you have 50,000 of those tokens total, then you can borrow 25,000 AlUSD. So you can mix and match. We will be.

• 45:56David Hoffman?

  Scoopy, can you, can you mix and match not only stablecoins, but also like other assets, crypto assets like ETH and Bitcoin in that mix?

• 46:04Speaker 02

  Um, so the way it's going to work is still going to be mirrored, just like in Alchemix version one. So stablecoins will mint AlUSD, and ETH and its flavors will mint AlETH, and Bitcoin and its flavors will mint AlBitcoin.

• 46:17David Hoffman?

  Got it.

• 46:18Speaker 02

  Um, and the cool thing here is that you can, you can do a collateral swap. So let's say that you have like 20,000 collateral in, in DAI. You say, you know what? I don't want to use DAI right now, or the yields on USDC are better. So I'm just going to switch my collateral over to USDC instead of DAI now. So then the contracts will take care of zapping that over to the correct currency and, you know, maintaining your position all the while.

• 46:44David Hoffman?

  This is, this is insane. This is so cool. And like, I'm, I'm sure that there is just like an endless amount of design space that you can build off with this because, you know, a Alchemix USD position, while the model is still the same with an Ether or BTC position, the use cases could be incredibly different. Uh, and then it also allows people to, to just kind of pick and choose the collateral of their, of their choice. It kind of feels like a multi-collateral Alchemix, if you will. Whereas as MakerDAO started as just Ether and then moved into many things, Alchemix is starting off with just DAI and then is moving into many, many collateral types. What, what, what would you say would be the, the lowest hanging fruit use cases for something like AlBTC or AlEther?

• 47:27Speaker 02

  Um, well, let me get to that in a second. Um, so back with the the multi collateral, um, Al USD or just multi collateral in general, um, it's, we're going to most likely expanding beyond yearn too. So you'll be able to choose not only which collateral you want to use, but also which yield provider. So let's say like, you know, there's a hot new yield farm or, you know, you know, aggregator comes out and it offers like forty percent interest. You could say, hey, I want to put my my collateral into that.

• 47:59Speaker 02

  You know, so you can not only balance the collateral types, but also their sources of yield. So you can, you can mix and match your own risk profile. Um, in the system. So there's that. So for Al BTC and Al ETH, um, I think that they are going to become, you know, very similar to, you know, something like a Maker Dow where you can use it to to get leverage. You know, on on your assets and stuff like that, but it's also going to open itself up to hedging strategies really, really, really well. So imagine, you know, you're an ETH bull, you don't want to sell your ETH, but you think that there might be some short term price, you know, pain coming up for ETH. So you could mint some Al ETH and then go to an options platform.

• 48:43Speaker 02

  Um, you know, something like premia or potion or hedge or something like that. And then you could hedge ETH there. So, you know, if if ETH goes down in price, then you'll be protected by buying that option.

• 48:58Speaker 02

  Um, I think that's a big one right there, or even just just shorting the market in general. You think like, hey, it's time to cash out. ETH is $10,000. Um, I think we're overextended, but I don't want to sell my ETH just in case it keeps on going up. So I'm going to borrow Al ETH and cash that out. And then a couple of years, you know, when the bear market's over, I'll still have my whole stash and I'll have all this extra money.

• 49:21Ryan Sean Adams?

  Yeah, I'm just like almost overwhelmed by the amount of creative use cases on top of this thing. It's like, there's like a playbook of possibilities that this unlocks.

• 49:30Speaker 02

  The other cool thing about V2 is that it's going to be highly composable. Um, we're gonna make it so that it's gonna be really easy to integrate Alchemix into your own protocol. So, you know, imagine something like, uh, you know, like ruler. Where you could deposit, you know, like right now in ruler, like, uh, there's like the contracts have e- uh, expiration dates. And if you don't, you know, settle your debts and, and claim them and, you know, take care of all the thing by the expiration date, then you're, you'll have to forfeit your collateral. But imagine if ruler could offer a perpetual pr- product using alchemics loans. They could do that.

• 50:06Ryan Sean Adams?

  Right.

• 50:07Speaker 02

  Um, another thing that's really exciting is imagine if DAOs build on top of alchemics. So the DAO account, like, you know, instead of putting it in Moloch and then, you know, let's say Moloch has like a million dollars and then people just, you know, slowly using that to, to fund whatever things that they're funding. They could then put a million dollars into alchemics and then take a loan against it and use that to fund things for their DAO.

