Bankless - AMA with Scoopy Trooples of Alchemix

Episode Date: April 29, 2021

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Hey, Bankless Nation. Welcome to this community. Ask Me Anything. Today we have on the show Scoopy Troops of the Alchemics Protocol. Alchemics is a brand new application just two months old, two months old as of the day of recording. And it's already harnessed over a billion dollars locked in his application and has really paved a new field of innovation when it comes to how to get credit and yield in Ethereum and DeFi. And it's got some unique properties that really are just a completely brand new money Lego to add to the overall Ethereum stack that is being built here. We actually lost the first part of the stream, which is why we are doing a little bit of a different introduction here. And so we are actually going to hop into the middle of the introduction with me and Ryan here in a second because we lost

the first part of the interview. And in that first part of the interview, we kind of explained what Alchemics is as a protocol. And really what it does is it allows you to deposit stable coins and then receive a payment up front on the future yield of those stable coins. And so it is a way to get more dollar exposure with dollar collateral.

But also, Scoopy leaks some alpha here first and for bankless listeners before everyone else further on in the podcast. that talks about Alchemics v2 and some unlocked features coming in Alchemics v2. So saving the alpha for the bankless nation. So without further ado, let's go into the second half of the introduction with me and Ryan. There you go. All right, guys.

I guess a few other short facts, and then we'll get the sponsors. We'll get into the show. So I mentioned that this protocol Alchemics has accumulated a massive amount of value over the last two months. So a billion in value locked. There's over 400 million in liquidity. We put out a tactic about this yesterday. So a tactic on the bankless newsletter is kind of a how-to. And we titled this, how to take out a self-repaying loan, because that's what this actually is.

And what's exciting, I think, to David and I about this project is it feels very much like first principles, defy. So a lot of defy to date, as we've said before on the bankless, has been about, about speed running the traditional financial system, as we said. So we're building out stuff that we already have in traditional finance and credit, lending, collateral-backed loans. All of that is super cool and awesome. But I feel like Alchemics is a first principles defy money Lego. By that, I mean, it's not skemorphic. It's not like when we created the first websites on the internet and they looked a lot like analog representations, like a newspaper website would look literally like a newspaper if you went back in time to 1994. Now we're starting to actually flex the programable money

platform for what it's good at. And we've created this really cool thing, a self-paying loan that time travels. It takes yield from the future and transports it to the present. I actually didn't know how any of this worked. David, you were kind enough to kind of explain it to me. There's so much going on in defy 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. 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

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And if you trade more than $100 within the first 30 days after sign up, you'll be gifted a free $15 Bitcoin bonus. Check them out at Gemini.com slash go bankless. All right, guys, we are here with Scoopy Truples, 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 Trooples. 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, you know, 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 Trooples is as the pseudo-anonymous Twitter engager that turned to, to Defi Platform Builder. And so I actually kind of want to start with that. Scoopy, what was the DeFi bear market like for you as a pseudo-anonymous person? And then where did the original inspiration for Alchemics come about from? Well, I got into crypto like 2016 with Bitcoin and then Ethereum and then a million and one

ICOs and shit points 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 holding it down 95% or something. Yeah, actually did buy the dip a bunch around $100. So that was very nice. And at the time, in early 2018, I was experimenting with different D-Apps. At the time, I was just doing just purely degenerate defy.

Not even really defy. They weren't even defy apps. It was just, you know, money games. One of them that I really liked and that kind of inspired me to become a dev was FOMO 3D. I remember FOMO 3D. Yeah. That one was, I thought it was just like, it kind of blew my mind to like what was possible 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 do stuff. Like I was following MakerDAO a lot at the time. I was watching or listening to podcasts, you know, avidly at that time.

Shout out to Epicenter, Epicenter podcast. They were one of the big ones I relied on early to learn about, you know, projects on a more technical level. And I learned about MakerDAO through them. And, you know, so I was like one of the early CDP holders. I think my first, my first number was 156 was, I was the CDP. That's early. Yeah, I got in very early.

It was very painful having to transfer ETH to Weith. into Pith and putting that into Vicar. It took like five or six transactions. And like, do you remember that old interface? Scooping? Like, how janky it was? That took me like a good like day or two just to find out how to do a deposit into it. So 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 and Heath would die as Heath was dying in 2018. and I just, you know, double 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 so 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. No way. Yeah. So crypto and Ethereum is your very first, like, actual coding programming. Yeah. I first I learned web development because they always told like they said that you know solidity is similar to JavaScript. Yep. So I did web development, got pretty good at that, started getting some jobs and some gigs doing Web2 development using React.

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, alchemics. He approached me in June of 2020. He's 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 DFI app. Back then, we were called cheesefi. And worked kind of similarly, but not nearly as good as alchemics. And then so I was building out UIs with him, learning some more solidity. I didn't actually write any of the solidity, but I feel like it's kind of too high stakes for someone with, you know, my experience level to be making that stuff just yet. 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. And, you know, this was, it was right around like the start of DFI summer is when we started building this out. And, put that in perspective, there was no yearn. We were actually going to build it on top of idle finance. Right. You know, which, you know, was an early yield aggregator. And then after we went through several iterations, we finally landed on alchemics.

