In light of the recent Rari hack our goals should be trust and resilience. Secure management of the PCV should be top priority.
This proposal will focus specifically on the ways FEI protocol can become more resilient.
The current conditions require some forms of contraction and reinforcement. I propose the following changes to ensure the focus and trust required:
- Fix Protocol Accounting
- Increase stable backing of FEI
- Contract FEI supply
- Refocusing of TRIBE incentives
- Minified product rollout
There are a number of PCV deposits which were affected by the hack on Fuse, either partially or completely.
In the short term, mark all of these to 0 by removing them from the collateralization oracle and analytics pages.
Begin to account for protocol owned FEI as both an asset and a liability, rather than removing it from collateralization considerations. To illustrate an example if PCV currently accounted as:
- 200m PCV, 100m protocol FEI, 100m user FEI. Collateralization ratio is 200% by dividing PCV by user FEI
The proposed accounting would be:
- 300m PCV (adding in protocol FEI) and 200m FEI (all FEI is debt) with a collateralization ratio of 150%.
As a concrete example, currently d3 liquidity is accounted as 33m in misc stablecoin backing (FRAX, alUSD) and 16m in protocol owned FEI. After, this would simply be 50m in d3 with all of the additional circulating FEI accounted as debt to the protocol.
This new accounting is more technically accurate and removes a layer of complexity from the mental model of how FEI is backed, it is also relevant for computing the stable backing numbers below.
- Yes, reformat protocol accounting
- No, don’t reformat protocol accounting
Consolidate PCV by liquidating DPI and CREAM for DAI. Consider selling some ETH and other PCV assets to ensure sufficient stable backing after the other hack related discussions are resolved.
By using the above accounting (assuming 150m protocol FEI is burned), the current stable backing is 72%, and the goal should be to increase this to 80-90%
- All FEI: $568M
- Protocol FEI: $304.16M
- = $322M - $10.18M (pool 8) - $0.986M (pool 27) - $6.67M (pool 156)
- User FEI: $284.84M
- = $568M - $304.16M
- PCV (non pFEI): $554.86M
- = $616.92M - $3.16M (pool 8 DAI) - $1.95M (pool 8 LUSD) - $6.76M (pool 146 ETH) - $50.19M (conservatively assuming a hack repayment)
- Collateralization Ratio using old accounting = 199%
- = $568M / $284.84M
- Stables (non-FEI): $143.69M
- = $79.7M (LUSD) + $31.7M (D3 LP) + $12.5M (RAI) + $10.2M (VOLT) + $9.5M (agEUR) + $5.2M (DAI) - $3.16M (pool 8 DAI) - $1.95M (pool 8 LUSD)
- Collateralization ratio: 175%
- = ( $554.86M + ~$150M) / $400M
- Stable Backing: ~72%
- = (~$150M + $143.69M) / $400M
- Yes, increase stable backing >=90%
- Yes, increase stable backing to 80-90%
- No, don’t increase stable backing
Withdraw protocol FEI from FEI deposits to ensure minimal circulation:
- 30-50m from d3 pool
- 1-5m from Compound
- 10m from UniV2 against agEUR
- 1-16m from Aave
- Small Fuse pool deposits (~2-3M total)
The FEI Savings Rate would help to attract more circulating FEI to a single deposit location, bolstering the peg and protocol reserves.
- Withdraw from Compound
- Withdraw from Aave
- Withdraw from Convex
- Withdraw from UniV2 agEUR
- Withdraw from smaller Fuse pools
- don’t withdraw
- Withdraw as much as possible
- Withdraw around 50-75%
- Withdraw around 25%
- don’t withdraw
TRIBE incentives have been an expensive way to attract secondary market liquidity for FEI on Curve and Uniswap v3.
This proposal would be to repoint all incentives to xTRIBE or remove the incentives entirely to bolster the treasury.
- Disable all incentives and bolster treasury
- Repoint incentives to xTRIBE only
- Leave incentives
The xTRIBE code includes a relatively complex new reward direction mechanism. In light of both the security risks of new code (even well audited), as well as the proposal above to reduce reliance on TRIBE incentives, this feature would not be used initially.
Turbo will remain in closed beta until a time when the FEI supply can more comfortably expand.
PCV leverage strategies such as FIP-101: Borrow DAI on AAVE - #3 by storm would not be pursued in the short term, with the exception of FIP 102: Propose and use a FEI-A vault on MakerDAO if approved by Maker DAO.
Notably, the governance upgrade of FIP-82 would proceed as planned.
- Simplify xTRIBE rollout
- Keep Turbo in closed beta
- Do not pursue PCV leverage
- None of the above
The combination of some or all of the above actions will strengthen PCV, deleverage the protocol, and set up Tribe to survive over the coming months and years.