Alchemix Finance

This proposal is to decide on the allocation of the Alchemix Optimism grant for vault boosts.

Context

The Optimism Collective runs an ongoing grant program for protocols deployed on the Optimism network, to incentivize usage. Protocols can apply for grants based on what value they provide to the network.

Alchemix applied for such a grant and was awarded 250k OP tokens (worth $250k at the time of writing). Read the application and discussions here: https://gov.optimism.io/t/review-gf-phase-1-cycle-7-proposal-alchemix/3475

The OP tokens are to be spent over the course of 6 months split in the following way:

• 50% (125,000 OP) will incentivize vault depositors in the form of boosted yield, for 6 months, split between alETH and alUSD.
• 50% (125,000 OP) will incentivize liquidity providers on Velodrome through bribes, for 6 months, split between alETH and alUSD. Estimated $2.5m additional liquidity at 10% APR

This is split into 2 proposals, [AIP-74-A] and [AIP-74-B], with this proposal written for the allocation of the vault boosts.

Vault Boosted Yield

The following Alchemix vaults are eligible on Optimism that can have boosts allocated to them (the deployment of the Yearn vaults is currently underway):

• Aave Dai
• Aave USDC
• Aave USDT
• Aave WETH
• Yearn Dai (yvDai)
• Yearn USDC (yvUSDC)
• Yearn WETH (yvWETH)

The boosts can be split between the strategies, concentrated in a few of them or even in a single one.

Context for decision making:

• Aave had an Optimism grant running where they applied boosts to their strategies, but that has since ended.
• Yearn’s grant on the other hand has just been approved and is expected to kick in shortly. So naturally, yields are expected to be higher on Yearn, compared to Aave (even though Yearn currently only deploys assets in Aave themselves). It also needs to be noted that through Yearn’s partner program, Alchemix collects more fees from Yearn vaults than other strategies.

As the vault migrator tool is getting deployed on Optimism as well, existing depositors will be able to move their funds from the Aave strategies to the Yearn strategies. For these reasons, this proposal assumes that all of the incentives should go to Yearn vaults. To signal disapproval, there is a corresponding voting option.

For Alchemix, generally, having a larger amount of funds in a lower number of vaults is preferable, as more frequent harvests can be run, compared to when funds are scattered amongst many vaults. Though in a low gas fee environment, like Optimism, this effect is not as impactful.

The boosts would be able to incentivize the following amount of deposits, given an expected boosted yield:

• $25M for a 1% boost
• $12M for a 2% boost
• $5M for a 5% boost
• etc.

Voting

Voting is ranked choice. Options are:

• 50% to yvDAI, 50% to yvUSDC
• 33% to yvWETH, 33% to yvDAI, 33% to yvUSDC
• 50% to yvWETH, 25% to yvDAI, 25% to yvUSDC
• 66% to yvWETH, 33% to yvDAI
• 66% to yvWETH, 33% to yvUSDC
• 66% to yvWETH, 17% to yvDAI, 17% to yvUSDC
• 100% to yvWETH
• Aave should be included - new vote needed