Audio and transcript from the February 10th, 2022 installment of “Conversations with the Coop” with Scoopy Trooples, the Co-Founder of Alchemix Finance.
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Crypto Texan:
Hello, everyone. Welcome to Conversations with the Coop. This is where we source questions from the Index Coop community to gain insights from today's leaders in Crypto and DeFi. I'm your host Crypto Texan, and today we have Scoopy Trooples, the Co-founder of the Alchemix protocol with us here today. Scoopy, thanks for being here with us.
Scoopy Trooples:
Thanks for having me.
Crypto Texan:
Absolutely. So Scoopy, let's just get started with your background. And how did you get into crypto?
Scoopy Trooples:
So my background was, I was in a completely different field before I even knew what crypto was. I had been doing that for a number of years, I don't want to get into exactly what it was. I'll just say I was in the education field. But I won't go into much detail about that. I got into bitcoin around 2016 and fell down the rabbit hole, as you know, it was customary to do. I really started geeking out about it and reading everything I possibly could and absorbing as much information and that naturally led me to Ethereum and participating in ICOs and things like that. And I think by the end of 2017, everything was pumping at that point, but I was just obsessed with it. That's all I could think about day and night.
Scoopy Trooples:
It was crypto and the immense potential of it. And I started playing around with dApps at that time like CryptoKitties, and a few other things really started coming out, because that's when MetaMask was launched and you could actually do things without using the Miss browser. And I just became really enamored with it and I was imagining all the possible possibilities, mobile money and smart contracts. And I decided to take a leap of faith and quit my job in the education field and learn how to program because I wanted to be part of building out Ethereum and Web3 and things like that. And so beginning 2018, beginning of 2018, I started learning how to code and a little over two years later I was approached by one of my friends in the space, and he had an idea for an app to build. He's like, "Can you make me a front end?" And then one thing led to another and it turned into Alchemix.
Crypto Texan:
Wow. So were you involved in any other crypto related projects before you became involved in Alchemix?
Scoopy Trooples:
Just hanging out in discord and talking Game Theory and Design with different friends in the space for a number of times, and lots of designs to make things but they all fizzled out until Alchemix came along.
Crypto Texan:
Okay, and I want to talk about names for a second. Why did you choose the name Scoopy Trooples and why was the protocol named Alchemix? Just wondering if there's any significance behind those names.
Scoopy Trooples:
When I first made a Twitter handle, my normal handle that I use other places was not available. And so I was just thinking about what name could I use, and I had a Dungeons and Dragons character I made one time and its name was Scooby Trooples. I decided to just go ahead and use that name. It seemed like it was pretty good. A lot of people like to have fun with my name. I know David Hoffman from Bankless, he always says like, he's just like saying it out loud then he'll just like laugh to himself as he says it. I like the name. It's just duck, and know it's too late to change it.
Crypto Texan:
Yes, it's definitely too late now. I was listening to the Gabriel Haines podcast that you were on not that long ago and I think he said, "Is it Scoops or Scooper?" And you said, "It's neither one of those. I don't know what you're talking about." I thought that was really funny.
Scoopy Trooples:
Gabriel's a troll. The first time I did a podcast with him he introduced me as Shooby Trooples. Ever since then it's been a running gag for him to see my name wrong.
Crypto Texan:
I love that. We had him on this show once and he was a great time. Love Gabriel and love his Twitter also. But let's get into an Alchemix a little bit. So you talked to me about-
Scoopy Trooples:
I can talk about something for Alchemix if you want.
Crypto Texan:
Yes. I forgot about that. Yes, go ahead.
Scoopy Trooples:
We were called CheeseFi because the original iteration of Alchemix was a lot different than what it is now. And the idea was that you would have the derivative that would then be used like a token to be used in games like in DeFi and stuff. And that naturally made me think like, "It's like one of those Chuck E. Cheese tokens because they have their own ... You put in your quarters at Chuck E. Cheese and then they give you their own tokens for their arcades, and you have to use those tokens in their arcades. So I was like, "This is just like a Chuck E. Cheese token. And it's like, "CheeseFi, DeFi, CheeseFi. That's pretty cool." And then YAM came out and Sushi came out, and all the terrible things with the food coins and the million derivative clones came out were like, "No. We shouldn't be a food coin at this point."
Scoopy Trooples:
And the app itself had changed quite a bit. And one of the contracts that we had was called the Transmitter. And we were like, "Wow." Because it kind of like changes one thing for another, transmits it to a different coin, that's our pick stability module. And we're like, "Let's do something alchemy themed then." And we were thinking about it. And it's alchemy, and they're synthetic tokens. And then one day in the shower, it's just like, "Eureka! It's Alchemix." Then I just ran up to the teams like, "It's alchemists, guys. It's Alchemix." And then like a week later, "Okay. Yes, it's Alchemix."
Crypto Texan:
So it's kind of a combination of alchemy and Synthetix, I guess.
Scoopy Trooples:
Yes.
Crypto Texan:
That's clever. Does Kain know this? Does Kain know that you stole this from him?
Scoopy Trooples:
I don't know if he knows it. But he should be happy because in our alETH LP pool, we have sETH in there. We've been giving Alchemix rewards basically to the Synthetix ecosystem for a little while now. So Kain should be happy with us.
Crypto Texan:
Yes, I'm sure that he is. So what went into... You kind of talked about it a little bit. You were CheeseFi and I remember CheeseFi if I think back to two years ago...
Scoopy Trooples:
Yes. I was teasing a bit at the time, like a little less than two years ago, I was teasing about it quite a bit.
