Audit Comp | Alchemix V3

Alchemix is your unified platform for saving, earning, borrowing, and fixed-term fixed-yield opportunities—all in one place. Built on years of iteration since launching the original self-repaying loan in 2021, Alchemix v3 brings all three pillars together with a smarter, more flexible design. The protocol allows you to:

• Save and grow – deposit ETH or USDC and let our vault invest and earn yield across diversified strategies.
• Borrow up to 90% LTV – access liquidity now while your collateral grows with yield and your leverage is reduced over time through scheduled redemptions. No interest rates to monitor, no price-based liquidations.
• Earn fixed-rate yield – lock in predictable returns through fixed-term redemptions of alETH or alUSD.

There are a few elements to the system. First, there is the Meta Yield Token. This is a Morpho V2 vault with custom strategies and some custom admin roles. There is an ETH and a USDC vault for each chain.

The core system is based around the Alchemist/Transmuter. Alchemists mint alAssets, and accept MYT as collatearl. Each Alchemist has a single alAsset it can mint (alETH for ETH, alUSD for USDC). Each Alchemist can only accept a single MYT token as collateral (MYT ETH for alETH Alchemist). Each Alchemist has a single Transmuter paired with it, and each Transmuter is only paired with a single Alchemist.

The Transmuter’s role is to redeem alAssets. Users may deposit alAssets to the transmuter. After a fixed period of time, they may claim equivalent value (based on protocol assumption that 1 alAsset = 1 Underlying, ie 1 alETH = 1 ETH) of the MYT.

The Alchemist’s role is to accept the MYT as collateral, mint alAsset debt, and fulfill redemption obligations to the transmuter. When a transmuter claim is executed, the Alchemist reduces global system debt, and sends MYT from the alchemist to the transmuter user. Thus, when a redemption occurs, an individual Alchemist position will see both their collateral and debt reduced.

To ensure collateral will always be available for redemptions, the Alchemist employs an earmarking system. Essentially, the system will reserve collateral and debt from user positions for future transmuter claims (time-based, continuous). Earmarked collateral cannot be withdrawn from the system. The only way to withdraw earmarked collateral is to repay earmarked debt with external MYT tokens. Separately, non-earmarked collateral/debt may be repaid and/or withdrawn at any time (subject to LTV requirements).

The MYT strategies are meant to be priced based off of fundamental oracles, ie the backing of each strategy. This is meant to avoid unfair liquidations due to flash crashes. Additionally, the MYT is never unwrapped or wrapped with the Alchemist - this is why transmuter positions recieve MYT tokens at time of redemption, not underlying.

The MYT strategies have a dual-unwrap approach through contracts and dexes. When a better outcome is gained through a dex (vs wrapping), a dex is used. For unwrapping, if the contract unwrap is unavailable (due to a queue), a dex is used. Thus, the MYT may be worth 1 ETH from the Alchemist point of view, even if the unwrap value at that exact instance is 0.99 (due to one of the strategies having a withdrawal queue). For this reason, long-tail risk strategies should not be used in the MYT.