• 50:32Speaker 02

  So I think that that's also a really cool use case there for it. Um, that could be extended to charities, to venture funding, to DAOs, treasury management. I think it's gonna be a, a nice tool for lots of people in DeFi, you know, beyond just us and our core users.

• 50:47Ryan Sean Adams?

  I just have a, a curious, maybe a side question here, but, um, are, have, have there been any use cases around like tax implications? Around this, so, so.

• 50:57Speaker 02

  I have talked to token tax.

• 50:59Ryan Sean Adams?

  Okay.

• 51:00Speaker 02

  Uh, about this, we've had some banter on Twitter and on, in, in DMs as well. And so when you originate the loan. That is not taxable.

• 51:11Ryan Sean Adams?

  Right.

• 51:11Speaker 02

  Cause it's a loan, but the debt repayments would be taxable as income.

• 51:20Ryan Sean Adams?

  Really?

• 51:21Speaker 02

  Because it's yield that's coming in.

• 51:22Ryan Sean Adams?

  I was wondering if you could, I was wondering if they said that you could get out of that.

• 51:26Speaker 02

  When this gets taxed, nobody really knows. Is it when you withdraw your collateral? Or is it every time there's a harvest of yield?

• 51:33Ryan Sean Adams?

  Right.

• 51:33Speaker 02

  We don't know. It's, I, I honestly think that if you try to explain alchemics to your, your accountant, their, their heads will just explode. They're like, what? What's going on?

• 51:44Ryan Sean Adams?

  Right, but it does, i- i- it is interesting because of course if you just receive that. Yield. Most jurisdictions would just treat that as like ordinary income, right? If you're just receiving yield from something like wire and this is different in that you're you're repaying the loan, but it's the protocol that's doing that. Be very cumbersome to have to treat each each atomic loan repayment as a as a tax event. But they'll catch up sometime.

• 52:15Speaker 02

  I'm not a lawyer, but I definitely think that you could probably get away with a lot using Alchemix.

• 52:22David Hoffman?

  And this is the power of DeFi. DeFi provides financial tools that maybe there was something like this for the the super wealthy, but now it's available to to everyone everywhere. And that's always what the power of DeFi is, is financial tools to allow people to get what they want done in a way that works for them. And so I really see Alchemix as a brand new money Lego fitting right into the rest of this DeFi structure. Scoopy, I got a I got a question I want to ask from from Gravity out of the YouTube. What about other flavors of Ether, not just Ether, but or wrapped Ether, but stuff like staked Ether? We have a staked Ether out of Lido and we have our Ether coming out of Rocket Pool. Could these types of interest-bearing Ether units also be viable collateral inside of Alchemix?

• 53:08Speaker 02

  Um, that that's a tough question. At the current moment, I don't know if our Ether or or Lido Ether would work because you can't actually, you know, get those yields from Ether too just yet. They're just kind of like virtualized and they're, you know, in the future when those are actually like on-chain yields and that you can, you know, grab them from, you know, the validators and stuff like that. And I think that that would open it up to more. But right now, you know, Urn has Ether Vaults that actually take, you know, that utilize Lido, like the ST Ether Vault.

• 53:46Speaker 02

  So it's using, you know, they're, they're on, you know, they're to yield and also Lido rewards to and curve rewards to drive its APY. So that could be one of the, the vault providers that we use for it. Um, you know, basically if there is a version that has like a vault associated with it, it'll be something that can be used as a collateral type. We kind of don't want to use like curve LP tokens as collateral types, but it is something that we definitely could do.

• 54:20Ryan Sean Adams?

  Scoopy, while we're on listener questions, this is another question that came in from Twitter. Um, what would prevent you, this is from DeFi dudes, what would prevent you from creating a perpetual loop of depositing some assets, say ETH? Uh, using the yield that they provide to buy more and then putting it back in and so on and so forth. So is there a way to create like, I don't know.

• 54:43David Hoffman?

  A recursive loop?

• 54:45Ryan Sean Adams?

  Recursive loop of withdrawing more and more?

