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Alchemix

A loan that repays itself

Alchemix showed up in 2021 with a pitch that sounded made up even by DeFi standards: deposit DAI, borrow half of it immediately, and never make a scheduled repayment. It treated alUSD as an advance on yield your deposit had not earned yet. The DAI kept working inside Yearn, and every harvest slowly reduced your debt. You got the money today. Your future yield got the bill.

Where the repayment came from

The original vault let you borrow up to 50% against your DAI, which meant maintaining a 200% collateral ratio. At the limit, a $10,000 deposit backed $5,000 alUSD and the whole deposit was locked as collateral. When Yearn produced yield, Alchemix took a 10% protocol fee and used the rest to pay down debt. As the debt fell, more DAI became withdrawable. You could wait for the yield, repay early with DAI or alUSD, or use some of the collateral to close the loan. Self-repaying was not free money. It was a loan whose repayment source was already sitting inside the protocol.

Borrowing from the future

With 10,000 DAI earning an illustrative 10%, the vault makes 1,000 DAI gross per year. After the fee, 900 DAI goes toward a 5,000 alUSD debt, so the simplified payoff time is about 5.6 years. Real yields move and harvests are not this clean, but that is the idea. Start the loan below and watch the debt shrink while the same deposit moves from locked to withdrawable.

Borrow from your future yield

A simplified version of the original 50% LTV Alchemix loan. Borrow today, then let the net yield earned by your deposit pay it back.

The loan

You deposit $10,000 DAI and borrow $5,000 alUSD immediately. That is a 50% loan-to-value, or LTV, meaning the borrowed amount is 50% of your deposit. At an example 10% strategy yield, the deposit earns $1,000 a year. The original 10% protocol fee takes $100, leaving $900 to reduce the debt. Enough collateral stays locked to maintain the required 200% collateral ratio. The rest is withdrawable.

Deposit
$10,000 DAI
Borrowed today
$5,000 alUSD at 50% LTV
Net yield to debt
$900 after fee
Debt reaches zero
5.6 years
Alchemix loan time machineA $10,000 DAI deposit produces $1,000 of example gross annual yield. After the original 10% protocol fee, $900 repays a $5,000 alUSD loan each year. Collateral gradually unlocks as the debt falls.Alchemix time machineOriginal 50% LTV modelDeposit remains invested$10,000 DAI$10,000 locked as collateral$0 withdrawable$1,000 gross yield − $100 fee = $900 toward debt each yearDebt paid by that yield$5,000 remaining0y1y2y3y4y5y5.6yDay one$5,000 alUSD ready to borrow$0 of net yield usedYear 0 of 5.6
Gross strategy yield

At this rate, the loan will repay itself in 5.6 years.

The loan is an advance on future yield. Its collateral unlocks as that yield repays the debt.

Why it was fun

That was what made Alchemix such a good DeFi primitive. It took something boring, yield slowly accumulating in a vault, and made it usable today. The risks did not disappear, but the shape of the loan changed completely. I still think "borrow now, let time repay it" is one of the cleanest ideas this space has produced.