📺 AMA with Scoopy Trooples of Alchemix

there's so much going on in d5 today sometimes you just need the 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 matched with other humans

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here on the show with us but we are showing his 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 a known physical human to to build something uh and so that's how i've known scooby trooples is as the pseudo-anonymous uh you know twitter engager that turned to d5 platform builder uh and so i actually kind of want to want to start with that uh scoopy what what was the uh the d5 bear market like for you as a pseudo-anonymous person and then

where did the original inspiration for alchemics come about from um well i i got into crypto like 2016 with bitcoin and then ethereum and then a million and one icos and ship points and everything like that just kind of like everyone else um and um i did sell a little here and there uh near the top and i was able to do pretty well for myself but not most of my stash um so i then became uh an ethereum community member

holding it down 95 or something yeah um actually did buy the dip a bunch around 100 so that was that was very nice um and at the time in early 2018 um i was experimenting with uh different d apps um at the time i was just doing just purely degenerate d5 not even really d5 they weren't even defy apps it was just you know money games uh one of them that i really liked

and that kind of inspired me to become a dev was um fomo 3d if you don't remember 3d yeah um that one was i thought it was just like it kind of blew my mind to like what was possible um 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 uh i was following uh maker dao a lot at the time um was watching or listening to to podcasts uh you know avidly at that time uh shout out to epicenter epicenter podcast uh they were one of the big ones i i relied on early to to learn about uh you know projects on a more technical level and i learned about makerdale through them um and you know so i was like one of the early

cdp holders i think my first my first number was 156 was uh i was the cdp that's early yeah i got in very early it was very painful having to transfer eath to wheath and to peace and putting that into bankruptcy it took like it took like five or six transactions and like do you remember that old interface scooping like how janky it was that that took me like a good like day or two just to find out how to do a deposit into it

so yeah it was painful and dye 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 eth would die as heath was dying in 2018 and i just you know doubled 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 um so after i was inspired by fomo uh to become a blockchain dev you know an ethereum dev i i started learning how to code before that i did something else

completely different no way yeah so so crypto and ethereum is your your very first like actual uh coding programming yeah um i i first i learned web development um because they always felt like they said that you know solidity is similar to javascript yep um so i i did web development got pretty good at that um started getting some jobs and some gigs uh doing web 2 development using react um 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 of alchemics he approached me in june of 2020. he's like hey i know you could do front end development and i need a front-end dev i got these contracts you know for this new defy app um back then we were called cheese spy and worked kind of similarly but not nearly as good as alchemics um

and then so i was building out uis with him um learning some more solidity i didn't actually write any of the solidity but um you know i feel like it's kind of too high stakes for someone with you know my experience level to to be making that stuff uh just yet um but i did um 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 um and you know this was it was right around

like the start of defy summer is when we started uh building this out and put that in perspective there was no urine right we were actually going to build it on top of idle finance right um you know which you know was an early yield aggregator um and then after we went through several iterations uh we finally landed on alchemics uh cheese five wouldn't have worked because we were gonna use amms to help deliver the uh 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 you know bots could extract all the revenue from the protocol you know and you know 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 but and i do want to start from very from scratch right so for those that aren't familiar with the protocol but first i wanted to ask about your avatar uh what's the background on your avatar and

for the podcast listeners we are seeing a a witch with spectacles and a purple witch hat uh and she looks like she's about to like summon a spell or something okay so this is this is really weird um so like it's always been like kind of my thing online for my avatars or handles to be like a waifu of some sort um before i had uh 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 nfp uh app called

avastar's and i saw this one like this one like which she had like cat whiskers i was like oh she looks really cool so i picked her up as an nft and use that as my profile and then um one of my friends and community members in the alchemics discord um made this piece with me as this uh you know this pretty hot wizard chick um and then there's this other poster on youtube named ratwell and ratwell start

like started turning everyone into sofas because uh the other there's another uh d5 user on twitter named mewn um who is like a ditto with this pokemon character ditto but also but the avatar is ditto as a couch and then ratwell turned these these couch characters into a meme and that's why you see couches all over twitter now right it's because of mune and ratwell yes that's why i'm a sofa

ratwell i've been uh couch pilled and seated [Laughter] all right so scoopy let's yeah yeah let's get into el comex so and as david said i think we want to start at the highest level what this thing actually is so how would you summarize this in sort of the you know few sentences what does alchemix do um alchemix is a way for you to tokenize your future yield i mean that's the