Cheese five wouldn't have worked because we were going to use AMMs to help deliver the future yield. But then we learned about MEV and sandwich attacks and everything like that. We're like, oh, no, this could potentially not work because of this. because bots could extract all the revenue for the protocol, you know, and basically damage it. So after a number of iterations, we finally got to the alchemic system that we have now. So I want to get into specifically alchemics,

and of course that's the whole entire AMA, and I do want to start 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 podcast listeners, we are seeing a witch with spectacles and a purple witch hat, and she looks like she's about to summon a spell or something.

Okay, so this is really weird. So it's always been like kind of my thing online for my avatars or handles to be like a wifu of some sort. Before I had my current one, I had this kind of like this anime character with a Wi-Fi logo on it. That was like my old avatar. And then knowing that I was making alchemics, I came across this other NFT, app called Avastars. And I saw this one, this one like which, you had like cat whiskers.

I was like, oh, she looked really cool. So I picked her up as an NFT and used that as my profile. And then one of my friends and community members in the Alchemics Discord made this piece with me as this, you know, this pretty hot wizard chick. And then there's this other poster on, on Twitter named Ratwell. And Ratwell started like started turning everyone into sofas because the other, there's another Dify user on Twitter named Mune,

who's like a Ditto, like this Pokemon character Ditto, but also, but the avatar is Ditto as a couch. And then Ratwell turned these couch characters into a meme, and that's why we see couches all over Twitter now. Right. It's because of Mune and Ratwell. Well, that's why I'm a sofa. Shout out.

Shout out, Ratwell. I've been couch-pilled and seated. All right, so, Scoopy, let's get into Alchemics. 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 alchemics do? Alchemics is a way for you to tokenize your future yield. I mean, that's the simple explanation of it.

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.5, and he has a page on it for Alchemics. 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. Instead, the interest you earn on your balance pays off any debt you have automatically. And I think that just sums it up perfectly in one paragraph about what we're all about

and what we can do. You can teleport your future yield into the present. and that, you know, while preserving your collateral, and that makes it more capital efficient. So the way I've described this to people is that you get your yield up front, right? And so you are committing a certain amount of deposits into alchemics, and those deposits are in die form. And they don't always have to be in die form. They can be in other assets, and I believe in future versions of alchemics, which is a topic we're going to get into. But you deposit your die into alchemics, and then you get the future yield payments up front.

And what that does is that locks a certain amount of dye into the Alchemics program or into the Alchemics 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. And so let's talk about why someone would want to do that. What are the use cases for getting your yield up front? Like what are people using the Alchamix protocol for today?

Yeah, so people are using it for a number of things. Some people are using it to yield farm more with it. So they're farming with their future yield. Some people are using it to Long-Eath or other coins. But more interestingly, some people are using it to finance things in their real life. The guy who you just put up his website, X-D-Fi, his dad's boat sank last year in a storm. voting accident? And he, yeah, unironically, a boating accident. And he actually deposited 50,000 dye into alchemics, minted 25,000 Al-USD, converted that to USCC, put it on Coinbase, sent it to his bank account, and then bought a boat for his dad using an alchemics loan.

Now, why wouldn't, so he deposited the die into alchemics in the first place. Why did he do that instead of just trading that die for USC? and sending that into his bank account? What's the advantage of putting the die in Alchemics first? So that $25,000 loan that he took out, with current rates right now in about two years, that would be paid off, and 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. So I actually did a little finance, analysis of this with this character named Jerry. This was actually in the in the bankless article that we we've put together and let's say Jerry has $1,000 and then his car breaks and

it costs $500 to fix his car. If he took that loan out in Al U.S.D using alchemics that you would have a fixed car and in two years later he'd have $1,000 that he could have freely, you know, access to. Whereas if he paid out of pocket with this $1,000 and he has 500 left over, and then he were to put his $500 to work in D-Fi, he would end up having less money overall than he would if he used, Alchemics. And so the way, the other way that I think about this, is that anything that you want to purchase 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 payment for the entire cost of the whole entire

thing up front. 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 Alchemics. And specifically, an Alchemics just plugs right into YERN. Earlier in this podcast, you talked about how a YERN wasn't here a year ago. we're going to use idle finance or something else. But now urine is here, and now we have this yield optimizing engine. And so really it's just Alchemics is just getting, letting you borrow money collateralized by yield from Yern, built on top of Yern.

