A relevant benefit I see in scenario 2 is to be a little bit more resilient regarding panic days. In the last weeks, crypto market was even more volatile than normal and concentrating in 3 days we have more risk to get bad ones. Daily volatility of ETH in the last 30 days was 9%, so it is even higher than the slippage costs. To have more chances to mitigating these unpredictable movements in the short term, I would prefer averaging during 7 days with scenario 2.
So with 40 ETH per swap, assuming no sandwich, the price impact is 0.2% and slippage is 0.1%. With optimized sandwich, the arber will buy from 0% to 0.2% and the PCV will buy from 0.2% to 0.4%, assuming that the slippage increases linearly in quantity. So the actual slippage is probably around 0.3%.
I also second other member’s preference for Scenario 2 because of perceived DCA benefits and my conservative outlook on being sandwiched so to retain a ~1% loss of the trades.
Alternatively if arbitrage is a large enough risk then can we consider moving funds via archerDAO to prevent the transfers from getting intercepted?
The core team has voted in favor of two options: a 40k ETH swap into DAI and no stablecoin swap. We believe both options are in line with the vision of having FEI as a decentralized stablecoin supported by PCV.
Pros of a DAI purchase:
- DAI can be used to provide FEI-DAI liquidity on UniswapV3 or BalancerV2, etc.
- Earning stable yield to grow PCV
- Reduced exposure to ETH volatility
Cons of a DAI purchase:
- Increased reliance on other USD stablecoins
- Second-order dependence on USDC
Since the size corresponds to about 15% of PCV, we are comfortable with the cons listed above. We want the Tribe community to have the ultimate say on whether other stablecoins belong in the PCV, and with this voting decision, we support our stance against dependence on custodial assets, including USDC. We also look forward to continuing the discussions on other assets we can purchase with the swapper.
UST but it can suffer break from peg as well, it went down to 0.96 but now back up to $1.
Even DAI can be minted by using USDC as collateral. So if we can swap to DAI, I assume we can have some portion swap to USDC as well.
FEI is intended to be an algorithmic stablecoin that does not (in time) need to be excess collateralized by assets backing it. In general, diversification does not provide value to FEI, only to TRIBE.
While I agree that diversifying PCV has the potential to benefit TRIBE, I am voting against FIP-6 for the following reasons:
- The current proposal simply trades ETH for stablecoins, without an associated plan for yield generation, management, etc. On its face, I am not convinced that the atomic act of converting ETH into DAI/USDC has a higher expected value than holding ETH.
- The execution plan as described, selling ETH on Uniswap v2, is fraught with costs, slippage, signalling, manual operational risks, etc…it is “lossy”.
I suggest that the TRIBE community consider an alternate path:
Use ETH PCV to create a one-sided range order on Uniswap v3 , e.g. offering to sell PCV for 2800 to 4000 USDC (or some other range determined by the community).
This would have the following advantages over the status quo plan:
- Yield-generating strategy, that produces income (in the form of trading fees) for TRIBE holders (instead of slippage and costs)
- Programmatic diversification, not human/manual/operationally led
- Ecosystem benefits: additional liquidity
- Scalable to other PCV diversification goals (e.g. DeFi tokens, DPI, WBTC, etc)
This approach has the potential to single-handedly make TRIBE the most important liquidity source in the entire DeFi ecosystem.
I support for Robert’s simple plan of utilizing Uniswap v3 to both sell ETH for stables as well as generate yield while ETH remains in the selected range. The plan includes yield generation and obviates the need for incentivized smart contracts to facilitate the sales which would be subject to significant cost and potential frontrunning.
I guess we’ll now use bonding curves instead, but let me just throw it out here that if we use the swapper, we could reduce a big chunk of the arbitrage slippage by having the keeper pay the protocol instead of the protocol reimbursing the keeper for gas.