FIP-17: Add FEI to Yield Protocol

Proposals
1

FIP-17 - Yield Protocol Integration

Status: Stage 0 - Discussion

Author: @countvidal

Summary

  1. Open the discussion for FEI to be used as an additional stablecoin to be borrowed and lent at fixed interest rates through bonds at Yield Protocol V2
  2. To borrow FEI at a fixed rate, users must deposit ETH collateral at Yield Protocol and choose to borrow FEI.
  3. To lend FEI at fixed rate, users purchase fyFEI at a discount to FEI and redeem 100% of FEI at maturity.

Motivation

FEI DAO needs to be able to control the rate at which it lends FEI. Currently, the FeiRari pool is one of the ways the FEI DAO can control the rate at which it lends but it is variable. Yield Protocol would allow FEI DAO to control fixed term lending rates and further assist peg maintenance.

FEI DAO could buy and sell fyFEI tokens to influence the market fixed interest rates in the same way it buys and sells ETH in the open market to influence the FEI price. When FEI is trading above the peg we could buy fyFEI tokens to decrease the interest rate. When FEI is trading below the peg we could sell fyFEI tokens to increase the interest rate. A high-interest-rate currency should appreciate relative to a low-interest-rate currency (Which goes against uncovered interest rate parity theory but empirical studies have documented that the high-interest-rate currency does not tend to depreciate as predicted by the theory).

Yield Protocol

The goal of the Yield Protocol is to bring fixed-term, fixed-rate lending and interest rate markets to decentralized finance using a new kind of token they call “fyTokens.” (You can read their whitepaper on fyTokens here.) Version 1 of the Yield protocol will include fyTokens for the Dai stablecoin. Called “fyDai”, this new class of tokens will enable fully collateralized fixed-rate borrowing and lending in Dai.

fyDai tokens are Ethereum-based tokens (ERC20) that may be redeemed one-for-one for Dai after a predetermined maturity date. fyDai are analogous to zero-coupon, or discount, bonds. The fungibility of these tokens is expected to encourage the liquidity of the tokens, due to their ease of transfer and their ability to take advantage of the financial infrastructure for tokens, such as decentralized exchanges.

  • Add FEI to Yield Protocol
  • Don’t Add FEI to Yield Protocol

0 voters

4 Likes
2

I support this initiative.

It permits to open FEI Bonds market (fyFEI) and go beyond the variable rate lending model.

Bonds are an important piece for stablecoin business. It creates more predictability for future interest rates and can also help to protect the peg in the future.

When listed, It would be good to deploy FEI there using the approved framework.

1 Like