A few thoughts towards algorithmic PCV management

  1. For the purposes of portfolio management PCV is divided into Collateral fund and Yield fund. Funds necessary to guarantee 110% Fei collateralization go to the Collateral fund, the rest — to the Yield fund. Collateral fund management is governed by the primacy of monetary policy with two main objectives: providing enough liquidity at any given moment and preserving value of the reserves in the long run. Yield fund management is governed by the purposes of serving other causes deemed necessary by the Tribe community as well as driving market interest to the Tribe token.
    For the purposes of lowering risk exposure and facilitating enough liquidity major part of the Collateral fund allocation mimics the DeFI market (e.g.: à la DeFi Pulse Index), which is complemented with some amount of BTC, ETH, algorithmic stable coins and perpetual swaps (essentially derivatives for hedging risks with no expiry date, hence no need for roll-overs — a good overview). Collateral fund is automatically adjusted subject to market & collateralization ratio changes.

  2. Yield fund places funds to a battery of experimental investment vehicles including, but not limited to on-chain asset managers like suggested here, NFT collection managers, VCs. Yield fund returns are shared in some proportion designated by the community, like 20/80, between the Tribe Grants & other causes program, and a dividends program.

n-th Tribe holding wallet is entitled to yields share as per the formula:

Yields_n = h_n*\frac {e^\frac{b_n}{B}} {\sum_{i=1}^N e^\frac{b_i}{B}}, where

h_n – n-th wallet’s share of total Tribe tokens,

b_n – # of ETH blocks since the last sell Tribe transaction of the n-th wallet,

B – total # ETH blocks since Tribe Genesis,

N – total # of ETH holding wallets.

This non-linearly rewards long-term investment into Tribe thereby reducing sell pressure, as well as spurs buy pressure.


Hello Pavel,

I think that maybe better than using PCV to pay dividend, when it is in excess, it could be used to buyback TRIBE, following the Buyback and make model.

We could establish a smart treasury on Balancer with TRIBE from DAOs (400mln) and ETH. When PCV is in excess of “x”, it could added to this smart treasury.

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If you buyback, everybody is rewarded equally. I’m interested in an architecture when token holders are rewarded/punished for their token-related strategies, thus nudging certain desirable behaviour in the interests of the Tribe.

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It is an interesting point, Pavel. Glad to exchange ideas with you. I agree with you on the objective. But if you buyback and not burn you will not necessarily reward everyone equally. When you implement this model of buyback and make, you could use the buyback TRIBEs to incentivize behaviours. For example, you use these tokens to reward liquidity provision of pairs FEI-token (eg.: DAI).

This way you are using PCV to create incentives for the market, what can increase the buy pressure for FEI and increase TRIBE value in the long term. Makes sense?

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@Bruno You know, I’m now thinking of penning a proposal to initiate Fei joining Balancer/Aave project aimed at building an Asset manager for Balancer V2 . Asset manager on top of AMM fits Fei perfectly: a minor part of the pool (˜20%) provides liquidity and a major (idle) part (˜80%) earns yield on Aave or elsewhere, the proportion is reweighed as per market/yield conditions (that’s Balancer’s initial feature). Possibly with many trading pairs and many yield sources. Essentially AMM and Yield farming are integrated under one hood. Yield revenues are then used to buyback-and-make. And bought back Tribe are used to reward holders in some form, like giving out interest-free loans. Something in this vein. What do you think? Anything to add?


Hey Pavel, I agree, Balancer V2 is very promising to FEI. They will launch stable pools (similar to curve) in the following weeks in V2. It is a good opportunity. The benefits are:

  • Earning yield on a great part of the PCV (more capital efficiency in providing liquidity)
  • Increase the liquidity between FEI and other stables (particularly important to pave this road and enable liquidity and low cost for these trades)
  • Diversifying operational risk of using Uniswap
  • Diversifying PCV with other stable assets (DAI, USDT, USDC)
  • Liquidity mining of BAL tokens

I like the idea of using the yield to buy-back and make model with a smart treasury in Balancer for the future. But maybe in the beginning we could use to bootstrap new bonding curves. As the destination of yield can generate further discussion, I would divide the proposal in two. One related to the creation of the pool and other later of what can we do with the yield generated. Because it also depends on market conditions, collateralization of protocol and risk mgmt.

It would also be good to hear @joey on this discussion.


My point: sure, eventually Fei will have liquidity on all major DEX’s, including Balancer. That’s kind of immediate future mainstream direction of activity. However, in parallel Aave+Balancer are doing pioneering work integrating AMM and asset management. That’s more kind of R&D. If Fei joins this work early on, it could give the protocol future competitive advantage in terms of capital allocation efficiency. As far as I understand, they are now working on a generic solution for a retail LP. Fei has extra moving parts and interests to take into account (collateralization, market conditions on different DEX’s, integrating PCV risk management & investment policy on different DEX’s) and needs bespoke solution, plus could also contribute to the generic architecture as well. I could imagine that eventually idle PCV funds management could be happening entirely through Balancer, with working/idle liquidity from other DEX’s being dynamically forwarded back and forth by respective rebalance mechanisms.


I agree Pavel, joining V2 early on will be good in terms of competitive advantage. My question is what is the better specification for this pool. A stable pool with USDC, USDT, DAI and FEI? What will be the weights of each token? This pool can receive BAL rewards? How much of PCV transferring to there to start?

Another benefit is that a stable liquidity pool is a great way to help FEI keep the peg. It makes easy for traders to arb when the price slips off the peg. And it would not depend on the oracle price of ETH/USD.

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Check my post on pcv diversification PCV Diversification Primer

I really like the idea posted here by OP epsecially collateral/yield division of PCV part. I think one important thing to note is that given how big the PCV size currently is we should have a tighter control on yield bearing mechanisms and PCV yields should be used as source of attraction to use FEI as stable currency in the long run.