FIP-49 FEI x VOLT Potential Cooperation

Greetings to the Tribe.

I’m @OneTrueKirk, working on Volt Protocol, a floating price stablecoin based on RAI but backed by a wide range of collateral assets. We’re a “friendly fork” and are sharing 6% of our governance token VCON with the Reflexer community in exchange for Reflexer Labs’ permission to use the RAI code.

We’ve been pursuing close cooperation with partners including Rari and Olympus. When setting out to build a new product in DeFi, I believe teaming up with existing DAOs is the best approach.

We’d love to work with the Tribe, allocating 6% of the VCON supply in exchange for support with our liquidity needs for launch and other forms of collaboration described below.

  • Liquidity support from the Tribe. We hope to see the FEI protocol support our launch by providing a substantial amount of FEI/VOLT liquidity, ideally on Uniswap v3 with full range (can be tightened later, we may see some initial volatility and full range minimizes oracle manipulation risk). This pool will be our core price oracle. In the future this position can be managed to stay in a range around market price.

  • VOLT as a high-yield PCV asset. VOLT can be considered a proxy for exposure to long tail DeFi assets that might be too risky to include in FEI’s backing. Onboarding VOLT as part of Fei’s PCV backing reduces the protocol’s exposure to ETH volatility while also offering an opportunity for yield.

  • Flexible leverage for FEI lenders. In various high demand Fuse pools, users will be able to mint VOLT against their fFEI, giving FEI users access to more capital efficient lending opportunities.

  • Control over VOLT credit allocation through VCON. Allocating VCON to the TRIBE means that in Volt v2 they will be able to direct a line of credit among assets of their choice, including PCV assets, preferred Fuse pools, or other opportunities for yield generation. The TRIBE owning VCON is like a larger bank taking an income-producing stake in a smaller bank with a riskier collateral basket.

  • FEI/VOLT LP as PCV for VOLT. Volt will likely carry out a bonding program via Olympus Pro to absorb PCV in exchange for VCON emissions. The FEI/VOLT pair is a natural choice if FEI helps us build up our early liquidity. The goals of this are as follows:

    • Preemptively build up surplus buffer, rather than relying on VCON as backstop
    • Productive reserve (protocol controlled liquidity)
    • Smooth supply dynamics
    • Ensure protocol is well capitalized for years of building
  • Bootstrapping decentralization. A large portion of the VCON supply is being distributed to partner DAOs including Olympus, Rari, Fei, and Reflexer. Our hope is to bootstrap an effective and decentralized community. We’d like to work closely with the Fei Labs team, but would also like to see the TRIBE community (as well as other partner DAOs) select one or more delegates to participate in VCON governance.

Looking forward to hearing feedback from the community. I believe there is room for a wide diversity of stable assets with different risk and return profiles, and that we’re stronger building together.

If you’d like to learn more or follow along with the project, please join us on Discord.

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Overall I’m extremely excited about this proposal. I think Fei brings a unique value to the table along with these other DAOs, and VOLT will be a useful and more conservative alternative to MIM for getting capital efficiency against yield bearing tokens.

Will address each of the points:

  • Liquidity support: Very logical value add Fei DAO can provide. We don’t yet have code for UniV3 or Balancer v2. @Eswak is prioritizing Balancer v2 code which can also support an embedded oracle, would this work? We can work on a lightweight deployment using Gelato for UniV3 if this is a requirement.

  • Would make sense to hold VOLT in PCV, should be limited to the amount of liquidity provided to start. Depending on where else VOLT is useful can consider deploying some amount to lending markets ETC.

  • Flexible leverage: This is great additional utility for FEI.

  • Control over VOLT credit allocation through VCON: This is logical as well and will allow TRIBE to increase relative debt ceiling for FEI based derivatives.

  • Olympus Pro bonding: This is a great way to bootstrap some of the PCV for Bolt. Fei Protocol can consider joining this as an alternative/complement to a direct PCV purchase of FEI/VOLT LP.

  • VCON delegate: Makes sense to include a delegate. At minimum we will form a process for participating with the VCON held by the DAO. Are your initial governance plans going to be on-chain, snapshot, or hybrid?

This partnership would be great for both protocols, and perfectly illustrates FEI’s utility as a DAO-first decentralized stablecoin.

DISCLAIMER: I am an angel investor in Volt. I’ve met Kirk and am optimistic about him as a founder and the utility of VOLT.

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Sounds Solid. Loving the inclusion of teams like Olympus, Rari, Reflexer… great community of talent to associate the project with!

Looking forward to it and all the best to the Volties!

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Thank you for your support Joey.

Regarding governance, we’d like to transition to on chain governance as soon as possible. Delegates from our partner DAOs can work closely with the core team in the early stage of the protocol. With a small and focused group participating in governance but accountable to a decentralized community, I think we can be effective and flexible while getting Volt off the ground.

In the long term, our flavor of RAI’s “ungovernance” is shifting from vote-based systems to liquid governance. Soon I will have more details to share publicly about our v2. The main goal is allowing the system to be controlled by open market processes, just like how RAI’s target price adjustment balances supply and demand to maintain stability.

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There’s strong goal alignment between Volt and Fei, I’m in favor of any of these opportunities.

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Hey @OneTrueKirk!

The cooperation is a good idea! Lending stablecoins are very complementary to Fei and it is also becoming clearer that Fei is the stablecoin for DAOs.

It would be interesting to know how each of these partners protocol will contribute, the role of each one for VOLT.

From what I understood, Fei would be assuming the IL risk from FEI/VOLT LP and the peg risk by holding VOLT.

What do you think about liquidity-as-a-service program for FEI/VOLT LP? I am asking this to explore if the model you suggested could be another product for Fei, like “Liquidity for equity”.

