From discussions with @Matthew_Graham:
Proposal
Create a Balancer Smart Pool with FEI and ETH. FEI starting price can be the Uniswap last price (let say the equivalent of $ 0.80).
Arb bots would buy FEI cheap via uniswap pool and sell FEI for ETH in Balancer. Using Balancer, PCV will be buying FEI with ETH at a price below $1. Starting with the price of Uniswap let say 0.8. The price of FEI on the Balancer will be going up as time passes until it reaches 1.00. The dutch auction. The pool weights change, increasing the incentive to deposit FEI into the pool and purchase ETH.
This FEI would be purchased from the UniSwap. As the dutch auction continues, the net effect is to lift the ecosystem price of FEI towards the peg. FEI Seller could sell on Balancer or to arb bots on Uniswap.
The Smart Pool starts off mostly ETH with some FEI and finishes majority FEI. With the auction, PCV uses its ETH to buy FEI at a reasonable price (below $1) contributing for the increase of its reserves in the long term. In other words, the auction is essentially selling ETH and receiving the excess FEI.
At any point this does not go to plan, Fei Protocol can pause the swap functionality. Fei Protocol receives fees, BAL rewards and creates the much needed buy side pressure on UniSwap.
We can test first with a small amount. Actually, it would be good to do many auctions and see how the market agents play with it.
Execution
- Start with ETH Uniswap pool price
- Define a specific amount of ETH for the auction
- Minimum price for the auction is the Peg price $1
If this works we could let a permanent Dutch auction there starting at the current FEI mkt price and with the maximum price of $1.
Reference Material:
