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DeFi lender Alchemix approves ALCX token buyback plan

The DAO behind crypto lending protocol Alchemix Finance on Monday approved a proposal to divert some of the cash bolstering its treasury and yield farming operations into a token buyback program for its native ALCX.

Alchemix issues so-called “self-paying loans” to users who deposit crypto collateral against “alAssets” to be traded primarily along with their underlying asset. The protocol states that protecting the peg is the top priority; it feels the pain when its synthetic assets falter, as they did during the crypto market turmoil of late 2022.

That has prompted Alchemix, which had its heyday in 2021, to look for short-term solutions that could help it attract more users and increase deposits. Pseudonymous co-founder Scoopy Trooples’ proposal seeks to remedy this by earmarking some of Alchemix’s long-term capital for other uses.

The newly adopted governance proposal aims to strengthen alAssets by directing Alchemix to spend a third of its yield farming revenue on buying ALCX tokens. He envisions using these tokens to increase Alchemix’s bribery power in DeFi yield markets.

“For every dollar we spend on ALCX bribes for the Elixir AMO LP pools, it returns approximately 15% more than we invested,” reads the proposal, authored by Scoopy. “It turned our biggest expense into a huge revenue driver for the protocol.”

Scoopy’s proposal states that this setup will boost alAssets by making it more profitable for traders to deposit into Alchemix-connected liquidity pools, prompting more traders to do so. AMOs, or Algorithmic Market Operators, are themselves price support mechanisms from a previous protocol upgrade.

It would also increase buying pressure on ALCX, the proposal said. ALCX was trading around $20.30 at press time. It is up nearly 50% in 2023 amid the crypto market rally, but remains far from its all-time highs. The total value of Alchemix is ​​$57 million per DeFi Llama.

If all goes according to plan, the proposal will see an increase in Alchemix’s CRV and CVX revenue generated by its alAsset trading pools, currently estimated at around $300,000 per month. These proceeds will partially fund the new buyback and bribery program. Previously, Alchemix sent half of its “crop” into its treasury and put half into Curve and Convex, but now those values ​​drop to a third.

Scoopy’s proposal suggested that the new model should generate enough revenue to “cover all expenses and leave the treasury a moderate surplus.” The treasury currently has $1 million in stablecoins and $2 million in ether against an annual burn of up to $1.2 million.

After a three-day voting period, the proposal passed Monday with 81 wallets participating with their governance tokens. Eighty-one percent of the ALCX who voted voted in favor of the proposal and 18 percent abstained, with only a fraction against.

Scoopy did not respond to a request for comment.

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