In the ‘Post Launch Peg Discussion’, Joey outlined some short term ideas to bring FEI closer to peg. These all had to do with weights and incentives for the current stability mechanism.
While the FEI reweight is important to improve upon, I believe it is also important to focus on other ways to improve the peg, most notably through adding new mechanisms.
Thinking of new mechanics that could help the FEI peg, I look no further than DAI.
At first glance, DAI has only one rebalancing mechanism - vaults in which one puts up collateral to borrow DAI. These vaults allow you to borrow x amount of DAI with y collateral up to z liquidation point, and calibration of these variables should result in the value of DAI to be one.
Vaults though, are not the only place which help control the price. Compound for instance, creates demand for DAI, as it can be used as collateral in order to take out loans. Large amount of yield farms incentivise DAI-XYZ pairs with rewards, also adding to demand. Pickle, for instance, is a project designed to bring stablecoins closer to peg using exactly that principle.
While we have made a good step through increasing the FEI-ETH pool incentives, I think that much more can be done. While Compound and Pickle are performing these duties for DAI, I believe given the amount of ETH in PCV and TRIBE we have to work with, we have more than enough to be able to create similar mechanisms to increase demand. Having lived through and been using compound & DAI from launch til now, it is my belief that activity beyond the mint & redemption is responsible for a large amount of DAI’s stability.
- incentivize more pools on other platforms (uni, 1inch, balancer, ?) which include FEI, say the existing FEI-ETH uni swap pool, or a 3pool/FEI curve pool
- allow people to put up FEI in order to borrow ETH from the PCV
- ??? other ideas??? you decide!!! always happy to talk about fei
of course i could just be completely wrong, but I think it’s important to look at solutions beyond what is right in front of us