• 54:48Speaker 02

  Yeah, you can totally do this. It's just leveraging your position, uh, your yield farming position in Alchemix. So the, the idea is that you would, you know, deposit die, then mint LUSD, then sell LUSD for more die, deposit more die, then et cetera, et cetera. Uh, you can only go so far because it's sort of like if you, um, if you want to go to point A to point B and you go halfway there.

• 55:11Speaker 02

  And then from that point, you go halfway there. And then from that point, you go halfway there.

• 55:14Ryan Sean Adams?

  Turns of doing that.

• 55:15Speaker 02

  Yeah.

• 55:15David Hoffman?

  Very quickly diminishing.

• 55:16Speaker 02

  You might be able to do two or three loops before it starts to get, you know, you know, not worth it anymore.

• 55:22Ryan Sean Adams?

  Right. And then what risk are you taking on when you do that, something like that?

• 55:26Speaker 02

  Um, I mean, you're not taking on any additional risk, um, in doing this. I mean, you still have the same protocol risk that any other user would have, uh, in Alchemix. Um, this loop though, does increase your debt with each loop. So while you might have a similar debt ratio, um, you're not, you know, you still, you'll have more aggregate debt. So when you go to liquidate everything at the end, you know, to get out, if you want to do it that way, you're not going to end up with anything more. The only way this strategy will be profitable is if you write it out until, uh, the debt is completely repaid. Cause then, you know, imagine you, you put in a hundred thousand and then you levered up to like a hundred ninety thousand. After that repaid, you'd have a hundred ninety thousand.

• 56:11Ryan Sean Adams?

  Right.

• 56:11Speaker 02

  All to yourself.

• 56:13David Hoffman?

  So Scoopy, I want to get...

• 56:15Speaker 02

  That's too different from like Alva Homora in that respect. They do the same thing, leveraging your stables.

• 56:23David Hoffman?

  Totally. So Scoopy, the YouTube chat box is blowing up about the Alchemix token. So I would be remiss if we didn't actually talk about the token explicitly. Usually when we're doing AMAs, we finish off with a question, "When token?" But Alchemix already has a token. And so let's talk about the role of the Alchemix token in the Alchemix application. And I'll lead in the question with saying that one of the reasons why I really like Alchemix is that it's actually already collecting fees and putting it into the treasury. Correct me if I'm wrong, I'm pretty sure that's true. And that treasury is monitored by the Alchemix token. So let's go into the details about the Alchemix token, its distribution,

• 57:03David Hoffman?

  and also the current opportunities that are awaiting Alchemix token holders.

• 57:10Speaker 02

  Yeah, yeah. So Alchemix had a 480,000 ALX pre-mine going to the DAO. 100,000 of that ALX is earmarked just for audits and bug bounties. And the other 300,000 or so, some of that was used to seed the liquidity pool on Sushi Swap. And some of that was used in the strategic sale we did with our investors. But we still have like around 350,000 ALX or so earmarked for the DAO.

• 57:46Speaker 02

  And that will be up to community discretion and how we use that. But for the time being, it's just locked funds and there for a rainy day in case we ever need it.

• 57:57Speaker 02

  Whenever we harvest yield from Urn, we take a 10% cut from that. And also Urn has an affiliate program that will do some profit sharing with people based on their TVL. At our current levels, we're getting 30% of the profit from Urn. So between our 10% harvest fee and the affiliate, we're pulling in around...

• 58:25Speaker 02

  Somewhere between ten and twenty thousand dollars a day in protocol fees, that's going to the treasury. Um, and between what we've amassed from our protocol fees and from the strategic sale, the treasury has three point three million dollars in addition to all of the ALCEX that it's holding. And then that that money that we have, and the treasury is also earning yield in DeFi as well. So it's a beautiful thing, beautiful thing. When we get to the Alchemix Dow, that's going to launch shortly after V2. That's when we will turn on the the profit sharing model for the Alchemix token.

• 59:08Speaker 02

  And when, right now, when you stake Alchemix, you just get Alchemix rewards. Uh, but when the Dow happens, you'll, you know, you'll get not only protocol fees, but you'll also get Alchemix rewards on top of that as well.

• 59:22Speaker 02

  So, you know, we're going to pass that on to the Alchemix holders. And the devs have a good amount of Alchemix. So of course, you know, we'll, you know, we'll stake and we'll earn our salary that way. By, you know, harvesting protocol fees that way. Um, but that also opens up to every other ALCX holder out there is to to earn like a real cash flow on it. And not have to to dump the token to to make money with it.

