ALEX: The First Complete DeFi Protocol the Stacks Blockchain

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Written by

two_sats

I am just some bored guy that likes crypto

1 year ago

Topics: ALEX, Stacks, Stacks Blockchain, Crypto, Cryptocurrency, ...

*obligatory not financial advice*

What is ALEX?

ALEX is short for Automated Liquidity Exchange and it is an all-in-one DeFi application and the most used dApp on the Stacks blockchain, which is a special smart contract blockchain that is connected to the Bitcoin chain and uses a unique type of proof of stake that rewards the stakers with BTC.

The main utility of ALEX is its decentralized exchange. It works like any other AMM exchange, like Uniswap, does. People provide cryptocurrencies to liquidity pools of trading pairs that are then offered to traders in exchange for a trading fee. The prices are set automatically based on the ratio of the supplied tokens.

There aren't many tokens available on the swap yet because the DeFi ecosystem on the Stacks blockchain is still relatively small. But STX, ALEX and wrapped BTC and USDC are all supported. There is a 0.3% trading fee of which half is going directly to the liquidity providers and half is used to buy back the ALEX governance token and use it to reward the stakers of the ALEX token.

ALEX also has its own Launchpad where new projects on the Stacks blockchain can raise funds thru Initial DEX Offerings. This Launchpad makes it possible for investors to get in especially early, which can be risky but also very rewarding. Projects can raise funds in form of the ALEX token or the STX coin, but only people that hold APower can invest. APower is a special token that is not transferable or exchangeable and you can only earn it by providing liquidity to the exchange or staking the ALEX token. This ensures that only people that are real supporters of the DeFi application can participate.

ALEX is already the most used dApp on Stacks but it is not completed yet. In the future there will be an Order book type of exchange added, which will allow its users to trade with limit orders. And there will be a lending protocol with fixed-rate and fixed-term lend and borrowing without liquidation risk.

The Stacks blockchain could grow a lot in popularity because of its unique approach of distributing BTC to its stakers and ALEX is well positioned to stay one of its most important DeFi applications.

The ALEX Token

ALEX has a governance token with the same name. It is used to vote on changes to the protocol and to reward liquidity providers. The stakers of the token are also earning a share the platform fees and earn APower that they need to participate on the Launchpad.

The revenue sharing is similar to the xSUSHI pool of SushiSwap. ALEX holders can stake their tokens in the atALEX pool and receive atALEX tokens that represent their share of the pool. 50% of the trading fees are used to buy back ALEX to add them to the pool. The amount of atALEX tokens a staker holds doesn't change, but the amount of ALEX that can be redeemed by burning it keeps increasing.

There is a max supply of 1 billion tokens. 50% of that is being distributed to the liquidity providers over the next 5 years, 20% is going to the Foundation to improve the protocol further and 30% are going to the team, their advisors and their investors directly. The community will eventually have half of the supply which is decent, but until then the developers have most of the control over the supply and the protocol.

Like always, the value of the ALEX token depends on how much liquidity is in its smart contracts and on how many transactions the dApp is processing. It is the most used dApp on Stacks and should its blockchain keep growing then there will be a lot of demand for decentralized trading there. The DEX does have only very cryptocurrencies available right now but if this could change if the blockchain grows. There could also be a lot of demand for supplying liquidity or staking ALEX to earn APower for the Launchpad, because you can't get it any other way. And ALEX also has nice roadmap with a lot of planned features.

ALEX is not supported by any centralized exchange right now, but you can buy it on its own DEX if you have some STX for the gas fees. You can use a Hiro Wallet to access dApps on Stacks and to store your crypto.