simple uh explanation of it um there is one explanation i really really really like i'm gonna pull it up right now it's actually made by one of our community members he has a website called dyor.phi and he has a page on it for alchemix 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 i think that 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 uh your collateral and that makes it more capital efficient

so the way i 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 for them they can be uh in in other assets and i believe in future versions of alcomix which is a topic we're going to get into but you deposit your your die into alchemics and then you get the future yield payments up front uh 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 uh 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 alchemics protocol for today um yeah so so people are using it for a number of things um some people are using it to yield far more with it so they're farming with their future yield um some people are using it to long east

or other coins um but more interestingly some people are using it to finance things in their real life um the guy who you just put up his website zerex d5 his um his dad's boat sank last year in a storm and he yeah yeah unironically a boating accident um and he actually deposited 50 000 die in the alchemics minted 25 000 al usd converted that to usdc put it on coinbase uh 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 dye into alchemics in the first place why did he do that instead of just trading that die for uscc and sending that into his bank account what's the advantage of putting the die in alchemics first so that that 25 000 loan that he took out um 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 principle and still get to you know spend money against it in a very low risk manner um so i actually did a little financial analysis of this um with this character named jerry this was actually in the uh in the bankless article uh that we put together and let's say jerry has a thousand dollars and then um his car breaks and costs five hundred dollars to fix his car um if you took a that loan out in uh al

usd using alchemics um that he would have a fixed card and two years later he'd have a thousand dollars that he could have freely uh you know access to whereas if he paid out of pocket uh with this thousand dollars and he had 500 left over and then he were to put his 500 to work in defy he would end up having less money overall than he would if he used alchemics and so the the way the the other way that i think about this is that anything that you want to purchase that you

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 alchemics loan and get that uh get that payment for the the entire cost of the whole entire thing up front there 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 in alchemics uh and specifically and alchemix just plugs right into into urine earlier in this podcast you talked about how um

urine wasn't here a year ago and so you were going to use idle finance or something else but then now urine is here and now we have this yield optimizing engine and so really it's just alchemix is just getting letting you borrow money collateralized by yield from urine built on top of yearn and so if you ever want to go and buy something but you want 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 um i don't have any dye because if i did have dye i would just sell it for ether and but if i wanted to buy something i could i could

keep that dye and and then get a a dollar loan from alchemix uh so i could buy my thing up front without having like the bank owned my house or the bank owned my car i can own my house or my car using alchemics uh anything you want to add on to there um yeah you would have to have double the amount of like a car cost fifty thousand you'd have to have a hundred thousand to do this so it's a little bit capital intensive but if you do have extra money um it's a fantastic um you know financial tool um it promotes

savings while you can also still you know get credit off of your savings um and i think that that's that's quite powerful i know personally i'm using it for uh my own budget for my house um i have a decent amount of dye um i'm trying to i've been slowly cashing out um some of my eats i know sacrilege david class for me but i've been doing some of that um it's not all but i still have most of my stack but um but basically i i put in

a nice chunk of dye into alchemics and you know my monthly expenses aren't much it's maybe two three thousand dollars at most um and so i'll just draw that much money in al usd uh you know then take it to my coin base and and you know put into my bank account and then at the end of the month i have like much less debt so you know almost zero debt dad this is cool this is like a point that you made scoopy in the uh in the article you wrote us which it 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 fifty thousand dollars in order to get a loan of twenty five thousand 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 fifty thousand dollars that you've worked so hard to save at all essentially the twenty five thousand dollar loan that you're getting with your fifty thousand dollars that you put into alchemix

you're taking that from future yield of of wiring that you'd receive in in d5 anyway and from you know you're borrowing from the future so the point yeah for free the point that you made in your in in the article is this really encourages users to save first and then borrow against their collateral so it's very um 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 in 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 struck 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 yields from the future yeah i think the closest analog in the

traditional finance world is if um you had like an investment property and then you had like you know 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 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 uh perhaps dangerous and i think the beautiful thing about alcoholics is it's dollar denominated collateral with a dollar denominated loan and so the liquidation risk is uh zero perhaps because you don't have any price risk you can't get liquid it's not built into the system you can you can repay your debt using your collateral and 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 let's talk about the risk make