• 59:46Speaker 02

  There's actually something that I've been playing around with as an as a Dow model. You know, earlier I was talking about how DAOs could make DAOs on top of Alchemix. And do the treasury manage that way?

• 59:57Ryan Sean Adams?

  Yeah.

• 59:58Speaker 02

  Well, if we can grow our treasury TVL um high enough as far as like assets and ETH and uh and stable coins and Bitcoin. Then we could just have the Dow be a participant in Alchemix. And then stream the rewards it gets via Alchemix to Alchemix takers. So imagine like right now, the the Dow total amount of value it has, including the Alchemix tokens, is somewhere around the five hundred million dollars. Um, imagine that we could convert that all into stable coins and then the Dow itself holds five hundred million dollars.

• 1:00:34Speaker 02

  And then $500 million earning 15% yield a year. That's, you know, going to be something like $70 million a year of yield that we can pass on to Alchemist holders.

• 1:00:43Ryan Sean Adams?

  It's perpetual funding using your own treasury.

• 1:00:46Speaker 02

  Yes, and then all the other users, when they pay that 10% fee, will then be growing, adding to the Dow treasury as well, including the Dow itself, because it's a participant in Alchemix, so it will snowball.

• 1:01:01Speaker 02

  So that's, that's an idea that we have. It would require that the Dow would sell some of its tokens, you know, in order to raise those funds. So not really sure exactly how we're going to do this, or even if we're going to do it this way or not. But it is an idea that I've been entertaining and I kind of like it because it's like dog fooding.

• 1:01:21Ryan Sean Adams?

  Yes, you get to eat your own dog food and I could see that there are a lot of DAOs with massive treasuries now. I could see them definitely being interested in, in something like what you're saying. It really seems like your, I mean, your customer base in the future is sort of DAOs, which is, which is very fascinating. You know what this reminds me of, Scoopy, a little bit is when David and I had Hayden Adams on from Uniswap. And just like, there are some pieces of the story that are kind of similar, right? So this is sort of Hayden's first engineering project. This is one of your first engineering projects, which is so interesting. Like bootstrapped with a, with a very small team, sort of came out of nowhere.

• 1:02:06Ryan Sean Adams?

  And grown so fast. So Alchemix is two months old. Am I getting that right, Scoopy?

• 1:02:11Speaker 02

  Yep, yep, two months yesterday.

• 1:02:14Ryan Sean Adams?

  Two months old, guys, a billion in assets locked inside of the protocol. And if, if I'm right, like calculation 20K per day, that's a annualized recurring revenue of 7.3 million. Like any traditional fintech startup, any startup anywhere would kill for numbers like that. Two, two months after launch. This is a point that we keep bringing up on Bankless because it's so true. The speed at which you can scale on DeFi and on Ethereum rails is absolutely staggering. You know, people kind of ask sometimes, well, aren't you, aren't you concerned that the banks and maybe the regulators,

• 1:02:59Ryan Sean Adams?

  but especially the banks will, will try to shut this whole DeFi thing down? And I'm like, no, I'm not because they have no idea the speed at which this is happening. They're going to be taken completely off guard before they even get into their brains. What DeFi actually is, it's going to have completely blown past them. So I'm, I'm just really impressed with the speed at which you guys have, have created this. We've seen this before in other protocols that quickly find product market fit. So like, congratulations on that. It's, it's super cool to, to share this story to the community. But I want to ask the question, were you surprised at how fast this picked up?

• 1:03:41Speaker 02

  Yeah, I was blown away, man. Like, like.

• 1:03:46Ryan Sean Adams?

  What did you think would happen?

• 1:03:48Speaker 02

  When, when we launched, you know, I set my expectations low. I was like, you know, if we can hit a hundred million TVL by the end of the year, that would be really cool. Right?

• 1:03:59Speaker 02

  And then like, I like a couple of days after we launched, we hit a hundred million TVL and I started panicking. I'm like, what's going on? I literally had like panic attacks and I couldn't sleep because it's like, you know, we thought we were making a little boutique, you know, DeFi project, and here we are like top 20 on, you know, DeFi Lama, you know? We're not on DeFi Pulse just yet. We're getting there, but yeah.

• 1:04:22Ryan Sean Adams?

