I fully agree that FEI’s position and visibility on AAVE is very important for the growth of the protocol. As I have mentioned in the FEI deployments thread, I am against extending TRIBE incentives for borrowing on AAVE, or any other platform. I will restate those arguments here, and explore other possible alternatives for encouraging FEI usage on AAVE.
TRIBE rewards for borrowing inflate the borrowing rate on that platform and disproportionately attracts arbitrage borrowers. As mentioned by SebVentures here, there is empirical evidence that AAVE borrowing is heavily redeployed into other TRIBE yield programs, rather than any organic usages.
In the same thread , I have argued in depth why it is more preferable to subsidize borrowers by lowering the interest rate, instead of giving out TRIBE rewards outright. I’d like to raise some of them here again: foster organic usage growth by non-arbitrageurs; equalizing FEI borrowing rates across different platforms, eventually allowing the rollout of an unified policy rate across the entire platform; amongst other reasons to not reinstate TRIBE rewards for borrowing.
Given that adding borrowing incentives would inevitably raise the borrowing rate to a very inflated rate that is close to the rewards payout (~20% p.a.), and is additionally inflationary for TRIBE holders. Although AAVE borrowings have generated a hefty profit for the PCV, one could argue that it is enriching AAVE and the PCV at the expense of existing TRIBE holders.
Instead of directly incentivizing borrowers with TRIBE, it would be better to oversupply FEI and simply accept lower PCV returns on those deployed funds instead of issuing more TRIBE rewards. By pinning the borrowing rate at a more competitive rate (cf. DAI/USDC), carry traders will ensure that FEI utilization remain high. (this is proven by the experience of the FeiRari pool)