Alchemix Finance

Proposal

Update all alAsset and ALCX bridging to utilize the a custom implementation of the OFT standard for cross-chain messaging. The new system will require at least 2 of the following messaging services (DVNs) to push a bridge transaction through:

• LayerZero (All Chains)
• Wormhole (All chains except Metis and Linea)
• BWare (All Chains)
• Netheremind (Metis and Linea only)

Rate limits for each chain will be as follows:

1. Mainnet
   1. alUSD | 1,000,000 per 24h In | 1,000,000 per 24h Out
   2. alETH | 500 per 24h In | 500 per 24h Out
   3. ALCX | 5,000 per 24h In | 5,000 per 24h Out
2. Optimism
   1. alUSD | 1,000,000 per 24h In | 1,000,000 per 24h Out
   2. alETH | 500 per 24h In | 500 per 24h Out
   3. ALCX | 5,000 per 24h In | 5,000 per 24h Out
3. Arbitrum
   1. alUSD | 1,000,000 per 24h In | 1,000,000 per 24h Out
   2. alETH | 500 per 24h In | 500 per 24h Out
   3. ALCX | 5,000 per 24h In | 5,000 per 24h Out
4. Linea
   1. alUSD | 100,000 per 24h In | 100,000 per 24h Out
   2. alETH | 100 per 24h In | 100 per 24h Out
   3. ALCX | 1,000 per 24h In | 1,000 per 24h Out
5. Metis
   1. alUSD | 25,000 per 24h In | 25,000 per 24h Out
   2. alETH | 25 per 24h In | 25 per 24h Out
   3. ALCX | 500 per 24h In | 500 per 24h Out

The upgrade enhances the cross-chain security of Alchemix while also significantly reducing bridge times across all chains.

Very Basic Explanation of Bridges

Most blockchains can’t communicate with each other quickly, so transferring tokens between them requires a messaging service. It’s crucial to minimize trust of this system as much as possible, as it is extrinsic to Ethereum and has many off-chain components. However, we also want to make sure that users find the process of bridging tokens easy and quick.

The xERC20 standard allows Alchemix to select its own messaging service, ensuring better control over the risk in the event that a messaging service is compromised.

Current System and Motivation

Alchemix currently utilizes the xERC20 system, which integrates two messaging services: Connext and Wormhole. Each has a separate rate limit. The potential damage is limited to the sum of rates on all chains for one specific service, OR the sum of rate limits on a single chain for all services. Thus, adding more chains and more messaging services both increase systematic risk.

The system operates with the following restrictions:

• alAssets and ALCX may be locked in a lockbox on Mainnet in order to mint tokens on any integrated L2. There are no hard caps - only rate limits.
• alAssets and ALCX may also be bridged between L2s with no hard caps - only rate limits.
• alAssets and ALCX may be bridged back to mainnet with rate limits, with a hard cap equivalent to the amount of assets stored in the lockbox on mainnet.

The xERC20 system is owned by the Alchemix DAO. The Alchemix DAO decides who the messaging service is. Connext is sunsetting, which means there will currently be only one operational service (Wormhole) which does not service all chains. All potential services with reasonable bridge times, including Wormhole, are fully dependent on off-chain components. Thus, it is a good time to upgrade the messaging system to the LayerZero standards.

New System - Security

The new system will still utilize the existing xERC20 contracts. However, a new custom messaging contract will be whitelisted on each chain. The new messaging contract will be owned by Alchemix and uses a custom implementation of LayerZero’s OFT and OAPP standards. The contract whitelists three messaging services per chain that may approve mints and burns of alAssets as well as manage the lockbox on Mainnet. At least two messaging services are required to validate any bridging transaction.

The result of the updated design is twofold:

1. No single bridge can cause damage to Alchemix through denial of service or unauthorized minting of Assets
2. Each chain will have a global mint/burn limit, rather than a separate limit per bridge

The proposed DVNs and the reasons for selection are:

1. LayerZero (All Chains) - proven and reliable, and aligned with the migration to OFT as it is their standard
2. Wormhole (All Chains excluding Linea and Metis) - retains the current service provider, and allows for diversity in ecosystems
3. Bware (All Chains) - creates additional diversity, services all required bridges, and have an existing relationship from when Bware provided fast-bridging liquidity for Alchemix via Connext.
4. Nethermind (Linea and Metis Only) - Chosen as it services both Linea and Metis

New System - UX

The new system will have significantly better UX in the following ways:

1. Transactions will typically complete in under 1 min, if not much faster
2. The UI can better handle edge cases and ensure funds are not stuck
3. Users no longer have to choose which bridge they use - they simply bridge thru the Alchemix UI and all bridges are automatically utilized
4. Transaction costs are similar to, if not less than, current bridging requirements

Developer Credit

The contracts for this upgrade were built by Blockdudes, who also built the AMO Harvest tool grant. The grant project can be viewed here: https://questbook.app/dashboard/?grantId=0xeb75a84db372485817c5fd4bf59ea639dfca685c&chainId=10&role=admin&proposalId=67dd416067a7ee92b7e521b6&isRenderingProposalBody=true

The contracts are currently undergoing an internal review, and the custom pieces of the code will be audited through Immunefi this month.

Voting is Simple For/Against/Abstain

For authorizes the Alchemix DAO to move forward with the OFT upgrade, targeting completion by end of June.