  I, I noticed that you guys weren't, weren't there yet. That seems to be ill fitting. Scott, Scott, get him on it.

• 1:04:28Speaker 02

  We're, we're in talks. We're, we're getting on. We are getting on. It's, you know, just the whole us not having an audit thing, you know?

• 1:04:36Ryan Sean Adams?

  It's just, it's all happened so quickly.

• 1:04:38Speaker 02

  We, we were reviewed by, you know, lots of coders, including most of Urine Core, some other noteworthy legendary people who I shall not name. So I feel like we're, we're really good on the security. You know, we've had like a billion dollar honeypot for two months now and nothing bad has happened. So I think we're, we're pretty good.

• 1:04:58Speaker 02

  You know, but still they want to see that audit. They want to see that, that special badge.

• 1:05:04David Hoffman?

  Scooby, I want to go back to the Alchemix token in the treasury just one last time because just to go back to the fact that Alchemix actually collects fees, which is relatively rare for a DeFi protocol. We all talk about the potential to collect fees, but Alchemix is actually doing it. How do, when you talked about actually paying out Alchemix holders with, you know, payments, how does, how functionally, how does that work? Because you're not just going to be sending on-chain transfers of DAI pro-rata to token holders. How do, how do token holders actually go and claim their revenue? Have you thought about this?

• 1:05:37Speaker 02

  Yeah, so in the DAO, we would just set up a reward contract in it. And based on how much ALCX that you're staking in the DAO, then you'll have a claim on, you know, the protocol revenue. And that will probably be like, you know, deposited weekly, because it wouldn't make sense to deposit every day. So you just, if you, if you're familiar with the synthetic staking contract, you can kind of set the rate for how many days it takes to pay out the balance in it. So you can set that to like a week, load it up with that week's, you know, you know, revenue. And then, you know, seven days later, load it up with the next week's revenue.

• 1:06:12David Hoffman?

  Right. And so like, if you, if you have Alchemix, but you have it like on an order book in Coinbase, or you are LPing in Uniswap, you actually aren't getting those rewards. You actually have to stake your Alchemix tokens to the contract in order to take your share of the, of the dividends. Is that the model?

• 1:06:31Speaker 02

  Yeah, we're not sure if we're gonna, if we're able to, or if we're gonna do something similar to like sushi, where it turns into like its own wrapped token.

• 1:06:41Speaker 02

  Some of the things that we're playing with as far as the mechanics of the DAO, it makes me believe that we're not going to be able to do that. Because there's gonna, we're gonna add like a security module to it, very similar to AVE. So stakers in the DAO, you know, in case there is a protocol hack, you know, they would, you know, get slashed a certain amount, and then their tokens would be sold at auction to kind of, you know, make the DAO, or make the protocol whole again. So there would be that. Also, there is a really interesting conviction voting mechanism that we've, we've created.

• 1:07:16Speaker 02

  Do you want me to get into that?

• 1:07:19David Hoffman?

  Sure.

• 1:07:20Speaker 02

  It's a bit much. It's a lot going on with it. But I think it's worth it.

• 1:07:24David Hoffman?

  Yeah.

• 1:07:25Speaker 02

  Yeah, it's something that we want to really do in this because right now, like in governance, everything's basically just like token votes. So it's just like whales win no matter what. You know, it's usually one or two big guys and they get to determine everything. And so, and then the other option is doing quadratic voting, you know, which is, you know, you'll take the square root of how many tokens you have and that'll be your voting power. I like quadratic voting, but it has a problem with it, which is Sybil attack. So let's say I have like 10,000 tokens. I can split them up into 100 different accounts and therefore my quadratic penalty will be much, much less. And I think Pickle, who recently did release a jar for us, and it's very good. It's very nice.

• 1:08:10Speaker 02

  But Pickle had quadratic voting and I know that there was one incident, I think it was actually a community mod, who basically Sybilled his Pickle across several different accounts to influence a vote.

• 1:08:27Speaker 02

  He got called out for it though, but still kind of funny. But it makes me not want to do quadratic because I think it's gamable. So instead, we're doing something that's time-based. So when you're in the DAO, for every ALCX you stake, you'll get one materia point every single day. And you can stock those up for up to 30 days. So if you have one ALCX in the DAO, 30 days later, you'll earn, you'll have 30 materia points. And then materia points can be used in two ways. One, they can be used for voting, you know, governance actions and stuff like that. And the other thing is, is since, you know, you can only have a certain amount of them based on how much ALCX you have staked, you can convert those into something called a materia shard.