Crypto Texan:
Yeah, What went into founding Alchemix? How did you identify this need in the market?
Scoopy Trooples:
It was a lot of experimentation. So the original idea for CheeseFi is having this yield derivative where you can get your future yield now. And that was something that we thought was really powerful and was something we wanted to explore. And the CheeseFi model, essentially, how it worked is you would deposit Dai or another Stablecoin and then you would choose to lock it between 10 and 100 days. And then, based on how many days you liked, and how many stable coins you deposited, you would get this Cheese token in return. And then the contract would then put all those stable coins into these sources of yield and then use that yield to buy the Cheese token off the market.
Scoopy Trooples:
And this was being composed with Uniswap and things like that, and yearn and Idle financing. We did a lot of research and a lot of modeling on it and learned about Sandwich attacks and MEV and everything like that. We just realized that this model would get destroyed by MEV bots, and we thought it would be a bad idea to do it in the long run. It would just not be good for anybody. So we went back to the drawing board. And we modeled so many different things at so many different designs until we finally got to this one that was for Alchemix, and everybody on our team just really liked it. We decided to go forward with it.
Crypto Texan:
You felt like that idea fit the culture of what you were trying to do, or what do you mean by that?
Scoopy Trooples:
Well, it harnesses the whole idea of getting your future yield up front. But we turn that into a CDP system with a stable coin is that trying to make a fancy yield derivative out of it. And I think that the simplicity of that makes it really accessible. There's other products in the market that try to do derivatives with yield, like something like an APY or an element and things like that. They're good projects in their own right but they're limited in the users who will adopt it because it requires a lot of savvy just to be able to use the platform and know how to trade these derivatives. Whereas ours is like, "Hey, you're sticking your money, and you can borrow from your future yield now. And it's like stable and a Stablecoin." So I think it just made a lot more sense to do it that way for the end user, at least.
Crypto Texan:
Yes, that makes sense. And let's try to get a little more higher level and just a background on what Alchemix is. I think the meme for Alchemix is self repaying loans, which you've kind of touched on a little bit, but I was just wondering if you could just give like a high level and then just kind of dig into that meme a little bit.
Scoopy Trooples:
Yes. So the way that Alchemix works is that you deposit Dai into Alchemix. So this is just for alUSD. You deposit Dai into Alchemix and then Alchemix will then batch all the Dai that has been deposited over the last couple days and put that into yearn. And it will be earning yield this entire time while your deposit is in there. And then once you have a deposit you can then borrow off of it like a CDP system, like MakerDAO. And since it's a stable to stable asset, so you're using a stable coin to borrow a stable coin essentially, we don't need to have liquidations in our system. The system assumes that Dai equals $1 for the purposes of the system. In the meantime, if you borrow alUSD, you have debt then at that point, right? So you're borrowing your future yield from yourself. Then that yearn, all that interest is coming from yearn actually is used to pay off your debt.
Scoopy Trooples:
So that's where the self repaying loan happens. So if the interest rate is like 10% and you took out a max loan, which is 50%, LTV, the expected payoff or repayment date would be five years after you take that loan. Now in Alchemix you're not locked into that position, you can repay your debt at any time and you can use our alUSD or Dai to do that, or you can even use your own collateral and liquidate yourself. So the only liquidations in Alchemix are done by users onto themselves as a way to get exit, or to pay off their debt so they can withdraw the rest of their collateral.
Scoopy Trooples:
And then there's all this money that's going towards repaying debt, at least when it's used in Dai, that's through yield harvest or when people repay in Dai, that goes into our Peg Stability module, which is our transmitter, where you can deposit alUSD and then get dive one to one for it. Although it does take a lot longer. It's like a slower drip. And that's on purpose. But the guarantee is always there that if alUSD ever de-pegs from the markets, you can always put it in the transmitter and get one to one for it.
Crypto Texan:
So I guess the transmitter is essentially how alUSD maintains its peg to a dollar, correct?
Scoopy Trooples:
It's one of the mechanisms. Yes.
Crypto Texan:
Okay. And I'm wondering, a couple of questions on that. So if I have Dai and I deposit it and I don't borrow against it in Alchemix, it's still being batched to the yearn protocol and earning interests, correct?
Scoopy Trooples:
So what happens in that scenario is your principal does not grow, but you'll be getting an alUSD credit for when you deposit into there. So let's say you put in 100,000 and you don't borrow anything and you wait like a month and then you come back a month later and you see that you have like, instead of being able to borrow 50,000, you can now borrow like 53,000 or something like that. So if you borrow just that amount that was your credit, then that's basically no debt at all. You would just be able to take that out, and then trade it freely or convert it in the transmitter.
Crypto Texan:
Okay. Yeah, that makes sense. And so I'm wondering if you're assuming Dai has a $1 value for simplicity sake in the protocol, why is the max borrowing amount against that Dai 50%? Why would it not be higher than that?
Scoopy Trooples:
That was done because if somebody can borrow more than 50%, or basically when somebody borrows, they can do a loop where they can borrow alUSD, sell it for Dai then put it back into Alchemix, borrow more from that and repeat the process and again and again. At 50% LTV, the max leverage they can get is 2x. If we did like 66% LTV, that would be 3x. So it's basically like the inverse of the fraction there. It's like how much leverage you can have. So if it was like 75% LTV, you could leverage 4x, if it was 90%, you can leverage 9x, et cetera. And the idea behind limiting this number was that if a lot of people use that strategy, it's essentially going to benefit the early users of it to the detriment of new entrants into Alchemix because it could result in a depegging if too many people do it.