And so if you ever want to go and buy something, but instead of making the monthly mortgage payments or monthly car payments, instead of making monthly car payments, alchemics can pay you monthly yield payments to your loan and you already got the full value of the loan up front. 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 up front. The only catch is that you have to have the full value of what you are trying to buy up front in die terms. And so that you have to, you do have to commit to a certain amount of dye to begin with, right? I don't have any die because if I did have dye, I would just sell it for ether. But if I wanted to buy something,

I could keep that die and then get a dollar loan from Alchemics so I could buy my thing up front without having like the bank own my house or the bank own my car. I can own my house or my car using Alchemics. Anything you want to add on to there? Yeah, you would have to have double the amount. Instead of like a car cost $50,000, you'd have to have $100,000 to do this. So it's a little bit capital intensive. But if you do have extra money, it's a fantastic, you know, financial tool. It promotes savings while you can also still, you know, get credit off of your savings. And I think that that's quite powerful. I know personally, I'm using it for my own budget for my house. I have a decent amount of dye. I'm trying to, I've been slowly cashing out

some of my Eath. I know sacrilege, David. Class for me. But I've been doing some of that. And then it's not all, but I still have most of my stack. But basically I put in a nice chunk of dye into alchemics. And, you know, my monthly expenses aren't much. It's maybe $3,000 at most. And so I'll just draw that much money in Al-USD, you know, then take it to my Coinbase and, you know, put into my bank account. And then at the end of the month, I have like much less debt, you know, almost zero debt.

this is cool this is like a point that you made scoopy in the in the article you wrote us which 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 50 000 in order to get a loan of 25000 dollars right and they're saying well that's not really a loan it's not and it's true it's not a credit type loan but what you're doing is you don't have to spend the 50,000 that you've worked so hard to save at all. Essentially, the $25,000 loan that you're getting with your $50,000 that you put into Elkimos,

you're taking that from future yield of WIREN that you'd receive in Defi anyway. Borrowing from the future. You're borrowing from the future. For free. Yeah, for free. The point that you made 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 U.S., which is like, yeah, how much credit can I get? How much like debt can I get? 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, 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 defy native stuff, the ability to get a self-paying loan that pulls yield from the future. Yeah, I think the closest analog in the traditional finance world is if you had an investment property, and then you had like tenants paying rent to you, and then you would take out like a home equity mortgage or a home equity line of credit. I think that would probably be the closest analog to what Alchemics offers in the traditional finance world. So, you know, your tenants will be paying off your mortgage for you and then you could use your house as collateral to, you know, borrow money.

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 Alchemics 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. You can't get liquidated. It's not built into the system. 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. Right. So let's talk about the risk. Make sure we understand it. So all of this yield, as David mentioned, is coming from places in defy like wiren, right? And, you know, W iron is doing really well from a yield perspective on stable coins. I don't know what percentage of stay, but like, say, double digits, right?

10 to 14 percent or so. So that means you can pay off a loan relatively quickly. But what happens, Scoopy, like let's talk about risk one, if defy yields evaporate for stable coins. And they go down to like, you know, 2%, 3%. Does that just lengthen the time it takes to pay off the loan? Or what's the effect of that? Yeah. So the only effect that would have is that your loan repayment time would lengthen.

What we could do to keep loan repayment times shorter is that we could adjust the collateralization ratio. So imagine instead of having to be 200%, we could change it to be like 300 or 400 percent. So it would be $400 of DAVE, you know, backing $100 worth of ALUSD. And that could be used to make the, you know, the principal higher versus the amount of debt. So that would make the loan repayment more reasonable. But I don't know if we're going to get down to three to five percent on yearn, honestly speaking. I just, I mean, I think that with the rate of innovation in defy and how, you know, the lending markets are evolving and how, you know,

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%. Right. I agree. Any time soon. What other risks do we have here? So we don't have the collateralization risk, but what else do we have here? The other risk, there's a couple other risks.

So one of them is a composability risk. We're building with urine and urine is building on top of other things. So the YV dival isn't just one strategy. I think it's eight strategies now. And some of that dye goes to pull together. Some of it goes to curve. Some of it goes to compound. Some of it goes to the iron bank.

I don't even know where all those sources of yield is from it, because they've added a few strategies since I last checked. And if any one of those sources were to be hacked, that would then trickle down to urine vault and then alchemics users. So that is one risk right there. Another risk is that right now we're only using dye as a collateral for alchemics. And so if dies peg were to break, then that would have a bad effect on alchemics as well. Version 2 will rectify that, and we're going to take basically any viable, stable coin with decent on-chain yield as a collateral type for alchemics.

So, you know, USDC, Tether, S-USD, it looks like this new liquidity protocol with their L-U-S-D is also a very very, attractive candidate. So there won't be a shortage of, you know, stable coin collaterals that we can add. So we'll be able to diversify a risk in that, in that aspect. The other risk is that, 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. Then there wouldn't be a whole lot of incentive to pull your, your tokens in curve. So then that might cause the peg to suffer. And if the peg is broken and yields on chain have gone down significantly, then the other pegging mechanism, the transmuter, might not be able to keep up and guarantee

a peg of $1 for Al-USD. In that case, Al-U-SD essentially becomes a bond, which will be able to mature to $1 over time using that yield from your. So that's the absolute worst-case scenario is things like that happening. Let's talk about that transmuter and specifically Al-USD, because that's a very critical component of the Alchemics protocol that makes everything function. So can you walk us through Al-U-S-D? ALUSD in the transmitter?