• 1:09:12Speaker 02

  And a materia shard can't be used for voting, but it can be used to buy NFTs and other power-ups that you can use for your character in the DAO.

• 1:09:23Ryan Sean Adams?

  Oh, wow. This is crazy. So you're making like an RPG DAO governance like MMO, basically. Is that right?

• 1:09:31Speaker 02

  Yeah, we want to make DAOs fun.

• 1:09:33Ryan Sean Adams?

  Right.

• 1:09:33Speaker 02

  You know, like, I don't think people are going to participate, you know, in high numbers if there's no reason to come back and check in every day and things like that for, you know, whatever is going on.

• 1:09:43Ryan Sean Adams?

  These.

• 1:09:44Speaker 02

  So we want to gamify it. You're gonna, you know,

• 1:09:48Speaker 02

  we're deciding on how exactly we can do that. And I'm afraid if I leak what we have right now, it might change, you know, with more development. So I don't want to say anything more. But, you know, there's going to be a number of interesting mechanics using that, that, that system. Hopefully it can add a little extra value to ALCX beyond, you know, dividends and, you know, governance.

• 1:10:13Ryan Sean Adams?

  Just quick question on that conviction voting. So these materia tokens, are they not able to be bought and sold, though?

• 1:10:19Speaker 02

  Materia points are non-transferable. They won't even be a token. It'll just be a value in the contract.

• 1:10:25Ryan Sean Adams?

  I see.

• 1:10:25Speaker 02

  And then when you convert those to shards, shards will be tradable with anybody freely, but they cannot be used for voting.

• 1:10:33Ryan Sean Adams?

  Very interesting. That's a very interesting dynamic. Is, is, is the Alchemix community the one like pioneering this? Or do you, are you seeing convictions?

• 1:10:42Speaker 02

  This is kind of my baby. This is my baby. This has been years of me thinking about DAOs and thinking about DeFi. And me wanting to build something I want to build.

• 1:10:53Ryan Sean Adams?

  Very cool. Well, you got to come back and talk to us about that. Once that comes to fruition, there's

• 1:10:57Speaker 02

  Oh, yeah.

• 1:10:58Ryan Sean Adams?

  There'll be all sorts of interesting DAO mechanisms that need to be built rather than, you know, token weighted vote. That is, we already have that in the traditional system. So requires some, I think, new thinking in DeFi.

• 1:11:11Speaker 02

  Yeah. So like with the conviction voting, let's say you have, you know, your 30 days MP stored up and then a vote that you really care about comes up. You can spend all of your points on that one vote. So it does swing the balance of power a little bit to the masses versus, you know, the whales. Because they can team up and use their, their, their time weighted voting points to, to influence something.

• 1:11:36Ryan Sean Adams?

  Very cool. Scoopy, as we come to a close here, is there any part of the Alchemix protocol, either current or future, that we haven't touched on yet that you think deserves some time?

• 1:11:47Speaker 02

  Um.

• 1:11:50Speaker 02

  I didn't go through all of my things that I could leak today.

• 1:11:53David Hoffman?

  Oh, we'll take more.

• 1:11:58Speaker 02

  This is another V2 thing.

• 1:11:59David Hoffman?

  Okay.

• 1:12:00Speaker 02

  I'm not going to go into much detail about this.

• 1:12:04David Hoffman?

  It would be perfect to end on, how about that? Yeah. Just leave them with a little bit of something.

• 1:12:08Speaker 02

  So imagine like when you deposit into Alchemix, you then basically have a credit line available to you.

• 1:12:15David Hoffman?

  Right.

• 1:12:15Speaker 02

  That you can use or choose not to use, right? If you don't use it, it just, you know, you'll just end up with more AlusD credits than you can get from it. And that's how the yield will be distributed to you. But what if you could delegate your credit to someone else?

• 1:12:37David Hoffman?

  Interesting.

• 1:12:38Speaker 02

  Imagine what could be built with that.

• 1:12:40David Hoffman?

  Right. Why would I want to do that, Scoopy?

