Alchemix lets you take out loans against Ethereum and/or DAI that repay themselves over time. Using synthetic tokens native to the protocol & backed by future yield, users can deposit ETH or DAI to mint alETH or alUSD, which can be borrowed and used however you want.
How do the loans repay themselves? When you deposit collateral into Alchemix, it starts generating yield immediately from Yearn Finance vaults. The yield earned on your collateral is then used to pay off the loan you took out.
While other platforms like Compound or Aave allow you to lend/borrow crypto, Alchemix sets itself apart by paying back your loan for you. This allows you to "set it and forget it" and never worry about liquidation.
Let's dig deeper on how this works.
The Alchemix dApp has 4 main parts:
- Vaults
- Transmuter
- Farming
- Treasury
For the sake of this guide, we'll discuss the basics of how to mint + borrow alETH. After minting alETH, you can swap it for other tokens, or stake it in a liquidity pool.
Step 1: Connect your ETH wallet by pressing the connect button in the top right corner of the Alchemix dApp.
You can connect any WalletConnect compatible wallet, or use the MetaMask Chrome extension (recommended) to quickly sign in.
Step 2: Once your wallet is connected, click the Vault tab in the top navigation bar, and select ETH from the USD/ETH slider.
Step 3: Deposit ETH into the Vault using the Deposit tab.
Type in the amount of ETH you want to deposit, or use the % buttons to deposit a certain % of the total amount of ETH in your wallet.
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Your "wallet balance" should show the total amount of ETH in your wallet.
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Your "collateral balance" should show the total amount of ETH you've deposited into the Alchemix smart contract, which will be used as collateral for the loans you take out.
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"Available to withdraw" shows the amount of ETH you can withdraw while still maintaining a <25% loan to value ratio.
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"ETH APY" shows the Annual Percentage Yield your deposited ETH will earn via yearn.finance vaults. You don't have to do anything to begin earning this APY — Alchemix will take care of it for you. The yield generated from these vaults will then be harvested & used to pay down the global debt in the Alchemix system, paying back everyone's loans slowly but surely.
Step 4: Borrow alETH using the Borrow tab.
You're able to borrow up to 25% of your deposited ETH in a synthetic ETH token called alETH. For every bit of ETH you want to borrow, an equal amount of alETH will be automatically minted.
Just as you deposited ETH into the Alchemix vault in the Deposit tab, type in the amount of alETH you want to mint/borrow in the Borrow tab, or use the % buttons.
This alETH can then be swapped for other tokens or staked in various Alchemix related liquidity pools to earn extra yield.
Congratulations! You've officially learned to mint & borrow alETH using Alchemix.
If you have any questions about this guide, feel free to reach out directly on Twitter @NotZachDavidson.