Direct Incentives sounds good in paper and theory, but it is proven (though in very short time) that it is not working as intended. We can safely get rid of it.
Turn our PCV into fractional collateralization pool. Starting by fully back our FEI with USDC (or other stablecoins, or even RAI and FLOAT and peg FEI to $1)
Change all ETH to USDC, and use it to fully back FEI.
using FEI price, to adjust the collateral ratio to include TRIBE in future as collateral together with USDC.
Basically turn FEI/TRIBE into something very similar to FRAX/FXS, which is proven to be working very well.
Keep in mind FEI was supposed to be “The Stablecoin for DeFi”, so that would mean a complete rebranding. I think options like these should be reserved as the last-ditch effort.
WIth current situation, there is not much choice left. We cannot have another chance to experiment. Only one shot left, so stick with what proven to be working. “The Stablecoin for Defi” has to be stable first, also the branding has already gone, so that is not something we should worry about. the FRAX’s mechanism is definitely one of the best out there at the moment.
The only advantage we have right now is the ETH in the PCV.
This project will have a virtuous cycle once ETH goes up another 20%. FEI is currently priced at 2600 to 1 ETH, so even if trading stops entirely the PEG will be restored when ETH hits $2600. I suspect it will happen before that though.
Then the problem will be how to keep the FEI price down, which is incredibly easy ! (primarily printing FEI for more ETH, a PSM for DAI/USDC/FEI swapping, low cost Maker-like loans)
In the meantime there is a ton of liquidity for FEI and Tribe to exit the system with a 20 or 40% haircut, respectively.
USDC is not a safe collateral to use. No way should we back FEI with USDC. The Circle org can blacklist the Fei smart contract at any time (could even be forced to by a regulator). RAI is much safer, for example, and backed 100% by pure ETH. A mix of DAI/RAI/sUSD might be good.
We just need to back FEI with something. USDC just because of its liquidity, since we need a lot to back FEI
I like RAI, I’m ok with RAI, but RAI is backed with ETH, so we might as well back our FEI directly with our PCV’s ETH.
DAI+USDC is the simplest to start with.
note: we are not looking for elegant and decentralized solution, we need to look for practical solutions, something that could just work now. This is our last-ditch effort to me, we cannot afford to experiment anymore. Unless we have an exit plan for most of the holders now, and we can start fresh with smaller cap not 1b.
A stable coin backed by other stable coin is not exactly a stable coin in and by itself, because it depends on the peg of other stable coins. It would be a meta stable coin.
Anyone make easily make a meta stable coin contract that will ganrautee a 1:1 peg, here is what the contract does: you can buy X stable coin from the contract at 1.001 DAI/USDC/USDT and sell the coin back to the contract at 1.
This will allow arbitragers to buy from the contract to sell into the secondary markets when the price is above peg, and they can buy from the secondary market to sell into the contract when price is below the peg. Very simple and effective.
But this coin would depend its peg , governance, and regulation and centralization level on other stable coins. You are suggesting to turn FEI into that. Which I think it can be so much more.
I’d be a hard NO against USDC and would actively campaign against it. Unless our PCV is decentralized, we open ourselves to tons of risk. RAI may be backed by ETH, but if we hold RAI we don’t assume the risks of ETH’s volatility: Reflexer vault holders do.
Ignoring regulatory risk WRT USDC is not wise to do. Regulators are actively pondering how to change laws and the FATF has proposed policies about money laundering prevention that this protocol could fall under according to which direction the winds blow. I’m really hoping the regulators don’t go that far, and don’t harm this space, but it’s the government: never underestimate their capability to fuck things up. USDC can be co-opted and likely will at some point in the future. It is wise to avoid it altogether.
We would have to reduce the FEI/TRIBE marketcap by 2/3, then we can continue to experiment with fully decentralized algo stablecoins (I think UST is doing so well, that people forgot that it is a algo stablecoin). Experimenting with current size shows that we could not proceed further, look like we have to offer some redemption campaign to those who want to exit, they have to be willing to take 10% cut, depending on the health of our PCV.
Anyone selling at 80cents is already taking a 10% cut after factoring for TRIBE airdrop. Anyone can sell their FEI right now. There’s no need to offer an exit or reduce PCV beyond what has already been paid out. TRIBE holders have already taken a 60+% cut. We need to use the funds to grow treasury, hire bigger team, stabilize PCV to prevent under collateralization, and tweak FEI mechanics.
I’m glad to see that many of the responses on this thread reflect a commitment to FEI’s design principles. It seems like there is some demand for FEI to be a fully functioning, risk free, stable coin immediately after genesis. But it’s ok for it to stumble.
If we do adopt an intermediate solution like converting all our pcv to another stable coin, we will entirely compromise the possibility that FEI will ever become what it has the potential of becoming. Instead, every new idea, no matter how great, will be seen as a way to risk the stability we borrow from the other stable coin.
There’s a lot of talk about how the FEI team needs to acknowledge their mistake and backtrack. That is important. And as far as I can tell, that’s what they’re doing. We’ll know more as the days go by. But it seems like they’re working on fixing the vulnerabilities that they’ve found. One step at a time. Yet what comes around goes around. People that thought they were investing in a project that guaranteed fully liquid stability from the get go should’ve put their money in a stable coin with a long track record. They should acknowledge their mistake and then decide whether they want to remain a part of this community. I imagine I don’t speak for myself when I say that I hope they decide to stay. But if they decide to leave, they should take responsibility for their loss and not ask the rest of us to subsidize them by risking the long term success of the project.
There could be an intermediary step - or a temporary backstep, to battle test the Direct incentive mechanism, fine-tune it, propose to the tribe to participate to the battle-testing that would lead to a fine tuning and a more 360 view on how the protocol reacts, don’t you think?
So a temporary change to get a peg based on a proven working mechanism (whatever you can think of - I ma not savvy enough to come to actual better propositions), that would just be there to minimize damages and give the needed time to reboot the initial design.
I’m sure we can think of a more transitional way to do it, that would not require a re-branding of the project.
The key would be absolute transparency and the support of as much of the tribe we can get.
The direct incentives mechanism is being battle tested at the moment! And hopefully the team will release an improvement soon.
What you’re proposing is protecting genesis participants from the risks inherent in trying something that’s never been tried before. But it’s not fair, and perhaps not possible, for us to be protected from the risks but exposed to the rewards.
I agree on almost all points: battle testing at the moment, the novelty and the risk/reward thinking.
TBH I first answered thinking about others more concerned than I am - especially those pushing short-term resolution. I mostly disagree with this perspective, but here is the thing, I think the project has gained too much traction and attention, and it is actually becoming a shitshow (victim of its success, you know the say) - and again, I normally would not care.
I was thinking of a transitional state and mostly, regarding “battle-testing”, doing it in a more methodical and controlled way (laboratory vs. in the wild), still of course taking into account the precious data we can gather on this start.
But, really I don’t know what’s best. I start thinking lowering the risk a bit might not be such a bad idea - and that there are some ways to do it that would absolutely not kill the initial design, but make it a phased deployment.
Again, just some thoughts, and giving echo to others I’ve heard.
I am a genesis participant and I frankly trust the teams and others more than myself on the direction to actually take
It takes time to build something useful, so if we start with billions while we are building, it is going not going to help because billions of fei out in the market without much utility (and far away from peg) , and building an ecosystem needs time, we cannot expect defi apps support fei overnight.
