Skip to main content

Redemptions pull MYT collateral from positions with earmarked debt, send it to the Transmuter, and cancel the same amount of debt.

Two ideas matter:

  • Redemption rate – how fast the system deleverages your position.

    • Note: Because debt and collateral are like kind, deleveraging does not lose the user any money (besides the redemption fee). This is different than many systems that charge interest rates that can at times be higher than the yield you are earning.

  • Temporal leverage – the bonus yield you earn while waiting for an earmarked redemption to settle.

The redemption rate​

The redemption rate tells borrowers what share of total system debt redemptions will repay in one year through the Transmuter. A higher rate means loans clear more quickly.

Formula​

Understanding the inputs​

The redemption rate formula calculates how much of the total system debt can be cleared in one year, based on current conditions.

  • The Inputs: The formula takes the current Transmuter Balance and the Transmutation Time (how long it takes for one batch of assets to be exchanged).
  • The Frequency: Count how many times the Transmuter can cycle its balance in a single year (e.g., a 0.25-year duration means 4 cycles per year).
  • The Volume: Multiplying the balance by the redemption frequency gives the Projected Annual Redemptions, the total value the system is on track to repay over the next 12 months.
  • The Rate: Finally, that projected volume is compared against the Total System Debt to determine the percentage rate.
Example​

The numbers below are illustrative. Actual Transmutation Times are governance-set and vary by asset and chain. If 1000 alETH sit in the Transmuter, the Transmutation Time is three months (0.25 years), and the Alchemist reports 1500 alETH of debt:

At that rate, the scheduled redemptions would repay roughly 2.67 times the current debt over a twelve-month horizon, meaning the average loan would clear well before a year has passed, assuming queue size, Transmutation Time, and debt levels remain unchanged.

What drives this number​

On-chain variableEffect on the rateRationale
Queued alAssets↑ Larger queue → higher rateMore alUSD or alETH waiting in the Transmuter funds more repayments. Arbitrage deposits enlarge this queue when the market price drifts below peg.
Total system debt↓ More debt → lower rateA bigger denominator dilutes the impact of a fixed queue.
Transmutation time↑ Shorter term → higher rateEach unit of queued alAsset cycles more often over a year.

Cover​

MYT reaches the Transmuter outside of redemptions as well: when a borrower repays debt that has not been earmarked using MYT or the underlying asset, and when collateral is used to clear debt in a liquidation or self-liquidation. The Alchemist counts that balance as cover. Each time it earmarks, it settles matured redemptions from cover first and only earmarks borrower debt for whatever remains.

While cover is absorbing every matured redemption, the vault page shows a live rate of 0% with the rate that applies afterwards marked as future, along with an estimate of how long the cover will last.

The app also reads the Transmuter's real schedule: it takes the redemptions maturing over the next seven days, annualizes them, and divides by total debt. The formula above is the same calculation in steady state.

Temporal leverage​

Earmarking in Alchemix v3 differs from typical redemption systems. In many protocols, once debt is queued for repayment the matching collateral is sold immediately and stops earning. In v3, the system only flags (earmarks) the portion of collateral needed, but leaves it earning until the Transmuter position is actually claimed. The transfer out of the vault happens at that claim, which the position holder can trigger for the vested portion at any time, including well after maturity.

Throughout that waiting period your full deposit continues to earn yield, giving you an extra return called “temporal leverage”. The longer the gap between earmark and settlement, the more additional yield you collect before the earmarked amount finally goes toward your debt.

Learn more​