Scoopy Trooples:
... and some aspects of loan repayment times that we want to be cognizant of and if somebody puts in $100,000 in borrows 90,000 off of it, even with a high interest rate that's going to take a long time to pay off. So also keeping that in mind.
Crypto Texan:
Right. So these loans are 0% interest, but the interest received from the collateral that you post goes towards repaying the loan. Are there any terms? Are there any maturity dates of these loans?
Scoopy Trooples:
No. There's no lockups, no minimum time at all. You could get in, borrow some alUSD, be in there for a day, a week, however long you want to repay, and then get out, or wait for your debt to be paid off and get out. It was really flexible, and that's I think one of the big powers of Alchemix where as opposed to these structured yield derivatives that are out there. Because they always have some time component to them, whereas Alchemix... It doesn't. It's very flexible.
Crypto Texan:
That's incredible, actually. So you said one of the ways that alUSD maintains this Peg is through this transmitter where you can deposit the alUSD and get Dai back. What other mechanisms are in place to, I guess, assist in maintaining that Peg?
Scoopy Trooples:
That's the core Peg Stability module that we have, using people's interest payments as a Peg Stability, or feeding the Peg Stability module through debt repayments. Another one is if alUSD goes under the Peg, then there's strong incentive to buy it off the market to repay your loan on a discount. We recently saw that actually defend the Abracadabra MIM Peg. It was slipping. It almost, I think, got down to like 97 cents. But since it was such a discount for people to pay off their loans at that point, they started buying it, and then that raised the price of it back to like 99 point something cents. So that's one Peg Stability mechanism. And that's something that all CDP platforms have. And then the other one that we have is just typical DeFi stuff where we incentivize liquidity and that helps.
Scoopy Trooples:
Having deeper pools helps. You have more stability on the Peg, and more utility because somebody... It's theoretic that somebody could go into Alchemix right now, borrow 10 million alUSD, and then swap that to USDC and maybe pay the four basis points curve trading fee, and then whatever tiny little bit amount of slippage there is on curve. But basically you could borrow $10 million and swap it for like $9.9999 million on curve. So that's, I think, pretty enticing.
Crypto Texan:
Yes, that makes sense too. And so, I guess, what other assets are available to borrow and lend on the Alchemix protocol. I know y'all are about to release v2 of the protocol, and I think that's going to add some additional collateral types. Just what are those collateral types, and if you want to just kind of touch on v2, that'd be great.
Scoopy Trooples:
So in version one of Alchemix, we have an alUSD and alETH product. alUSD only takes Dai and uses the yearn strategy for it and alETH only takes ETH, and then also uses the yearn strategy for that. That's where we're at right now. Very soon, we're going to be launching v2. And v2 is going to allow for multi-collateral deposits into Alchemix, and also more strategy selection as well. So, right now, people can only put in Dai and then that automatically goes to yearn, whereas in v2 we know that we're going to be launching with Dai, USDC and USDT. We'd be looking at other decentralized stable coins as well. But right now, I think just for launch, we're going to keep it simple with the three curve assets.
Scoopy Trooples:
The launch is also only going to have yearn, but we have AAVE and compound strategies that are under audit actually right now, and we hope to get those out sometime in March or April. So that will open up strategies to yearn and compound but also anything that shares the same kind of design patterns as A tokens or C tokens. So imagine something like Rari Fuse that would become compatible with Alchemix. And for A tokens, something like Staked ETH, Lido Staked ETH would also become available in Alchemix because of that. So those are going to be some really big upgrades that we're looking forward to releasing shortly after v2 launch. So, one of the cool things about v2 is you can have different collateral and different strategies, and you can kind of build your own yield aggregator that way.
Scoopy Trooples:
And the neat thing is that if you have multiple collateral and multiple strategies, you don't have a vault for every single one of them. There's going to be one volt for alUSD, one volt for alETH and one volt for any other AL token we might have in the future as well. So if you put in Dai USDC, USDT and some other coins, and they all have different strategies, you would be able to borrow off of the grand total of what you have deposited. It would be like a composite. If that makes sense.
Crypto Texan:
Yes, that does make sense. So how did y'all decide for v2 from a composability standpoint? How did you decide to incorporate AAVE, compound, and yearn? I guess you're already doing yearn with v1. But what took place in that decision process?
Scoopy Trooples:
Well, we decided to focus on those two strategies immediately because they would have big payoffs beyond the yearn or beyond the AAVE and compound ecosystems, because them being trailblazers, a lot of other protocols have copied them or used their design patterns. So by selecting the strategies to go with and to implement, it opens up a lot more strategies than just AAVE and compound. And so we thought that would be the most bang for our buck when we had this looming audit engagement ahead of us.
Scoopy Trooples:
So we thought that was the best use of resources at the moment. Also working on a curve LP strategy as well. So all the different Curve LPs like FRAX curve or like MIM curve. Not alUSD curve, but I don't think we'd take alUSD as collateral. But hose types of pools and those LP tokens will eventually become collateral types on Alchemix, which will allow us to look into convex strategies. And I think there's also going to be another protocol built on top of convex and we should be in a position to be able to get on top of that as well.
Crypto Texan:
This sounds like the most DeFi 2.0 protocol of all the DeFi 2.0 protocols, because it sounds like y'all are just incorporating and building on top of everything.
