Hmm. It’s hard to tell. Imagine a situation where a reweight doesn’t happen because a combination of short term speculator bots and long term fei buyers bring the price back to the peg. As soon as the short term speculators see that the market reaches the peg, or any price that’s profitable to them, the fastest bots will dump just as they are dumping at the moment. That will keep the price off peg by a similar dynamic as the one that keeps the price off peg at the moment. So it seems to me that even small scale honest users are incentivized under FIP-1? to not bring the price back to peg and to wait for a reweight. A re weight would be the only reasonable chance for an average user to sell at a dollar.
I know that doesn’t sound so bad, but I’ll try to explain why it is.
At the moment, it’s hard to tell what’s happening with the reward incentives because the team hasn’t yet been very clear as to what the vulnerability they found was. But in principle, the beauty of the direct incentives mechanism is that the game of buying under the peg to sell as soon as the peg is restored by buy pressure or by a reweight is biased in favor of the protocol. The importance of this is that it should work to disincentivize speculation as the community of bots realize they’re just competing against and profiting off of each other and in the meantime improving the protocol’s pcv/fei ratio. As more and more bots drop out of this race, there will eventually be one bot left. That one bot left, in principle, will be operating at a loss because the burns are greater than the rewards. Evidently, something was wrong with the execution of this mechanism, and some bot apparently found a vulnerability. But in principle, the DI mechanism can lead to an equilibrium where bots stop speculating for short term profits.
My concern about FIP-1? at the moment is that it flips the equation. It biases the speculation game in favor of the speculators. Speculators would no longer be competing against each other, but against the protocol. They’d profit directly from the protocol and might even be incentivized to work together in pools. Maybe I’m being a little dramatic, but the ultimate equilibrium would be the moment the protocol has been so drained of PCV that there aren’t many profits to be made from this scheme.
Another way of seeing this is that, at the moment, at least by design, the faster speculators take ETH from the slower speculators while those that hold fei hold an ever more collateralized coin, whereas under FIP-1?, all speculators take ETH from the PCV, which is just to say that they take ETH from the honest genesis participants.