Users can manage their advanced profit positions using the vault. Users deposit an asset, such as Dai, into a vault that Alchemix then deploys to Yearn to begin generating yields. With the deposited assets as collateral, users can now mint synthetic tokens, alUSD in this case, backed by future returns of the deposited Dai. Specifically for Dai, users can deposit up to 50% of Dai's value. The alUSD loan is repaid whenever yield is obtained from the initial Dai deposit and will eventually repay the entire loan balance.
When the loan balance decreases and the collateralization ratio drops below 200%, users can withdraw some of their deposited Dai or withdraw more alUSD tokens until their collateral ratio returns 200%. If a user wants to withdraw their margin at any time, they must repay the debt with the underlying asset or its synthetic Alchemix equivalent (i.e. Dai or alUSD) or liquidate a portion of the collateral theirs to cover. Users can withdraw their collateral when they are no longer in debt. Collateral left in the vault without a corresponding loan will continue to earn as a synthetic equivalent until it is withdrawn.
Alchemix uses Transmuter to help maintain the peg for its synthetic tokens, allowing users to trade Dai and alUSD one for one. The protocol typically harvests yields from the underlying Yearn Vaults, which are counted towards the payment of user loans and then transferred to Transmuter. Users can stake their alUSD on Transmuter, and as the yield increases, the deposited alUSD is converted into the underlying asset over time, essentially acting like a bond to maturity. Transmutation allows users to repay their alUSD loans faster than they would if based solely on the yield generated by the vault protocol. Users can convert (i.e. withdraw) any time, in which case they will receive the converted base asset from their deposited alUSD plus the rest of the deposited alUSD their assets have not been converted into underlying assets.
Use of Native tokens in the ecosystem:
ALCX is an Ethereum token that governs Alchemix Finance, a protocol that lets users open collateral-backed loans that are paid off automatically using yield generated by the collateral. ALCX can be used to propose and vote on changes to the protocol.