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

Then the person would then withdraw the rest of their die, then put it into the curve pool. And then they would be able to put in 50% ALUSD, 50% die into the curve pool, then farm with that. And every single time people did that. that die was going to the transmuter backing ALUSD. And what's the function of the transmuter? Why does alchemics need the transmitter to work? So the transmitter is a way to guarantee that you can always get one die for your, for one ALUSD. So in the event that the peg breaks, you could, and then alchemics becomes like a bond,

you stake your ALUSD in the transmitter. and over time that will mature, so where you can convert it completely to die one-to-one. And so that's actually the mechanism, because Al-U-S-D is a synthetic USD coin produced by Al-QMex. And the way that Al-U-S-D actually maintains its peg is by being able to be traded for one die. But there's a bottleneck, right?

There's not everyone can go and trade Al-U-S-D. 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 is smaller to wider yeah so in alchemics we say that your only debt is time so imagine you take out an alchemics 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 And so, like, even if we didn't have yield farming incentives and things like that, there would still be a nominal price for ALUSD because it would mature at at least double the rate of the year in interest because everything is a collateralized 200%.

Right. So imagine, you know, the peg breaks horribly. You can now buy ALUSD off the market for 50 cents. You know, you know, hey, in two years, this 50 cents. it's 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.

But I don't think we're going to worry about that. Our USD and the curve pool will actually be going on to curve.5, the actual official site in a few weeks, a couple weeks after our audit clears. That's our last hurdle, everything else. There's a number of requirements to get on to curve.5. and we check all of the boxes except for the audit. So once we get on there, then we'll be eligible for the gauges. So that'll be another source of on-chain yield for the ALUSD tokens, aside from ALCX tokens.

And we are working with other partners as well to make ALUSD more integrated into other defy apps to help take care of the demand side for it. So Scoopy, I just want to quickly summarize this. And I think a user interface might sort of help me explain this for folks and then fit in a question that's come in specifically about AlUSD. Do you see my screen here? Yeah. Right? So I go to the vault.

I can hit deposit. I've got some dye in my wallet. So I could deposit, we'll say, about 688 dye into the wallet. And then I'm able to get half of that as a loan, up to half of that as a loan. Is that correct? Yeah, you would be able to borrow 344 ALUSD. Okay. If you put in 688,

okay. And so I'm getting ALUSD, I'm not getting dye. And then once I have the ALUSD, then I then go to like curve and I swap it for some other stable coin. Is that what I'm doing? Yes, you can do that. Okay. All right.

So, and then let's go to the repayment process. So if I want to repay this loan, my $688 that that I put in, or actually half of that that I'm actually borrowing, I have to actually have L-U-S-D and repay that amount. And can I do that at any point in time? Yeah, you can actually repay an L-U-S-D or die. So if you click on the little box where it says L-U-S-D there, it will go to die.

Or you can do both at the same time if you hit the little plus button there. Oh, very cool. Yeah, and so you can pay with both. And what's this liquidate? Yeah, so I talked about that briefly a second ago. So you can use your dye that you have as your collateral to repay your ALUSD debt. Ah, okay, I see. In the event, you want to sort of instantly close your loan, you just take that die and repay the ALUSD debt.

Our thinking for this feature is like, what if, you know, somebody came in, borrowed ALUSD and then, you know, solve this new Andre token launch. But it turns out it actually wasn't an Andre token. And it was just something to spoofing it was Andre, and that person got rubbed and lost all their their money. Right. And then something else comes up in life. And they're like, oh, man, I really need access to this collateral.

And so, you know, instead of having to wait, 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. 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 83 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?

So that's not actually the real price of Al USD. I'm guessing they went to coin market cap or coin gecko, which is referencing this high, illiquid uniswap pool. Oh, I see. It has like $5,000 in it. So like any little buy will send the price, you know, easily fluctuated like well over a dollar or well under a dollar. The actual price of LUSD right now is, last time I checked it was 0.999 die.

One LUSD equals 0.999 die. And I think it would be one to one if it wasn't for the 0.4%. a 0.04% fee that curve charges. I see. So then can you explain a little bit, maybe you've partially explained it. I think you have, but just put a fine tip on what the currency risk is. When you have something like LUSD and you have to repay an LUSD, what sort of currency risk is somebody taking on there?

So, I mean, I think this is with any decentralized stable coin that somebody could be taking on pegging risk. So let's say that you are an LP in the curve pool. And, you know, there's just massive amounts of people selling ALUSD. And then it would cause an imbalance in the pool leading to the price of ALUSD dropping. And this would be impermanent loss, right? The cool thing about alchemics is if you were to actually take out your coins in a balanced manner, let's say you put like $100,000 into the curve pool and then it gets depagged and things like that. If you were to withdraw in a balanced manner, you would have maybe slightly less than like $100,000 in total value.