Scoopy Trooples:
That's the goal. We want to be the top stack of DeFi. So whatever protocols are out there that you really like that offer good yields for stable coins or other assets, we want to be able to implement them in Alchemix because like, yes, it's good to be in those protocols but wouldn't it also be good to be in this protocol but also have CDP functionality on top of it? And that's where we're going with it?
Crypto Texan:
Yes, that makes sense. To have that- Go ahead.
Scoopy Trooples:
Why would you be in convex if you can be in Alchemix, get the same yield as convex, but also be able to borrow off of it. I think that's powerful.
Crypto Texan:
Right. And you also talks about incorporating Lido Staked ETH. So is alstETH? Is that a potential token in the future?
Scoopy Trooples:
It would just be alETH, because it's multi-collateral. Especially once the merge happens and the state transitions happen on ETH2, stETH is essentially the same thing as ETH at that point, because you can swap between the two of them with a very little delay. So anytime that the stETH price slips or goes under that of ETH, the arbitrage is there and it's going to be re-balanced. So for all intents and purposes, we think that it is a good enough asset.
Crypto Texan:
Yes, that makes sense. Yes, it would just be alETH with the multi-collateral aspect of it. Other reasons you chose... You already have Dai but then also incorporating USDC and USDT, is that because of the Curve pool that's there?
Scoopy Trooples:
It's because it's the largest total addressable market that there is. More people hold USDC and USDT than any other stable coin out there. And so we can address a huge amount of people in DeFi by having those assets. There's also a lot of trust with USDC, much less than Tether, but I'm of the opinion that if Tether blows up, all of DeFi is going to blow up anyway, so it's kind of impossible to avoid it. So...
Crypto Texan:
Do you think Tether is the biggest risk to DeFi right now?
Scoopy Trooples:
Yes and no. I almost feel like if Tether just comes out and says, "Hey, we don't even have $1 in our treasury. Haha." That it'll probably still trade at $1 for a while, just because so many people use it like that because of the insane efficiency of Curve. It'll probably take a while for it to depeg, even if it's being persecuted by the law or whatever. I don't think Tether is going to implode. There's so much financial interest behind it. It might get rolled into something else in the future, but I think that if the SEC or some other agency goes after them, they're going to do a lot more harm than good.
Crypto Texan:
Yes, that makes sense. And what does keep you up at night from a macro perspective related to DeFi? What is the biggest risk to DeFi as a whole right now, in your opinion?
Scoopy Trooples:
It would have to do like, if basically, if Congress were to make a law that's saying like, stable coins are illegal or something like that. That would be like a major blow, but other things like that I feel like there's enough regulatory arbitrage that you can get around a lot of these things. And it's also pretty apparent that the SEC is imploding right now. So I don't know. Especially with government agencies, if the change comes directly from them and not Congress, then it can be challenged, overruled, and going to court. And then there'll be years and years and years of litigation before there's a resolution. So I think we're fine for the next at least few years. I think even then a few years from now, society will be in a place that I think is a lot more accepting of crypto.
Crypto Texan:
Yes, I tend to agree with you there. You also mentioned about potentially adding more stable coins in the future. What do you think are some of those perspective stable coins that could be implemented into the Alchemix protocol?
Scoopy Trooples:
Off the top of my head, probably the most attractive would be FRAX. I think of all of the decentralized stable coins not named Dai, it has probably the greatest chance of success at this point. And I don't know if that's because of adoption per se, but more so of mechanism design and protocol design. Because at FRAX, they have these really cool system, it's called an Algorithmic Market Operator, an AMO for short. And these AMOs basically, the whole point of them is to increase the liquidity and depth of FRAX, as long as it does not impact the price of FRAX negatively. They define that the minimum pay for FRAX is 99.8 US cents per FRAX, measured in USDC. And so they have a Curve convex AMO strategy where they can single side mint FRAX into the pool, as long as it doesn't make the price of FRAX under 99.8 cents.
Scoopy Trooples:
Then they take that LP that they just thought for depositing FRAX and then it put that into Convex to farm with. So they've been doing this for a while and amassing convex tokens and curve tokens, all the while growing and growing and growing. I think they own like $1.3-1.4 billion worth of LP and the FRAX three curve pool in their AMO. And as a result, I think they're now the largest holder of CVX, at least the largest DAO holder of CVX at this point. For the people who are not super in tuned with the curve wars, CVX is used as a proxy to vote on the curve gauges. And the curve gauges are a system that directs rewards to different LPs and curves. So the more CB curve that you hold, the more you can direct curve and CVX rewards to your protocol. And since they have such a huge treasure trove of it and they own so much liquidity, they're in a very good position.
Scoopy Trooples:
The cool thing about the AMO is that they can use it to expand quite a bit. But if for some reason FRAX starts dumping and its Peg suffers, they can just withdraw the FRAX single sided from their AMO and burn it to rebalance it and bring it back to its Peg. And since it's so deep and they own all of that, I really think it's going to be... I can't imagine a situation where FRAX depegs. That's, I know, a long answer, but I think fracks is really cool in that regard. Also, Sam is a really cool guy. We talk quite a bit and them being able to... If we can accept FRAX, they can actually build an AMO strategy into Alchemix and then deposit a bunch of FRAX into Alchemix or alUSD with it, and then use that in our own like D3 pool. So we are in a pool with FRAX and FEI, and so they can integrate their AMO stuff into Alchemix essentially, and to the benefit of each protocol.
