TL;DR - Alchemix leveraged the Stake DAO Liquid Lockers to boost their voting power by 1.39x, and earn yield that will increase their governance power even more, while spending only a third of what they were previously having to pay with bribes.
In order to attract liquidity, DAOs regularly use bribing mechanisms to attract CRV emissions to their token’s Curve pools.
At first glance, bribes seem to present a flexible and cost-effective alternative to keeping capital locked in maintaining a sizable veCRV reserve.
However, as competition heats up, so does the bribe market, with raised prices making bribing less and less attractive, especially for recurrent voting.
As the following example demonstrates, protocols can retake direct control of their voting power through Stake DAO’s new Liquid Lockers, breaking the assumption that vote ownership is either too expensive, or restrictive.
Liquid Lockers allow protocols to own their vote-locked tokens with no trade-off. They maintain yield, voting power and flexibility, while veSDT amplifies all these benefits. Alchemix is amongst the first DAOs who have decided to implement the Liquid Lockers to boost their treasury.
Here is what’s happened so far:
Alchemix was keen to improve the cost-efficiency of directing emissions to their Curve pools. Despite spending heavily on bribes, CRV rewards on their alUSD and alETH pools had been falling steadily from their late 2021 peak.
Source: Llama Airforce
The drop in rewards is down to the fierce competition for bribes on Votium where, even when willing to spend >$10M in total, they have slipped down the rankings, leading to low APY on their pools.
Source: Llama Airforce
With the launch of Stake DAO’s CRV Liquid Locker, Alchemix took their chance to get back in the game.
The CRV Liquid Locker allows DAOs to participate in Curve vote-locking, via the liquid sdCRV wrapper, without the need for whitelisting. Alchemix was able to take advantage of this ‘whitelist-as-a-service’ by using their own funds to secure a more efficient result than navigating the bribes market.
Following a market buy of 500k SDT, they secured a governance agreement to get whitelisted to lock SDT.
As well as accumulating SDT, Alchemix took advantage of the favorable market conditions to acquire nearly 3m CRV from the market, which they locked in Stake DAO’s liquid locker the next day. This enables them to farm CRV at an attractive APY (>$12k weekly revenue in 3CRV):
With the platform fees, Alchemix can farm CRV on top of the current 3CRV. They also get SDT rewards which they can lock to get more veSDT , further increasing their yield (by 1.26x) and voting power (by 1.39x).
Furthermore, thanks to the 1m SDT already locked, Alchemix will receive a boost to their voting power of 1.39x, enabling them to gain nearly 1,36m additional CRV votes and reach c.4.36m veCRV votes in total.
All in all, Alchemix will have spent a total of $3.5M in order to secure perpetual, revenue-generating, liquid voting power for their protocol.
This same amount would buy just 14 weeks of bribes at the former bribe rate.
Through use of veSDT and the CRV Liquid Locker, Alchemix is efficiently incentivising their pools, as well as generating >$12k in 3CRV and $1,177 in SDT weekly while earning extra CRV.
These revenues will enable a flywheel effect of re-locking the farmed SDT (as veSDT) and CRV (back into the Locker), further increasing the above rewards and maximising vote boosting.
Disclaimer: This case study has been written on the 17th of June 2022. It aims to show the effectiveness of Liquid Lockers at this moment in time by using publicly available data. This data evolves with market conditions, the usage of the Liquid Lockers and other parameters. This article is not financial advice.