You'd be withdrawing from it. But you'd have, if you were then to put all that extra ALUSD that's allocated to you now, and then you put that in a transmuter, then you would actually come out ahead. So there would be no impermanent loss. So you just have to wait a little while to come out ahead. And so this is this feature and among other features in Alchemics is why I'm particularly interested in Alchemics, because it seems to be a very risk-managed position. Because not only do you have a natural hedge with the transmuter and exposure to Al-U-S-D, but also you never actually can really get out over your ski tips with leverage, right?

And so I'm in the middle of writing an article, which I think perhaps might come. come out of the bankless newsletter next week. We'll see. I've got to ask Lucas for permission on that one. But I illustrate like an exit strategy is what I'm calling it, where I collateralize my ether because I'm in the never-sell gang. I collateralize my ether and Maker Dow, borrow die against that ether, put that dye in Alchemix to borrow Al-U-S-D against that die, send the Al-USD into curve, swap it out for USDC, send that USB to my bank account and ball out, right? Like then 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? But the point is that if that, and that's risk because I have ether and MakerDAO and I have a loan backed against my ether. If ether gets cut in half, I have a safety net because all of the dollars. that I borrowed from MakerDAO is still in Alchemics. And so if I got out over my ski tips and I took out too much leverage,

I can just take my principle and just give it right back to MakerDAO, and Alchemics takes care of the rest. Now, if I also took out the maximum risky position in Alchemics, which I borrowed the maximum, which is 50%, then I immediately can only actually get 50% of what I borrowed from Maker Dow 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 Alchemics and the hedge against the currency risk, as well as not actually losing control of your principle, I think it's overall a very risk-managed position. And while we are in the world of Defi, we are used to just like 100x D-Gen long aping, Alchemics is actually, I feel like a sigh of relief when it comes to defy apps that actually allow people to take on reduced risk rather than more risk. Scoopy, you want to add anything to that?

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... If it's the alpha? 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-eath as well and so your cash-out strategy will be a lot easier you just put your eth into alchemics borrow al-eath and then do stuff with your al-Eath instead big fan of that yeah that's cool

because so in that model david you get to keep all of your eith it's like that that's massively more simple for an exit strategy. And 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 Alchemics and start that whole loop again. You could do that. So we're excited about that. I also notice something, I want to touch a point about what you said about kind of like risk management. Alchemics actually lets you be incredibly risky if you want to be. We're actually partnering with a newly launched at Defy 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 uniswap. And right now, ALCX is one of the supported assets in it, along with other blue chips. It's nice to be included among them. but we're going to be getting Al USD on there as well. So imagine you can fund a leverage position using debt that repays itself.

So you can go, you know, 5X leverage on, you know, some uniswap gem. And if it gets rugged or you get liquidated, oh, no big deal. You know, you're going to get your money back in two years. You get to hedge your downside. You get to, you get to gamble, I guess, on uniswob gems with the yield. that you've just brought forward into the future. Yeah, you can do that with 5X leverage using margin swap. So I think that's something that's been very appealing.

Wow. They're a new DAP, though, so I do want to give them a shout out. And I think they're very much an under-the-radar gem at this point. But I'm excited for what they're doing. Well, Scroby, 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 Alchamix V2 in more detail. and the future assets being added to alchemics as well. And there are even more mental models I want to share about alchemics

because this thing is just a mental model, just treasure trove. There's so many things to talk about. 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. Balancer is Defi's most powerful automated market maker. Typical AMMs just have two tokens inside of one liquidity pool, which can lead to fractured liquidity across the many pairs in DeFi.

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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. 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. For version two, we're going to be adding more collateral types. RATs that we're going to be launching Al-Eath, possibly sometime in May. Version 2 will also will be bringing AL-BTC to the table, which will take, you know, wrap Bitcoin as its collateral type.

But version 2, let me get into that, is a massive upgrade over version 1. One of the key things that we have in version 2 is the fact that AL assets will become multi-collateral. So Al-USD right now is only backed by dye. Version 2 will be backed by any viable stable coin. So, you know, USDC, USDT, et cetera. And the cool thing is, is that, you know, when you are creating your position in Alchemics, you can say, hey, I want to deposit, 10,000 die, 5,000 S-USD, 20,000 USDC, 5,000 Tether. And then it'll basically just add up all of that total.

in aggregate forms, let's say you have 50,000 of those tokens total. Then you can borrow 25,000 LUSD. So you can mix and match. We will be... Scoopy, can you mix and match not only stable coins, but also like other assets, crypto assets, like ETH and Bitcoin in that mix? So the way it's going to work is still going to be mirrored, just like in Alchemics version one.

So stable coins will mint Al U.S.D. And then Eith and its flavors will mint Al-Eth. and Bitcoin in its flavors will mint out Bitcoin. Got it. And the cool thing here is that you can do a collateral swap. So let's say that you have like 20,000 collateral in dye. You say, you know what? I don't want to use die right now or the yields on USDC are better.