• 1:12:43Speaker 02

  Well, you know, you could make money on your AlusD doing that for one. But I don't want to go into too much. We have a number of modules that we're going to build using this idea. And if I give you, if I answer that question, I'd be giving too much away.

• 1:13:03David Hoffman?

  Well, Scooby, you have given us plenty on this podcast. So thank you for saving that alpha for the Bankless AMA. And that reminds me of this one last mental model that I have that I think I want to share to finish up on is that, say you have your DAI savings that you've saved and you deposit that into Alchemix. And like you said, Alchemix offers you a line of credit on your savings. And you never actually have to sell your savings in order to actually spend money. And so to me, the Alchemix yield rate, which is getting from yearn, is like, to me, this permission to go and spend this much money, which without it being irresponsible spending because you are keeping your principal, right?

• 1:13:44David Hoffman?

  And so say you put in 50,000 DAI, you get a $25,000 line of credit. So you can go to Vegas and gamble on Blackjack, right? And that's not, maybe that's not responsible, but it's not completely irresponsible because you still have your principal, right? And so that $25,000 that you spent starts to reaccrue its interest rate based on the yield. And so after you just blew away $25,000, you wait a couple of months and then you have a couple more thousand dollars from the yield that was generated for you. And so it actually, Alchemix allows you to meter yourself with your spending based on the interest rates that it's getting for you. And so you can always-

• 1:14:23Ryan Sean Adams?

  You're only spending your interest.

• 1:14:24David Hoffman?

  You're only spending your interest and if you only spend your AlUSD that's being generated from your DAI, you are never spending outside of your own means, right? You are always, it's a self-management system and I think that's really cool. So like you can, you can go to your nine to five, you can make all your dollars, you can transfer into DAI, you can put that DAI more into Alchemix, you can extend your credit and your rate of consumption without actually ever spending your savings. And so I think, I think that's a nice mental model to go out on. Scoopy, anything you want to add on to that?

• 1:14:57Speaker 02

  Yeah, I like Alchemix as like a rainy day fund. You know, imagine like you have like $10,000 saved up, you know, just in case something bad happens. Then boom, you know, you get hit by a car, unfortunate. And now you have $5,000 of credit card, of hospital bills. You know, you could just take that through Alchemix and be like, all right, in a few more years, I can get hit by another car.

• 1:15:21Ryan Sean Adams?

  Boating accidents and car accidents today. Unfortunate things happening to our listeners.

• 1:15:26David Hoffman?

  Ryan, we have an answer to your question.

• 1:15:28Speaker 02

  Another thing I like is like a family, you know, imagine they have, you know, savings that they have for like family vacations. And you know, they could, you know, finance their vacations using an AlUSD loan and then a year or two later, they could have enough for another vacation.

• 1:15:47David Hoffman?

  Right. Ryan, we have an answer to your question, why would I want to delegate my, my credit to someone else? And somebody, somebody in DeFi Donut in the YouTube says, you can give your kids their allowance trickled to them in AlUSD.

• 1:16:02Ryan Sean Adams?

  Well, there you go.

• 1:16:03David Hoffman?

  There you go.

• 1:16:03Ryan Sean Adams?

  For the parents out there, it's a good way to teach your kids DeFi while teaching them personal finance responsibility. Scoopy Triples, this has been an absolute pleasure. Thanks for creating something so interesting and so unique. It's been great to have you on Tankless.

• 1:16:18Speaker 02

  No, thanks for having me here. This has been a lot of fun, for sure.

• 1:16:22Ryan Sean Adams?

  Alright guys, it sounds like some big things are coming down the pike for Alchemix. Scoopy Triples dropped the alpha today. I've gotta end with this, of course. Risks and disclaimers, guys. ETH is risky, Ethereum is risky, so are DeFi protocols like Alchemix. You're getting exposed to things like smart contract risk and composability risk that we talked about in the show, and you could lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but thanks for joining us on the bankless journey.

• 1:16:57David Hoffman?

  Okay, we're done. Cool. Thanks, Scoopy.

• 1:17:04David Hoffman?

  Yeah, and for some reason, the second stream went as beautifully as we wanted the first stream to go. So thankfully, the stream didn't cut out while you were talking. So I think we're just gonna leave that video up there, and it's gonna have like a weird intro. But then, the full podcast is gonna go out on the podcast tomorrow.

• 1:17:25David Hoffman?

  Awesome.