Liquidity Mining Program
Introduction
Alkemi Network's incentive structure is designed with the institutional DeFi user in mind. The Liquidity Mining Program’s objective is simple: drive platform utility using network incentives and grow with a balanced composition of lenders and borrowers.
Liquidity Providers (‘LPs’) and Borrowers accumulate network rewards in the form of native Alkemi Network (‘ALK’) tokens. Reward tokens are distributed according to participants' allocated capital and active borrows in the Alkemi Earn markets across the 'Verified' (permissioned) and 'Open' (permissionless) digital asset pools.
Further details on the program, including benefits and how to participate are outlined below.
Key Considerations
Alkemi Network has allocated ~70 million ALK tokens, 35% of its total token supply, to the Liquidity Mining Program as an incentive to drive Liquidity Providers’ participation on the platform. There are three key considerations for this program:
Early Participation Alkemi Earn launched early 2021 with a curated group of Liquidity Providers. The curation naturally limits the amount of competition for the reward tokens and participants have access to greater rewards.
Asset Deposit and Borrow The reward tokens are distributed formulaically based on the active supply and borrows in each market. Lenders receive reward tokens based upon their proportional supply to the protocol. Larger deposits result in a higher token reward potential. Depositors borrowing other assets against their collateral receive additional token rewards. This incentivizes borrowing activity on the protocol.
Deposit Duration ALK token allocations are calculated on a per-block basis. The calculation takes into account the dollar value of assets deposited/borrowed at each block. The longer a participant has assets deposited/borrowed in the network, the greater the accumulation potential for ALK rewards.
ALK Token Supply and Reward Distribution
The Alkemi Network Liquidity Mining Program calculation and distribution parameters have been designed as follows:
REWARDS POOL CALCULATION | |
Total ALK Token Supply | 200,000,000 |
Total Reward Allocation | 35.00% |
Mining Program Duration | 4 Years |
ALK Rewards / Year (% of total supply) | 8.75% |
ALK Rewards / Year (#) | 17,500,000 |
Number of Blocks / Year (Ethereum avg.) | 2,371,128 |
ALK Rewards Issued Per Block | 7.38045352 |
REWARDS DISTRIBUTION CRITERIA | |
Participating Markets (Verified Pool) | wBTC, USDC, DAI, ETH |
Participating Markets (Open Pool) | ETH, USDC, DAI |
Reward Allocation Ratio for Markets | Market Supply + Borrows / Total Supply + Borrows |
Reward Breakdown in Each Market | 50% Lenders 50% Borrowers |
Vesting | No vesting period - tokens are allocated and vest at every block |
Please note the following in the above tables:
Each year, 8.75% of Alkemi’s total token supply (17,500,000 ALK tokens) will be distributed to network participants as ALK reward tokens
The actual number of reward tokens are calculated at every Ethereum block creation (i.e. 7.38045352 ALK tokens assuming a constant 13.3 second block time)
In each market, the reward-based ALK tokens are split equally between lenders/borrowers
The ALK token reward accrual process is initiated by protocol participants at their Loan / Borrow effective date.
For genesis liquidity providers who participated in the program prior to TGE (September 2021):
Reward-based ALK tokens accrued to genesis liquidity providers prior to Alkemi Network’s TGE will carry a vesting duration of 6 months starting from the TGE date
All calculations prior to TGE will be carried out by Alkemi Network based purely on the individual's wallet transaction history and balance on a by-block basis
ALK Reward Calculation (for illustration only)
Use the ALK Rewards Calculator, an interactive tool for current ALK yields and borrow/lend APRs based on most recent API data
The table below is a snapshot of active supply&borrows and the reward distribution in Verified and Pools in Earn, as of January 27, 2022.
In each market, total ALK rewards per block emitted by the liquidity mining program (7.38045352) is multiplied by the market's Reward Allocation Ratio (RAR) to determine that market's take from the rewards at each block. Reward Allocation Ratio is calculated with the following formula:
In each market, allocated rewards are distributed to lenders and borrowers equally (50/50 split). Individual lender and borrower's take would be determined by their proportional participation in that market.
So, for a lender, the ALK reward/block formula for a particular market is:
Similarly for a borrower, the ALK reward/block formula for a particular market is:
One key thing to note is that borrowers also earn lender rewards with the collateral they provide to the pool.
Lender Rewards Example
Let's assume that you supply $500k to the DAI market in the Verified Pool as a lender.
Per the Earn snapshot table above, your liquidity is added to the DAI market, bringing the DAI market supply to $3,039,930.22. The updated liquidity and reward distribution figures are displayed in the table below.
With this contribution, your liquidity would constitute 14.12% of the DAI market supply (Supply Ratio). Therefore, you would get 14.12% of DAI Lender Rewards (0.076 out of 0.536 ALK) at each block as long as the protocol's liquidity makeup stays the same.
Borrower Rewards Example
Let's assume you borrow $200k worth of DAI using WETH as collateral. The required collateral ratio at Earn is 125%, so you would be supplying $250k worth of WETH as collateral.
Similar to the calculation for lender rewards above, you would be getting borrower rewards commensurate with your borrowed amount in DAI pool. In addition, you will be getting lender rewards with the collateral you supplied, figures for both are displayed in the table below:
Important Note:
While the reward rate per block remains the same, distribution figures change with every lend and borrow at Earn. For most recent liquidity figures and reward distribution, please use the ALK Rewards Calculator, an interactive tool for current ALK yields and borrow/lend APRs based on most recent API data.
Participation Terms
For the 'Verified' (permissioned) pool, participants must complete the Alkemi Network KYC application process to use Alkemi Earn. Once their application is reviewed and approved, nominated wallets are allowlisted for participation in the 'Verified' pool as lenders / borrowers.
For the 'Open' pool, there are no prerequisites for lending and borrowing. For both pools, participants earn reward tokens on a per-block basis for active deposits and borrows.
Please contact Brian Mahoney, CSO, at brian@alkemi.ai to learn more.
LENDERS
Deposit Amount: No minimum or maximum deposit requirements.
Minimum Deposit Period: No commitment period. Deposited funds may be withdrawn at any time.
Loan Type: High-yield, variable rate.
Interest Rate: Liquidity Provider receives interest rate payment(s) from collateralized borrowers on Alkemi Earn.
Protocol Fees: Alkemi Earn takes a 1% commission on interest earned from supplied assets. This is used to cover operating costs.
BORROWERS
Collateral Requirement: Borrowers are required to deposit a minimum of 125% of their desired borrow amount as collateral in the Alkemi Earn markets. Deposits earn interest as well as ALK token rewards whilst allocated to the protocol.
Duration and Repayment: Borrows can be repaid anytime. Once a borrow has been repaid, the account’s collateral can be entirely withdrawn or transferred.
Algorithmic Interest Rate: Borrowers pay an interest rate according to the algorithmic rate determined by the protocol. This interest rate is re-calculated at each block. ALK tokens are earned by borrowers upon both borrowed and deposited assets.
Liquidation: A borrowing account becomes insolvent when the Borrow Balance exceeds the amount allowed by the collateralization ratio. When an account becomes insolvent, other users can repay a portion of the outstanding borrowed balance in exchange for a portion of the collateral. This function carries a liquidation incentive — currently set at 10% (subject to change).
Origination fee: Borrowers pay 0.1% of the borrowed amount as an origination fee, which is added to the total borrow amount in its respective currency.
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