[Discussion] Alchemix alUSD/mUSD fPool

Hi everyone, shubi here :grin:

Before kicking things off, I just want to note that almost all credit for this thread goes to @derc for having composed and compiled the original post for an extremely solid feeder pool discussion framework, and considering that there is seemingly little chance of a mutually beneficial deployment anytime soon with Liquity, I think we should move on to brighter shores and put our energy and eyes towards the Alchemix protocol, which recently had their CertiK audit completed, and is thus ready for some serious consideration for mStable.

TLDR :

  • Deploy mUSD/alUSD feeder pool on mStable
  • Opening up an alUSD/mUSD fPool provides interesting arbitrage opportunities with low impermanent loss risk while helping to keep alUSD close to peg, all the while earning swap fees and MTA for LPs who want exposure to both mUSD and alUSD
  • Get introduced to the Alchemix core team and build a solid foundation for potential future collaborations with other Alchemix DeFi derivatives and primitives

Abstract :

  • Alchemix is a decentralized borrowing protocol that allows you to draw self-repaying loans in their native stablecoin alUSD against DAI (and soon ETH and WBTC) as collateral
  • alUSD can be swapped or transmuted back at any time for any 3pool asset or DAI directly
  • A minimum collateral ratio (MCR) of 200% is required to mint alUSD (e.g. $10K of DAI for $5K of alUSD)
  • No risk of liquidations, as you would only require further time to pay back your loan (yuge imho)
  • As of today 5th of June 2021, TVL in Alchemix has reached US$659M

  • With our newly reduced swap fees compared to Curve, there is a real opportunity for mStable to capture the market for alUSD liquidity
  • Assuming swap volumes for alUSD range between US$5m to US$10m per day, a 0.02% fee capture will accrue between US$1,000 to US$2,000 per day to Savers and LPs

With the soon to be released ETH and WBTC collateral options and the overall extremely positive sentiment in the community around this new DeFi primitive, I propose to launch a mUSD/alUSD fPool to capture this momentum.

Benefits

  • Exposure to a very strong community and potentially US$250M and growing liquidity of alUSD
  • alUSD is collateralised by DAI, so definitely a safe bet considering the alternatives in the space
  • Fantastic hedging opportunities in the near future, where you can deposit ETH and WBTC on Alchemix to re-deploy the stable derivative on one of our farms for crypto-native rewards without the risk of having your collateral liquidated in adverse market conditions
  • Easy composable access from one ecosystem to the other, which might become very important in the near future
  • Self-repaying loans will become a new standard in the cryptoeconomic systems, and being able to serve as an entry point will only solidify mStable’s position as a swiss army knife for almost all opportunities that will happen in the coming months and years for this space

Risks

  • The protocol has not been live for as long as other DeFi natives, and there is currently only one audit present, although from a very solid one
  • We’re definitely going to compete with Curve on this one, and would need a mutually beneficial relationship with the Alchemix team to get listed on their website as an alternative to the Curve pool as to not lose visibility too quickly
  • Self-repaying loans are a novelty, and the full long-term risks might not be fully understood yet, although I personally feel that their lead dev & team have an extremely solid vision forward in terms of potential issues down the line. On top of that, previous smaller concerns were always quickly and efficiently resolved by the team, which further validates initial observations made

Temperature Check :

Should we deploy a mUSD/alUSD feeder pool?
  • Let’s buidl it
  • Nay, I don’t like the stock
  • Abstain

0 voters

4 Likes

100% for - I’m in favour of integrating with algo/synthetic stablecoins like FRAX, alUSD in feeder pools as they actually provide really great arb opportunities to keep the peg stable which channels fees to save

4 Likes

The only drawback (or maybe consideration rather) that I see here is what the impact will have on existing MTA rewards for the other fpools. Perhaps an analysis is warranted to see how the fpools are doing: should we tune rewards for existing pools? release more from the faucet? Use an algo to distribute rewards based on volume? Would like to see some conversation on this topic.

All of this can be handled in a separate discussion though, so for the time being: yes from me!

2 Likes

agree, yes, there needs to be an analysis on whether the existing fPools. The existing ones already have performance-based rewards and are algo-driven.

I think maybe something not related to this topic is we should relook at incentives since MCCP-4 set an emissions schedule for 16 weeks and we are soon approaching the end of the 16 weeks.

1 Like

I concur as well. I think algostables are going to be a good usecase, not to mention arb opportunities already highlighted by @derc .

Not to hijack on this topic but i believe there is merit in looking at Fei as well as another potential feeder pool candidate.

1 Like

Love this Topic, thanks for bringing this up! I am all for an alUSD/mUSD feeder Pool. The risk for mUSD is quite low since that is exactly what feeder pools are designed for.

This feeder pool could spark also a lot more collaboration with the Alchemix team. Think of mUSD, mBTC, mETH as collateral in Alchemix.

Excited about this, Seems the feedback is also very positive so far. Let’s get the ball rolling

3 Likes

Late to the party here. But im completely for this. We should create niche swap markets with less known assets in order to corner those swap volumes. Feeders are great for that, with dual incentivisation

Separately, this is off topic, so maybe respond to me in the discord on this subtopic, but I think it’d be awesome if we created mUSDx on top of save, potentially in collaboration with Alchemix. You’d be able to mint a 120% of the value put into save and teh interest would pay it off (or you can pay it back to close the position)

@derc @Cold_Summer

2 Likes

Also in support of this. alUSD pool does good volume over at Curve, so I think this is a logical implementation for us. In addition, as @Dimsome mentioned, perhaps this could be a jumping off point for an alchemix integration with Save (as @james.simpson and other community members have suggested).

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I like the idea of going for smaller stablecoins (like alUSD) for our feeders and trying to get dual incentives going. That way we can try and corner volumes for specific pairs and don’t have liquidity of other protocols / exchanges. And yeah keen on building mUSDx mETHx mBTCx (Alchemix style mAssets on top of save) in collaboration with Alchemix.

I’m going to set up a call to discuss it this week. I’ll post a summary here

2 Likes