I am curious to know more about the differences between VOLT and MIM.

Thank you for the questions Bruno.

Fei would indeed be assuming the IL risk from FEI/VOLT LP for a period of time, however the Volt Protocol plans to take over this risk by onboarding the majority of FEI/VOLT liquidity into its PCV as a surplus buffer through an Olympus Pro bonding program. This will ensure the Volt system remains solvent in future volatility events. Since VOLT is a stable asset, IL risk is not too high.

The reason we can’t use the standard LAAS model for FEI/VOLT LP is that the Volt DAO doesn’t control any VOLT in the early stage of the system, as opposed to the governance token VCON which will be held in the protocol treasury.

We intend that this will be a long term partnership rather than a short term contractual service agreement. As VOLT proves its stability and scales its supply, it’s a great choice for a decentralized reserve asset for Fei. We also look forward to the Fei community’s participation in VCON governance. The amount of VCON the TRIBE would receive is a “founder-level” allocation, which shows the commitment we have to working together.

I am curious to know more about the differences between VOLT and MIM.

Here are a few key differences:

  • VOLT is based on RAI, so it is a floating price rather than a dollar pegged stablecoin
  • More conservative collateral factors than used by MIM for many assets
  • In v2, VOLT will have a novel “liquid governance” system inspired by Curve, Tokemak, and other innovative DeFi projects. Our focus is scaling governance to support an unlimited diversity of collateral assets in the future.
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Negotiations are ongoing, but here is an overview of the partners involved:

Reflexer created RAI, the code that is the base of our project. They’ve licensed code to us and are providing technical help including stability modelling of VOLT under various market conditions. We are distributing 6% of the VOLT supply to the Reflexer community, you can read more about this here.

Rari incubated this project even before we decided to use the RAI code, and Fuse will be a core part of our strategy. Details of the allocation to Rari are being finalized.

We are hoping to work closely with OlympusDAO since we will be conducting an extensive bonding program through Olympus Pro and expect gOHM or other staked OHM derivative to be a major collateral type. There will likely be more news on this soon.

I’ve also made a proposal to collaborate with FRAX on our liquidity needs, since there are limits to how much risk in our new stablecoin any single partner may wish to support.

I’ll emphasize that the FEI/VOLT LP pair is the only asset we plan to absorb into our PCV through our initial bonding program.

In the long term, I see deep involvement by multiple partner DAOs as a great path to modular decentralization, with different centers of expertise exerting their own influence over the system. I’m really excited by the potential collaboration here and the leading role the TRIBE can play in Volt.

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Thanks for the answers, @OneTrueKirk ! All clear. I liked the partnership idea between Fei and Volt.

What is a substantial amount for FEI/VOLT in your opinion?

We should come to consensus on this together, 10 million in a Balancer v2 pool seems like a reasonable target to me. This is enough liquidity to support liquidations and ensure a stable price oracle for Volt.

The Volt DAO will be conducting a bonding program through Olympus Pro to absorb FEI/VOLT LP tokens into its surplus buffer. We can expect users to provide liquidity and bond into the treasury in exchange for distribution of VCON. This way, the Tribe won’t be the only large LP in the pool as the size of Volt’s surplus buffer increases.

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Hey all,

This is a last call for comments before we move to the formal proposal stage of this cooperation.

To summarize the proposal so far:

Fei Protocol will enter a strategic partnership with Volt Protocol, receiving 6% of the VCON governance token supply in exchange for liquidity support as well as long term cooperation and involvement in VCON governance.

Our collaboration will evolve over time, but here are the specifics I’m proposing to start, with some modifications from what’s mentioned above.

Volt has identified Fuse as a primary mechanism for enhancing our initial liquidity. We will use a “VOLT Stable Swap Pool” that accepts exclusively VOLT as collateral and allows users to borrow other stable assets at affordable rates. Fei will be able to earn yield lending against VOLT, and we will be able to “piggyback” off Fei’s deep liquidity.

Given that FIP-39 has authorized up to $1m FEI for any verified Fuse pool, I feel $10m is a reasonable allocation for the Volt Stable Swap pool.

We hope to see Volt onboarded as part of Fei’s PCV, once a mutually agreed upon threshold of liquidity and history of price stability has been met. We can continue to discuss this and confirm plans in a future proposal.

Likewise, Volt Protocol will plan to incorporate Fei as part of its “surplus buffer”/PCV raised as part of an Olympus Pro bonding program. The form this takes will be confirmed in the future, and may include VOLT/FEI LP shares, fFEI from the Volt Stable Swap Pool, or other relevant asset.

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Hugely in favor! Its rare for any entity to be entrusted with this much of a token network, and I believe Fei and Volt have a ton of great integration potential.

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How would VCON be priced during its launch? If I am understanding the proposal correctly, it is essentially a soft swap of $10M FEI (since it will be paired in FEI/VOLT LP for an undetermined amount of time, and the balancer pool would be in the control of VOLT) for 6% of VCON circulation.

Otherwise would you kindly elaborate through what mechanism, or on what timeline, would the $10M FEI liquidity be returned? I am not saying it is likely, but in case that FEI protocol needs to quickly recall its LaaS and interest rate subsidies funds; how can FEI protocol recall this 10M deposited in the fei/volt LP? Does this proposal imply a lockup period for these funds?

Does Volt have any internal backstops against under collateralization, which could cause VOLT to plunge?

It is more like a loan of 10M FEI for VCON given the non-binding nature of our deployment, which is an extremely attractive offer for 6% of FDV of a fork of RAI with more unique collateral types.

Volt uses liquidations and is largely a for of GEB protocol by Reflexer, a very battle tested mechanism.