Alchemix ETHPrice

(ALETH)

alETH is a synthetic version of Ethereum (ETH) built on the Alchemix platform, designed to track the price of ETH. Users deposit ETH as collateral into Alchemix vaults and can then borrow alETH. The deposited ETH is deployed into yield-generating decentralized finance protocols. The yield generated from this collateral automatically repays the user's alETH debt over time, creating a self-repaying loan. This mechanism allows users to access liquidity from their ETH holdings without selling the underlying asset.

alETH offers several key benefits. It provides self-repaying loans, where the yield from the collateral automatically pays down the debt. This design also significantly reduces liquidation risk, a common concern in traditional decentralized finance lending. Users can leverage their ETH holdings to gain immediate liquidity without needing to sell their ETH, thus maintaining their exposure to the asset. Essentially, it allows users to access their future yield today.

alETH is overcollateralized with ETH. This means that the value of the ETH deposited as collateral in Alchemix vaults is greater than the value of the alETH borrowed. For example, the initial collateralization ratio for alETH was 400%, allowing users to borrow 1 alETH for every 4 ETH deposited. This overcollateralization acts as a safeguard, enhancing the stability and reliability of the synthetic asset's backing.

Yes, alETH could potentially lose its peg to ETH. While designed to track ETH's price, factors such as extreme market volatility or operational risks within the underlying yield-generating protocols (like those used by yield aggregators) could impact its stability. Although the protocol has mechanisms in place to maintain the peg, a 1:1 parity with ETH is not guaranteed under all circumstances, especially during periods of significant market stress or unforeseen technical issues.

In July 2023, a vulnerability in the Vyper programming language led to an exploit impacting a specific decentralized exchange pool involving alETH. This incident resulted in a loss of approximately 5000 ETH from the alETH reserves within that pool. However, Alchemix explicitly stated that its core smart contracts were not directly attacked. Furthermore, funds held within the Alchemix treasury were confirmed to be safe and secure for users, indicating the core protocol's resilience despite the external pool exploit.

Alchemix is uniquely designed to prevent typical loan liquidations, offering a significant advantage over many other decentralized finance lending platforms. This is achieved because the loans are inherently self-repaying. The ETH collateral deposited by users is actively deployed into external yield-generating strategies. The yield earned from this collateral directly and automatically contributes to paying back the user's alETH debt. Consequently, borrowers do not face the risk of cascading liquidations due to price drops, as the underlying asset continually works to repay the loan.