Scoopy Trooples:
I think that's really cool. Other coins on my radar would be alUSD and FEI and I like both of those for different reasons. I think alUSD is like the purest representation of what MakerDAO was trying to do. So only using ETH as collateral. It's very decentralized, not even the front end is hosted by the protocol or team. So I think that's really a good one. The only problem with LUSD is that, while it does have a mean average of $1, it does fluctuate quite a bit in that range. I've seen it go down as low as 98 cents and as high as $1.03. If we accepted alUSD, we would probably just limit the amounts of deposits into our strategies because the alUSD essentially takes on an aggregate of all the different collateral for it, if that makes sense.
Crypto Texan:
Yes, it does. And I'm surprised that you haven't said RAI, or Reflexes RAI in there. Is there a reason for that?
Scoopy Trooples:
RAI just can't work with alUSD because we only do mirrored assets. So only Stable coins, dollar Peg stable coins can work with alUSD.
Crypto Texan:
Oh, that's right. And RAI finds its own Peg, which is like $3.04 right now or something like that, I think.
Scoopy Trooples:
I love RAI, I think it's cool. I've talked to the developers over there and I really think what they're making is cool. The system that they have is really well thought out. I definitely hold some RAI. I don't put my all my eggs in one basket. But it just wouldn't work without alUSD. The other one FEI, I like FEI because they're very similar to FRAX in that they have the minting mechanism for it is controlled by the protocol, and they have a lot of protocols and liquidity and value. But most of their backing is in Ethereum, right? So they have the best asset that is backing it. So it's very decentralized in that way as far as like a collateral standpoint. And also like Joey and even the very team and stuff like that, they're all just really awesome and they're really good builders and super smart. So I think those coins would all make a lot of sense to add to Alchemix, we were thinking about MIM and Abracadabra, adding that.
Scoopy Trooples:
But with the recent drama behind every Sifu-gate and all this other stuff, I think it's a little bit more prudent to take a wait and see approach to see how that all plays out before we would entertain adding that. And then UST is another coin that I think a lot of people would want. But I'm very hesitant to employ a cross chain strategy that would take advantage of like the anchor yields and stuff, just because of all the things that can go wrong in a cross chain application. That's where we are with FRAX, FEI, alUSD kind of being the front runners for decentralized stable coins for right now. And then everything else is basically up to our community which ones will be accept. So we'll have to consult them to see what they want, analyze our risks and then let them decide.
Crypto Texan:
And you mentioned the MIM Abracadabra Sifu incident and I feel like Anons have been getting a little bit more heat lately in the space, at least on Twitter. And I just kind of wanted to get your take on your Anon and just wondering do you feel the need or do you want to be anonymous? I don't know, what does it mean to be an anonymous co founder in this space to you?
Scoopy Trooples:
I'm not trying to hide anything other than the fact that I really just like my privacy. I don't want people targeting me or treating me differently because they perceive me as wealthy or anything like that. Most of my close friends don't even know that I'm doing Alchemix or anything like that. A lot of my family doesn't know that I'm doing Alchemix. So I'm very, very private in that regard. I really just want to blend in and just not be disturbed and build in peace. That's kind of my philosophy behind it. Whereas, I think the general perception about Anons, I think it's kind of silly. I understand why there is that perception, and I think it's very disheartening to see some of these people on Twitter really trying to drive against Anons and disparage them and things like that.
Scoopy Trooples:
And just generally, the kind of new culture that's starting to form up in there, where it's like this, I don't want to say cancel culture, but it feels very much like that in the past week or so. It's kind of disheartening to see that, especially with the people like Brantley even though what he said was disgusting, the way he's treated people over the years has not been and he's also been a great builder. So I'm very conflicted about all this stuff. And I think that those same people who are trying to insult Bradley and stuff like that are also the people who we're trying to disparage Anons. And I mean, if that's the way it's going, that's the way it's going. But I think for Anons, the best thing that we can do now is try to be above the board, increase transparency, and prove it to people that that narrative is BS.
Crypto Texan:
Do you feel like I guess Sifu, and Daniel over there at Abracadabra. Do you feel like they had maybe too much power over that multisig and that may have ultimately been their downfall? I mean, I do see that as crypt-
Scoopy Trooples:
I mean, Danielle was doxed. And I think definitely, if you're going to have protocol making huge movements with funds and things like that, that yes, you should have a multisig. You can do that with a multisig easily. You get to know you're safe. You get at least a two of three to make sure that person is not going to be running off the funds. It's probably better to have a four of seven or something like that instead. It's really easy to set it up. You can set up a multisig and get everybody in there in a matter of minutes. There's no excuse not to.
Crypto Texan:
Yeah I was just kind of thinking of... I don't know, do you follow Chris Blec at all on Twitter?
Scoopy Trooples:
I know who Chris is. I don't follow him though. I've had some number of dicey encounters with him. So let's leave it at that.
Crypto Texan:
Yes, he's very anti multisig. I'm just interested to hear your perspective and your takes on on all of these topics.
Scoopy Trooples:
Full automation and trustlessness is the dream and the desire. I would have viewed a multisig as a temporary crutch. And, people might think that's a bad statement, but when you think about it, crutches help you walk, right? And I think until all these systems can be automated and stuff like that, that it's fine as a transitory thing for DAOs to use, as long as the DAOs are respecting the will of the token holders and they're not going off and doing rogue things and they're very much adhering to the authorization of what the DAO says, then I think that that's fine. Better yet you can use like a Compound governator contract or even SafeSnap, and then that'll be an extra level of trustlessness that you can add to governance multisigs.