So I'm just going to switch my collateral over to USDC instead of dye 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. This is insane. This is so cool. 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 alchemyx USD position, while the model is still the same with an ether or BTC position, the use cases could be incredibly different. And then it also allows people to just kind of pick and choose the collateral of their choice.

It kind of feels like a multi-collateral alchemics, if you will, whereas as MakerDAO started as just ether and then moved into many things. things, Alchemics is starting off with just die and then is moving into many, many collateral types. What would you say it would be the lowest hanging fruit use cases for something like Al BTC or Al Ether? Well, let me get to that in a second. So back with the multi-collateral ALUSD or just multi-collateral in general, 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 that comes out and it offers like 40% interest. You could say, hey, I want to put my

collateral into that. You know, so you can not only balance the collateral types, but also there are sources of yield. So you can mix and match your own risk profile in the system. So there's that. So for Al-BTC and Al-Eath, I think that they are going to become, you know, very similar to, you know, something like a MakerDAO where you can use it to get leverage, you know, 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 Heath Bowl. 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 L-Eath and then go to an options platform, you know, something like Premia or Potion or Hedgek or something like that.

And then you could hedge ETH there. So, you know, if ETH goes down in price, then you'll be protected by buying that option. I think that's a big one right there. Or even just shorting the market in general, you think like, hey, it's time to cash out. ETH is $10,000. 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 Eath 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. 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. The other cool thing about V2 is that it's going to be highly composable. We're going to make it so that it's going to be really easy to integrate alchemics into your own protocol. So, you know, imagine something like, you know, like Ruler where you could deposit, like right now in Ruler, like there's like the contracts have expiration dates. And if you don't, you know, settle your debts 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 product using Alchemics loans. They could do that. Right. Um, and then Another thing that's really exciting is imagine if Dow's build on top of alchemics. So the Dow account, like, you know, instead of putting it in a Moloch and then, you know, let's say Molo has like a million dollars and then people just, you know, slowly using that to fund whatever things that they're funding, they could then put a million dollars in to alchemics and then take a loan against it and use that to fund things for their Dell. So I think that that's also a really cool use case there for it. It allows you to preserve the treasury to venture funding to Dowell.

Treasury management, I think it's going to be a nice tool for lots of people in D5, beyond just us and our core users. I just have a curious, maybe a side question here, but have there been any use cases around like tax implications? So I have talked to token tax. Okay. About this, we've had some banter on Twitter and in DMs as well. And so when you originate the loan, that is not tax. Right. Because it's a loan. But the debt repayments would be taxable as income. Really? Because it's yield that's coming in. I was wondering if you could, now, I was wondering if they said that you could get out of that.

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? Right. We don't know. It's just, I honestly think that if you try to explain Al-Camp. to your accountant, their heads will just explode. They're like, what, what's going on? Right. But it does, 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 repaying the loan. But it's the protocol that's doing that. Be very cumbersome to have to treat each atomic, loan repayment as a as a tax event but they'll catch up sometime I'm not a lawyer but I definitely think that you could probably get away with a lot using alchemics and this is the power of defy defy provides financial tools that maybe there was something like this for the super wealthy but now it's available to to everyone everywhere and that's always what the power of defy 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 Alchemics as a brand new money Lego fitting right into the rest of this defy structure. Scoopy, I got a question I want to ask from gravity out of the YouTube. What about other flavors of ether, not just ether, or wrapped ether, but stuff like staked ether. We have a staked ether out of Lido and we have our ether coming out of a rocket pool. Could these types of interest-bearing ether units also be viable collateral inside of Alchemics? Um, it, that's a tough question. At the current moment, I don't know if our eth or, um, or Lido Eth would work because you can't actually, um, you know, get those yields from ETH2 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 some more. But right now, um, you know, Urn has ETH vaults that actually take, you know, that utilize the Lido, like the ST-Eth vault. So it's using, you know, they're on, you know, their ETH-2 yield and also Lido rewards to, and curve rewards to drive its APY. So that could be one of the vault providers that we use for it. 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 Scoopy while we're on listener questions this is another question that came in from Twitter what would prevent you this is from defy deeds what would prevent you from creating a perpetual loop of depositing some assets, say, ETH, 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, some recursive loop? Recursive loop of withdrawing more and more? Yeah, you can totally do this. It's just leveraging your position, your yield farming position in alchemics. So the idea is that you would, you know, deposit die, then mint LUSD, then sell LUSD for more dye, deposit more dye, then et cetera, et cetera, you can only go so far because it's sort of like if you, if you want to go to point A to point B and you go halfway there. And then from that point, you go halfway there. And then from that point, you go halfway there.

Just diminishing returns of doing that. Yeah. Very quickly diminishing returns. You might be able to do two or three loops before it starts to get, you know, you know, not worth it anymore. Right. And then what risk are you taking on when you do that, something like that? I mean, you're not taking on any additional risk. in doing this.

I mean, you still have the same protocol risk that any other user would have in alchemics. This loop, though, does increase your debt with each loop. So while you might have a similar debt ratio, you're not, you know, you still, you'll have more aggregate debt. So when you go to liquidate everything at the end, you need 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 the debt is completely repaid. Because then, you know, imagine you put in 100,000, and then you levered up to like 190,000. After the debt repaid, you have 190,000.

