Proposal

This proposal seeks to define a framework for Alchemix to ensure: The treasury is adequately funded each quarter Effective ALCX emissions are in line with expected ALCX emissions (ie, limit additional ALCX spent by the treasury) Define priorities for excess revenue from the AMOs and the treasury, after above needs are met. Allow for yield farming of the treasury at the discretion of the multisig, including utilizing Gauntlet’s Aera product.

This proposal also details how the framework will be executed.

Context

Alchemix currently earns revenue primarily from three sources: The Elixir AMOs, the 10% fee on all yield, and treasury yield-farming positions. The earnings of the Elixir AMO, and some treasury positions, are created by voting with treasury positions (such as sdCRV) and ALCX emissions used as vote incentives. Much of the value of the spent ALCX is recouped through CRV, CVX, FXS, and other emissions. However, the net result is that the amount of ALCX in the treasury is depleting over time, with about a 1.5-year runway.

Additionally, the treasury currently operates on a budget of 450k per quarter as defined in (AIP-450)[https://snapshot.org/#/alchemixstakers.eth/proposal/0x946608f1c5b3046fb412cdbb3e3a298a500a30db98694274e30ae559438c9272]. The baseline projected budget is much lower, at ~300k/quarter, with the 450k budget typically only being met when audits and audit expenses are necessary.

Lastly, Alchemix intends to pay veALCX lockers for locking ALCX/ETH balancer liquidity, which will require a portion of revenue. Given the recent delay of veALCX, this mechanism will be addressed in a future proposal.

Framework for Revenue

The following framework applies to weekly AMO revenue: If treasury stablecoins + ETH alone are < $2m, fund treasury with up to $35k in stables. Note this target excludes protocol owned alAsset liquidity. Buyback all ALCX from the treasury that are used for vote incentives, minus 2200 ALCX of weekly emissions Excess revenue will be used to buy into protocoled-owned alAsset liquidity, which will be built up and eventually be distributed as veALCX revenue.

The following framework applies to weekly treasury revenue (using yield from treasury assets): If treasury stablecoins < $2m AND #1 above was not completed, fund treasury with up to $35k in stables (including amount from #1 above) Remaining farmed assets shall be used to accumulate liquidity-driving assets, stablecoins, and ETH, at the discretion of the multisig. (focus on stablecoins/eth when big audits or other expenses are coming up, focus on liquidity driving assets otherwise) Assets held in the treasury may be deposited in DeFi strategies to earn yield at the discretion of the mulsitig, including Gauntlet’s Aera product.

In all scenarios where claiming revenue instead of locking would require a significant penalty or forgo significant rewards, the multisig may opt to relock instead of following these procedures. An example of such revenue is OP rewards from locking into veVELO.

Gauntlet Aera

The multisig will be running two trial vaults with Gauntlet’s Aera product, which automatically manages funds in a non-custodial manner. This management includes automatically shifting eth/stables to the highest-yielding whitelisted strategies, leveraging stETH in AAVE for additional yield, and balancing yield into ETH accumulation. Aera is a means by which custody of the treasury could potentially be handed over to on-chain governance while still allowing for active management. It also allows for higher yield without requiring the multisig to frequently rebalance manually, which will ultimately extend Alchemix’s runway. More information is available in this proposal from Aera.

Framework for ALCX used for external Vote Incentives

ALCX vote incentive quantities will be modified each epoch through the following workflow.

If alAsset is at a price where there is demand for self-repaying loans (defined by growth in loans over last month OR alAsset price above 0.99) AND the AMO earned more in revenue than the value of ALCX used to incentivize votes in the prior epoch, and there are no further significant ecosystem changes -> vote incentives will remain as is or can increase up to 10%. If the alAsset is at a price where there is no demand for self-repaying loans, the AMO earned more in revenue than the value of ALCX used to incentivize votes in the prior epoch -> Vote incentives will remain as is or increase up to 10%, and the AMO will do a single-sided withdrawal. If the alAsset is at a price where there is demand for self-repaying loans, AND the AMO did not earn more in revenue than the value of ALCX used to incentivize votes in the prior epoch -> Vote incentives shall be decreased by at least 5%. If the alAsset is at a price where there is no demand for self-repaying loans, AND the AMO did not earn more in revenue than the value of ALCX used to incentivize votes in the prior epoch -> Vote incentives shall be decreased by at least 5%, and the AMO will do a single-sided withdrawal.

The following restrictions apply: The AMO shall never withdraw if it owns less than 50% of the liquidity pool. To limit the negative effects of miscalculations, the absolute maximum ALCX that can be used from the treasury for all liquidity in all pools on all chains for one week of vote incentives is 10,000 ALCX.

Implementation

In the short term, this framework will begin to be manually implemented. First and foremost, ALCX buybacks will begin based on AMO revenue. It is expected that given the operational intensity of the framework, operations are batched such that actions are carried out at least every month, based on the month's results as a whole.

Note that constantly changing prices and vote incentive values in the market will mean this framework will be somewhat subjective based on how values are calculated. That is OK - the intent is for this to be a rough framework to ensure Alchemix is sustainable in terms of ALCX in the treasury and tier-1 asset treasury runway.

Various tools will be developed to assist in the implementation of this framework. Firstly, an external team has already made significant progress on a dashboard used to harvest AMOs into assets as specified by this framework. Secondly, a future dashboard will be built to assist the multisig in the determination of ALCX vote incentives each epoch.

Voting

For, Against, or Abstain the above framework