Crypto Texan:
Interesting. Well, we'll change gears here away from those topics. You were speaking about the curve wars earlier. I've also noticed that Alchemix has a relationship now with a Tokemak. So I guess you all are involved in the curve wars too. Is that fair to say?
Scoopy Trooples:
Well, that's the Tokemak wars, man. That's a different battlefield.
Crypto Texan:
Yes, that is the Tokemak wars. Yes. Can you explain what that is?
Scoopy Trooples:
Okay. So, Tokemak is a protocol that aims to be a decentralized market maker. So right now for indexes, their automatic market makers, you have to put in two sides of collateral and Uniswap, equally distributed, so 50-50 ETH and something else, for example. And then it uses a very, very simple algorithm to provide liquidity and conduct trades and everything. Whereas, Tokemak is trying to abstract all that away for the end user. So you would just deposit whatever coin that you have. It could be ETH, they have a bunch of different stable coins, including alUSD. They have a bunch of other DeFi tokens Alchemix, FRAX, Synthetix, Sushi, and a bunch of others as well. And so you would deposit any of those assets single sided into Tokemak. Then Tokemak has integrations into multiple different DEXs in DeFi, including Curve, Uniswap v2, SushiSwap, Balancer and I think they're going to have 0x soon and the list is only going to grow and grow and grow.
Scoopy Trooples:
Then basically, you have all these different pools with all these different tokens that are deposited into them. Then the token holders can then determine where these go, what DEXs that these assets go into. So if a lot of people voted for Alchemix to be on let's say Balancer they would pair ALCX with ETH on Balancer and then supply liquidity because they have both ALCX and ETH. So it basically abstracts everything away and then also since like, TOKE is very much similar to ve-curve or CVX in the way that it can direct emissions. So, this has two facets to it. One is that if you stake your TOKE on one of these reactors one of these pools of capital, that boosts the rewards, the TOKE rewards for depositing. So if I deposit ALCX then I can earn TOKE. And the more TOKE that votes for ALCX, the more TOKE you get per ALCX that is deposited into Tokemak. And the second layer of it is that the TOKE that's voted for there can actually direct which DEXs it goes to.
Scoopy Trooples:
So that way, they can direct liquidity. And they have sort of like this overflow pool as well. So when you're adding liquidity to a protocol and stuff like that, there is kind of like a Goldilocks zone of the right amount of liquidity. If you have too little, then the trades are going to suffer too much suffered slippage from illiquidity, and if there's too much liquidity, then there's not going to be any volatility or price action and then that's going to be very unattractive to traders. So you have to get the sweet spot where there's enough liquidity that can facilitate trades of all sizes but also allow for there to be some volatility as well.
Scoopy Trooples:
So it's important not to over or under incentivize. So they had these kind of overflow pools so there's like when you deposit ALCX you get a receipt token back called tALCX, and it takes one week to unstake from Tokemak with the T asset. But they're going to have curve pools that are stable with the canonical asset, and then the T assets, for example, tALCX, ALCX on curve. So that is going to help people get in and out of the T tokens faster and make them more composable. But at the same time, if too much liquidity is getting directed to SushiSwap, or Uniswap, or the other DEXs and stuff like that, you can actually vote to put it into this kind of overflow pool, which then kind of sidelines it but in a way without any potential for a permanent loss. So I think it's pretty cool in that regard.
Crypto Texan:
Yes, it sounds like you're being very strategic about partnerships in how you utilize your treasury as well. What does the treasury makeup look like of Alchemix and how diversified is the treasury right now?
Scoopy Trooples:
It's getting more and more diversified by the day. So let me take a look at Zapper real quick. And I'll look at our operational. So we have like a big treasure trove of ALCX tokens that the DAO controls, and those are largely out of circulation. At the moment, they're basically only used to facilitate external farms. But even then that amount in the treasury gets replenished through our own staking contract that we have because if we're going to say, "We need 2000 ALCX to go to the SushiSwap Onsen and pool, basically, we're going to make it so that we will get 2000 ALCX and rewards for that period from our other staking contract and that will go to replenish the DAO. So we have ALCX in there and quite a bit. A lot of that's reserved for like bug bounties and also it could be for future ecosystem development stuff. But aside from that, we've been very actively trying to acquire protocol owned liquidity and other assets and diversifying our treasury.
Scoopy Trooples:
So it's not just ALCX. Let me take a look at this. So we have about 180,000 CVX tokens, which is roughly $5 million at this point, and CVX helps us direct liquidity to get rewards on various curve pools that we have. We have 130,000 TOKE tokens, so that's roughly around $5 million, and that helps us direct liquidity on Tokemak. We have a decent amounts of CVX curve because we've had LP in Convex for a while. So our LP positions in there are alUSD3 curve and the alETH factory pool as well. And we have between those two around $9 million in liquidity that is vertical owned and staking in Convex. Then we also have our own pool too like ETH, Alchemix, SushiSwap, and we own around four and a half million dollars of that LP, which is roughly I think, 6% or 7% of our entire SushiSwap market. So we've been diversifying quite a bit and that's helping our bottom line quite a bit as well. But also more strategically, is the acquisition of CVX and TOKE because that will ultimately allow us to maintain or grow liquidity in the face of our dis-inflationary emissions.
Crypto Texan:
It sounds like y'all are one of the more diversified treasuries that I've come across just talking on this show. I don't know, I think that says a lot just about the protocol as a going concern, and just the stability that you can provide into the future. I know we got started a little late. Did you have a hard stop at the hour or can you go for like one or two more questions?
Scoopy Trooples:
I'm fine, we're good.