All to yourself. So, Scoopi, I want to get... It's different from like Alba, Flamora. In that respect. They do the same thing, leveraging your stables. Totally. So, Scoopie, the YouTube chat box is blowing up about the alchamix 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 the question, when token, but alchemics already has a token. And so let's talk about the role of the alchemic's token in the alchemic's application. And I'll lead in the question with saying that one of the reasons why I really like Alchemics 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 Alchamix token. So let's go into the details about the Alchemic token, its distribution, and also the current opportunities that are awaiting Alchemy's token holders. Yeah, yeah. So the Alchemics, Alchemics had a 480,000 ALCX pre-mine going to the Dow.

100,000 of that ALCX 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 in the strategic sale we did with our investors, but we still have like around 350,000 ALCX or so earmarked for the Dow. And that will be up to community discretion and how we use that. But for the time being, it's just locked funds and therefore a rainy day in case we ever need it. We, whenever we harvest yield from urine, we take a 10% cut from that. And also, urine has an affiliate program that will, they will do some profit sharing with people based on their TVL. At our current levels, we're getting 30% of the profit from urine.

So between our 10% harvest fee and the affiliate, we're pulling in around, somewhere between $10,000 and $20,000 a day in protocol fees that's going to the Treasury. And between what we've amassed from our protocol fees and from the strategic sale, the Treasury has $3.3 million in addition to all of its ALSX that it's holding. And then 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 alchemics Dow, that's going to launch shortly after V2, that's when we will turn on the profit sharing model for the alchemics token. And right now when you stake alchemics, you just get alchemics rewards.

But when the Dow happens, you'll get not only protocol fees, but you'll also get alchemics rewards on top of that as well. So, you know, we're going to pass that on to the alchemics holders. And the devs have a good amount of alchemics. 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. But that also opens up to every other ALCX holder out there is to earn like a real cash flow on it and not have to dump the token to make money with it. There's actually something that I've been playing around with as a Dowel model.

You know how earlier I was talking about how Dow's could make Dow's on top of alchemics and do their treasury manage that way? Yeah. Well, if we can grow our Treasury TVL high enough as far as like assets and eth and stable coins and Bitcoin, then we could just have the Dow be a participant in alchemics and then stream the rewards it gets via alchemics to alchemics stakers. So imagine like right now the Dow total amount of value it has, including the alchemics tokens, is somewhere around $500 million. Imagine that we could convert that all into stable coins, and then the Dow itself holds $500 million. 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 alchemics holders. It's perpetual funding using your own treasury. Yes. And then all the other. 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 alchemics, it will snowball. 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 we're 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 Yes, you get to eat your own dog food. And I could see there are a lot of Dauze with massive treasuries now. I could see them definitely being interested in something like what you're saying. It really seems like your customer base of the future is sort of DOWS, 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 very small team,

sort of came out of nowhere and grown so fast. So Alchemics is two months old. Am I getting that right? Scoopy? Yep, yep. Two months yesterday. Two months old, guys, a billion in assets locked inside of the protocol. And if I'm right, like calculation 20K per day, that's an annualized recurring revenue of 7.3 million. Like any traditional fintech startup, any startup anywhere would kill

for numbers like that 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 defy and on Ethereum Rails is absolutely staggering. You know, people kind of ask sometimes, well, aren't you concerned that the banks and maybe the regulators, but especially the banks, we'll try to shut this whole defy 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 defy actually is, it's going to have completely blown past them. So I'm just really impressed with the

speed at which you guys have created this. We've seen this before in other protocols that quickly find product market fits. So like congratulations on that. It's it's super cool to share this story to the community. But I want to ask the question, were you surprised at how fast this picked up? Yeah. I was blown away, man. Like, Like, what did you think would happen? When we launched, you know, I set my expectations low. I was like, you know, if we can hit 100 million TVL by the end of the year, that would be really cool, right? And then like a couple days after we launched, we hit 100 million TVL and I started panicking.

I'm like, what's going on? I literally had like panic attacks. I couldn't sleep because it's like, you know, we thought we were making a little boutique, you know, a D5 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. I noticed that you guys weren't there yet. It seems to be ill-fitting.