sure we understand it so all of this yield as david mentioned is coming from uh places in d5 like wire right and you know uh why iron is doing really well from a yield perspective on on uh stable coins yeah i don't i don't know what percentages today but like say double digits right 10 to 14 or so so that means you can pay off a a loan relatively quickly but what happens scoopy like let's talk about risk one if uh d5 yields evaporate for

stable coins and they go down to like you know two percent three percent does that just like 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 uh lengthen um 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

uh 200 we could change it to be like 300 or 400 percent so it would be 400 of dive you know you know backing a hundred dollars worth of value usd and that that could be used to to make the the you know the principle higher versus the amount of debt so that would make the loan repayment uh more reasonable but i i don't know if we're gonna get down to three to five percent and yearn honestly speaking um i just i mean i think that with the rate of innovation in d5 and how

you know the the lending markets are evolving and how you know there can 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 five percent right i agree anytime 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 uh there's a couple other risks so one of them is um you know a composability risk where we're building with urine and urine is building on top of other things like so the the yv divulge 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 alchemix users um so that is one risk right there

another risk is that right now we're only using dye as a collateral for alchemics um and so if dye's peg were to break then that would have a bad effect on alchemics as well um version two we'll rectify that and we're gonna take basically any viable stable coin with you know decent on chain yield as a collateral type for alchemic so you know usdc tether susd uh it looks like this new liquidy protocol with their lusd is also a very

attractive candidate um so there won't be a shortage of uh you know stable coin collaterals that we can add so we'll be able to diversify our 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 um

then there wouldn't be a whole lot of incentive to pull your uh your tokens and and curve so then that might um cause uh the peg to suffer and if the peg is is broken and yields on chain have gone down significantly then the other pegging mechanism the the transmuter might not be able to keep up and and guarantee a peg of one dollar for al usd in that case al usd essentially becomes a bond

which will be able to mature to one dollar over time using that yield from here so let's go ahead 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 can you walk us through al usd in the transmuter yeah so anytime all usd 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 all usd debt using die um all that stuff goes to the transmitter um there was a very popular degenerate strategy uh that that we we observed people using uh where they would deposit dye max mint alusd then liquidate their their collateral

so imagine you put in like a hundred thousand die mint fifty thousand alusd then you would liquidate your collateral paying down your fifty thousand dollar 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 fifty percent alley usd fifty percent dye into the curve pool then farm with that and every single time people did that that dye was going to the transmuter backing al usd and and what's the function of the transmuter why does alchemix need the transmitter to work so the transmitter

is a way to guarantee that you can always get one die for your for one all usd right um so in the event that the peg breaks you could um and then alchemics becomes like a bond you stake your alliosd in the transmitter and over time that will mature so where you can convert it completely to um to die one to one and so that's actually the mechanism because al usd is a synthetic usd coin

produced by alcomix and the way that al usd actually maintains its peg is by uh being able to be traded for one die but not but there's a there's a bottleneck right there's not everyone can go and trade al usd 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 smaller to wider yeah so in alchemics we say that your only debt is time so

you imagine you take out an alchemics loan it takes two years to pay off that that yield that we harvest you know or that yield that you get from the future isn't completely uh accounted for until you know all your debt has been repaid by the system um and so like even if we didn't have yield farming incentives and things like that there would still be a nominal price for al usd because it would mature at at least double the rate of uh the urine interest because everything's a collateralized

200 right so imagine you know the peg breaks horribly you can now buy al usd off the market for 50 cents you know you know hey in two years this 50 cents is going to be worth one dollar 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 um but i don't think we have to worry about that um al usd in the the curve pool we'll actually be going on to curve.phi the actual

official site um in a few weeks a couple weeks after our audit uh clears that's our last hurdle everything else there's a number of requirements to get on to uh to curb that fi and we check all the boxes except for the audit um so once we get on there then we'll be eligible for the the gauges so that'll be another source of on-chain yield um for the aliosd tokens aside from the alcx tokens and uh we are working with other partners as well to you know make iosd

more integrated into other d5 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 al usd 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 die uh into the wallet um

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 al usd okay put in 688 okay and so i'm getting al usd i'm not getting die and then once i have the al usd 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 dollars that that i put in um or actually a half of that that i'm actually borrowing i have to actually have uh al usd and repay that amount and can i do that at any point in time yeah you can actually repay an all usd or die so if you click on the little box where it says i'll usd 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 paint with with both and what's this liquidate but yeah so i