Crypto Texan:
Okay. Well, so my next question, I guess, related to the treasury is what other protocol specific revenue drivers does Alchemix have? How does the protocol specifically drive revenue into the treasury?
Scoopy Trooples:
We have two ways right now. We have a third I'll talk about in a second. So first is whenever there is a yield harvest that goes on in the Alchemix system which is used for like debt repayments, 10% of that is taxed by the protocol and that goes towards protocol revenue. The majority of that is used to... Not the majority but about half of that is used for operational things like paying some contractors, audit costs, and infrastructure costs and stuff like that. And then the rest that we have that's like kind of surplus that we just roll that over into our protocol and liquidity and add LP to our pools because we get Dai and we get ETH, so we just throw that into our LP so we can increase the depth and then farm with it so we can have those be productive.
Scoopy Trooples:
So that's one area that we're earning. The other one is Olympus Pro, where we are selling ALCX bonds in order to raise different funds. That's how we're getting our SushiSwap liquidity. We have a modest amount of Dai and ETH that we are acquiring that way to add liquidity for our alUSD and our ETH products. And then we are aggressively acquiring CVX this way, and we just started trying to get some TOKE this way as well. So that's how we're mainly diversifying our treasury, instead of actually just like selling ALCX on the open market. I think that might be really spooky and also it would have to be done in big chunks, whereas Olympus Pro is like a very slow drip and it also presents a lot of opportunities for people who are aligned in our ecosystem.
Scoopy Trooples:
So we like Olympus Pro for those reasons. And as far as TOKE goes, when we got our pair reactor with Tokemak, we did a $3 million DAO token swap. And since then, we've been using Tokemak and directing our liquidity and sticking with it. Our treasury also deposited ALCX into Tokemak, so we hold some tALCX. We have a tALCX staking pool on Alchemix where normally if you hold tALCX, you would get TOKE rewards, but we worked it out with Tokemak where if somebody deposits the tALCX into our staking contract, that our DAO will end up getting that TOKE rewards and in exchange stakers will get more ALCX. We've been able to amass a lot of Tokemak because of these efforts.
Crypto Texan:
Yes, absolutely. From a governance standpoint, I think I was reading that y'all are going to kind of switch up the tokenomics a little bit. Are y'all gonna implement a like a “ve” Alchemix token? How does governance work and how do you see that changing in the future?
Scoopy Trooples:
Right now, governance is done through snapshot and multi Sig, and basically any kind of ALCX in your wallet, or in a staking contracts, or in the LPs, all count towards governance. So we have different scripts that calculate how much ALCX you have in various places, and that's your voting total. Going forward, we will have a more full fledged DAO with on chain governance and all that fun stuff. And we're more or less done our specification for the DAO now and development is underway in earnest. And, yes, we're gonna have a modified ve-curve, tokenomics system. I don't want to get into all of the details, but it's going to address like the one concern that I have or at least most of the concerns I have about ve-curve and the V tokenomics system. Which is kind of like making somebody a prisoner.
Scoopy Trooples:
I really hate that, like, you have to lock for four years. And it gets more and more painful as you're investing continues in the ve-curve system. Because your voting power goes down linearly over time, and then also your rewards and other things like that. So once you're in, it's very hard to stomach through the process of getting out, because there's so much lost opportunity cost in the process. So I really don't like that about it. So in order to rectify that, there are two things that we're going to do in Alchemix. One is kind of taking a page from Andres book and turn those into NF T positions. So, people can transfer their V power to other people through swapping NFTs. And then the other one is a rage quit function where you can exit at any time and take a penalty based on how much time you have left locked for your V tokens and then whatever penalty is there, that will then get fed to the other V token holders.
Crypto Texan:
Okay, interesting. The index Coop we've been playing around with different types of governance ideas and which one works best for our DAO and yes, it's interesting to hear y'all’s strategy there and kind of the process pros and cons, which you think of all those different types of governance strategies.
Scoopy Trooples:
Yes, I think the gauge system though, is probably the most brilliant of it all. And I understand that the need to have like locked tokens to align incentives is there as well. We're actually planning to have two gauges in Alchemix. One for directing liquidity and like emissions and stuff, and then the other one would be for directing boosted yield. So right now in Alchemix, our transmitter module has close to 200 million Dai in it and that's all in yearn. And then all the interest earned from that Peg stability module is actually used to boost our users yield for their Dai deposits in Alchemix. So that's why at yearn right now, for a Dai it says it's like 3% on their website, when you go to Alchemix, it's like I think six or 7%, is because we are able to boost the yield because of our additional principal in the transmitter. In version two, we're going to be upgrading the transmitter quite a bit. Right now, it only deploys this yearn strategy and it's kind of dumb.
Scoopy Trooples:
It makes money for the protocol and increases like the yield for users, but it doesn't always align well with us and what we want to do. So we're actually going to be kind of borrowing some ideas from FRAX and make sort of like a pseudo-AMO using our Peg stability module, or at least the bounce in it. And that will basically allow us to take that 190 million Dai and just put it into our main liquidity pool single sided, because you can do single side deposits on Curve. if we do that, then the pool is going to be very heavy Dai, USDC, USDT, and very light alUSD which will create a premium, and then that'll drive a lot of TVL to Alchemix just to try to arb that away. So that's certainly good. And then when we have this, if alUSD starts slipping and it's Peg and since we own so much of the LP, we can just single site withdraw alUSD from there to balance it.
