This is how I’m interpreting the two recent proposals by Storm:
Given the overwhelming support and pending integrations with Aave, Compound, and our activity on Curve, on top of the existing and thriving integrations, it is necessary to optimize the protocol for increased utility and velocity of FEI across DeFi.
The two separate proposals (this one and FIP-27: Revamp FEI Bonding Curves ) should be executed together for a greater impact:
- Tighten the peg within 1% (this proposal)
- Raise the stabilizer to $0.995 redemption (lower the redemption fee from 1% to 0.5%)
- Lower bonding curve buffer from 1% to 0.5% ($1.005)
- Grow and diversify PCV via bonding curves (FIP-27: Revamp FEI Bonding Curves)
- increased caps and updated parameters of ETH, DAI, RAI, and DPI bonding curves
- Add LUSD bonding curve
Bonding curves have been a very effective tool for PCV growth and diversification, and we should continue to leverage them moving forward while exploring additional use cases for yield generation with the acquired funds. Per the proposal, we are not incentivizing just making it available.
Guaranteed redemption (initially at $0.95) has proved to be one of the most effective peg stabilization tools. Peg stability is one of the main goals of the Fei Protocol and moving the redemption rate to $0.99 has proved effective, but still, dependant on periodic reweights for tightening of the peg. With the lowered buffer to $1.005 (reflected in the updated ETH bonding curve parameters) and increased redemption to $0.995 we are inviting the market forces (arbing) to keep the peg as close to $1 as possible, and are standing behind it with our evolving PCV strategy.
I think this is a great step forward and is aligned with the v2 path.