Scott, Scott, get him on it. Get him on. We're in talks. We're getting on. We are getting on. It's, you know, just the whole us not having an audit thing, you know. It's just, it's all happened so quickly. 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 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 pretty good. You know, but still they want to see that audit. They want to see that special badge. Scooby, I want to go back to the Alchemics token in the treasury just one last time. Because just to go back to the fact that Alchemics actually collects fees, which is,

relatively rare for a defy protocol we all talk about the potential to collect fees but alchemics is actually doing it um how do when you when you talked about actually paying out alchlamics 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 dye pro rata to token holders how do how do token holders actually go and claim their revenue have you thought about this um yeah so in the doubt we would just set up a reward contract in it and based on how much al-s CX that you're staking in the Dow, then you'll have a claim on, you know, the protocol revenue. And that would probably be like, you know, deposited weekly because it wouldn't make

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

Is that the model? Yeah, we're not sure if we're going to, or we're able to or if we're going to do something similar to like sushi where it turns into like its own wrap token. Some of the things that we're playing with as far as the mechanics and the doubt, makes me believe that we're not going to be able to do that because there's going to we're going to add like a security module to it very similar to Avey so stakers and the Dow 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 Dow or make that protocol whole again so there would be that also there's a really interesting conviction voting mechanism that we've we've we we've created. Do you want me to get into that? Sure. It's a bit much. It's a lot going on with it. But I think it's worth it.

Yeah. Yeah, it's something that we want to really do in this. Because right now, like in governance, everything is 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 office. 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 civil attack. So let's say I have like 10,000 tokens. I can split them up to 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. But Pickle had quadratic voting and I know that there was one incident, I think it was actually a community mod, who basically sibbled his pickle across several different accounts to influence a vote. 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 gameable. So instead we're doing something as time-based. So when you're in the doubt 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 Dow, 30 days later, you'll earn, you'll have 30 material points. And then material 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 only have a certain amount of them based on how much ALCX you have stake, you can convert those into something called a materia shard. and a material 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 Dow. Oh, wow, this is crazy. So you're making like an RPG Dow governance, like MMO, basically.

Is that right? Yeah, we want to make Dow's fun. Right. 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 whatever is going on. So we want to gamify it.

You're going to, you know, 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 system. That hopefully can add a little extra value to ALCX beyond, you know, dividends and you know, governance. Just quick question on that conviction voting.

So these materia tokens, are they not able to be bought and sold, though? Materia points are non-transferable. They won't even be a token. It will just be a value in the contract. I see. And then when you convert those to shards, shards will be tradable with anybody freely, but they cannot be used for voting. Very interesting.

That's a very interesting dynamic. Is the Alchemics community, the one like pioneering this? Are you seeing convictions voting? This is kind of my baby. This is my baby. This has been years of me thinking about DAOs and thinking about DFI and me wanting to build something I want to build. Very cool.

You've got to come back and talk to us about that once that comes to fruition. There's all sorts of interesting DAO mechanisms that need to be built rather than token weighted vote. We already have that in the traditional system. So it requires some, I think, new thinking in DFI. Yeah. So like with the conviction voting, let's say you have, you know, your 30 days empty 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 time weighted voting points to influence something. Very cool. Scoopy, as we come to a close here, is there any part of the Alchemics protocol, either current or future that we haven't touched on yet, that you think deserves some time? I didn't go through all of my things that I could leak today. Oh. We'll take more. I mean, this is another V2 thing.

I'm not going to go into much detail about this. It'll be perfect to end on. How about that? Yeah. Even with a little bit of something. So imagine, like, when you deposit into the alchemics, you then basically, have a credit line available to you. Right.

Then you can use or choose not to use, right? If you don't use it, it's 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, you know, distributed to you. But what if you could delegate your credit to someone else? Interesting. Imagine what could be built with that. Right.

Why would I want to do that, Scoopy? Well, you know, you could make money on your Al USD 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. 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 dye savings that you've saved and and you deposit that into alchemics and like you said there's alchemics 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 alchemics like 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? And so, say you put in 50,000 die, 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 principle, right? And so

that $25,000 that you spent starts to reacrue its interest rate based on the yield. And so after you just blew away $25,000, you wait a couple months, and then you have a couple more $1,000 from the yield that was generated for you. And so it actually Alchemics allows you to meter yourself with your spending based on the interest rates that it's getting for you. And so you can always- You're only spending your interest. You're only spending your interest.

And if you only spend your L-U-S-D that's being generated from your die, 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 go to your 9 to 5, you can make all your dollars. you can transfer into dye, you can put that dye more into alchemics. You can extend your credit and your rate of consumption without actually ever spending your savings. And so I think that's a nice mental model to go out on.

Scoopy, anything you want to add on to that. Yeah, I like alchemics 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 a credit card of hospital bills. you know, you could just take that through alchemics and be like, all right, in a few more years, I can get hit by another car. Boating accidents and car accidents today. Unfortunately things happening to our listeners.

Ryan, we have an answer to your question. 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 LUSD. loan and then a year or two later they could have enough for another vacation 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 defy donut in the YouTube says you can give your kids their allowance trickled to them in LUSD well there you go there you know parents out there's a good way to teach your kids DFI while teaching them personal finance responsibility

This has been an absolute pleasure. Thanks for creating something so interesting and so unique. It's been great to have you on Danglis. Oh, no, thanks for having me here. This has been a lot of fun for sure. All right, guys, it sounds like some big things are coming down the pike for Alchemics. Scoopy Trooples drop the alpha today. I've got to end with this, of course, risks and disclaimers, guys.

ETH is risky. Ethereum is risky. So are D5 protocols like Alchemics. 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.