Scoopy Trooples:
So it's going to be a big enhancement. And furthermore, if we have all that LP, if we put in our transmitter balances in there, we would own literally like half of the LP for it. And then we could put that in Convex, and then use that to acquire more Convex as a protocol. Then we can take a cut or take some amount of CVX and Curve that we get from farming it and use that for boosted yield in our system. Since version two is going to have multi collateral multi strategy we can do is boost individual strategies with a gauge using this extra yield from this transmitter strategy. And so that'll be really cool. So imagine you can get like an extra 5% on your deposits.
Scoopy Trooples:
If somebody get max vote, so you get the max allocation on there, and then that's going to be really attractive I think for especially yield aggregators and other protocols that have ALCX, because then they're going to be able to have say in how much rewards get allocated to their platform, essentially. And that could be a way for them to boost their own TVL. you have choices, and one of them gets all the boosted yield and the other ones don't, that one with the boosted deal is going to be a lot more attractive.
Crypto Texan:
It really just fascinates me how sophisticated some of these treasury management strategies are developing in the DeFi world. I feel you see this more in the quote unquote, DeFi 2.0 protocols, than you do I guess in the blue chip, or the OG DeFi 1.0 protocols? Do you have any theory as to why that might be?
Scoopy Trooples:
I think, a lot of these like, the blue chip and stuff like that, they've kind of been grandfathered into a lot of different things. For example, Dai, they don't have liquidity incentives for Dai, and yet it's super liquid. And that's because Curve made the three Curve token. So it's Dai, USDC, USDT, and then all these other protocols who want to establish pegs for their stable coins use three curve as like and curve as a proxy in order to do that. In the process, they're giving tons of liquidity to Tether, to USDC and to Dai and incentivizing that. So they have that, we were early, a lot of them did ICOs, so they also have flushed treasuries already from when they got all their ETH at like $100 back in 2017.
Scoopy Trooples:
So, you look at something like Gnosis for example, they have a bigger treasury than Olympus DAO, but their market cap is tiny compared to their treasury and stuff like that. So, what need do they have to be more efficient with their capital, right? Whereas I think with these new protocols, since we're not getting these advantages of being grandfathered in, and kind of the benefit of the doubt and stuff like that, we have to be very much more cognizant of the sustainability of the protocols. It kind of dawned on me last summer that if Alchemix is going to continue at its current rate, that liquidity would not be sustainable. It's because of mercenary farmers and things like that.
Scoopy Trooples:
And so that's why we started moving towards getting these kind of liquidity as a service tokens like Tokemak and CVX, E curve, and also trying to acquire protocol own liquidity for the protocol as well. And also now this new AMO strategy that we are developing. We don't want to build some like flash in the pan, this is good for like a year or two, and then it's time to dump it and move on to the new protocol type of thing. We want to hold it so Alchemix is going to be relevant and a player for well over a decade, if not longer. And in order to do that, we had to really address the sustainability problem of veal farming. So that's why we're going the route that we're going as far as being aggressive in acquiring protocol and liquidity.
Crypto Texan:
Well, you've kind of painted that in a different color that I haven't really thought about it before, and that makes a lot of sense. So Scoopy, I've got one more question for you and then I'll let you go. We ask this of pretty much everybody that comes on the show. What other projects are you looking at right now that maybe you haven't mentioned yet in this conversation that's really catching your eye lately?
Scoopy Trooples:
Let's see. I mean, I'll try to show something new, I guess. You know, I think everyone knows I'm pretty partial to the Curve and Tokemak ecosystems. But there's a new lending protocol that's going to be coming out, slash stable coin protocol. It's called Silo. I think that's going to be something that's going to be pretty cool. I think that's being built on Arbitrum if I'm not mistaken. They're kind of similar to what Rari Fuse is doing. It's like a permissionless lending protocol. I think that's really cool. And there's one that I really like, it's very unknown, very little known is called Babylon Finance. Basically, it's like a build your own index or yield aggregator application.
Scoopy Trooples:
So you can select what tokens go in and what strategies go in. Then, basically make your own, yearn essentially, or yearn pool. And it can be something stable like only number go up assets, or it can be like an index something more aligned with what you guys are doing. But then it's completely made by their own users and stuff like that. So I think that's really cool. I really like permissionless systems at the end of the day, where people can use it as a design space to build on or do their own thing on it. And that's also why I like Rari Fuse a lot as well.
Crypto Texan:
Yes, we like the Rari guys quite a bit too. That's another really solid protocol. Well, Scoopy, thanks for the alpha and thanks for coming on the show today. Everyone in the audience who's listening live, thank you for listening live. This is being recorded. So we'll get this out and published in about a week. Scoopy, final word. Where can people go to find out more about you and Alchemix?
Scoopy Trooples:
Yes, so you can find me on Twitter, Scoopy Trooples. That's S-C-U-P-Y T-R-O-O-P-L-E-S. Scupy Trooples. I hang out on Discord in the Alchemix Discord quite a bit too. You can go to the Alchemix Discord. You can find the Alchemix Twitter and then there's a Discord link there or website and join our community there if you are interested in using Alchemix or trying out v2 when it comes out very soon and you want to learn more then yes, please come to our Discord. We have tons of very helpful people who will help you learn anything that you need to know to get started.
Crypto Texan:
Awesome. Well, Scoopy, thanks again for being on the show out here for conversations with the Coop and the Index Coop Discord, and I'll see you out there on Twitter. Thanks again.
Scoopy Trooples:
Thanks for having me.
Host: @Crypto_Texan
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Conversations with the Coop - Scoopy Trooples - Alchemix