FIP-74: Buyback Adjustments

Status: Last Call


This proposal seeks to get consensus on how (if at all) to adjust the Tribe Buybacks.


Per FIP-73 (which is passing but has not yet completed the 4-day vote cycle), we are now seeking to decrease circulating FEI in support of the peg as part of our Contractionary Monetary Policy.

One way to do this is to stop or decrease Tribe buyback amounts.

Currently we are buying-back with 20% of APR (calculated weekly) for Tribe.
At the current protocol equity of ~300M, this is $1.15m of FEI being put into circulation per week.

((300m * 0.2) / 52) = $1.15m

As protocol equity lowers, so too do the buybacks, so there does exist some amount of scaling within the system as protocol health increases or decreases.


(Note that this will be moved into last call 24 hours from the time of this post, and then to snapshot 48 hours after that)

Voting should be multi-choice, and offer options to adjust buybacks as such:

  • Keep at 20% of protocol equity
  • Reduce to 10% of protocol equity
  • Reduce to 5% of protocol equity
  • Pause buybacks

Definitely in favor of reducing. Something around 2-5% so we maintain some buybacks is worthwhile if it makes sense.

Prefer pausing to 10 or 20%, for now.

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One statistic I’d like to calculate before forming a strong opinion here is how much each weekly buyback affects our collateralization ratio at each APR % point. Whiteboarding this out now and will come back with some stats.

I do think buybacks are an important thing to keep going from a PR and user-engagement perspective. Not sure if <10% makes sense for that but that’s a gut reaction and not fully backed by evidence.

Okay, here’s the stats, given the current context of 615M protocol controlled value and 315M user circulating FEI:

At 20% APR, we are sacrificing 8 basis points (0.08) of our collateralization ratio per week
At 10% APR, we would be sacrificing 4 basis points (0.04)
At 5% APR, we would be sacrificing 2 basis points (0.02)


I have proposed to pause buybacks entirely. I have also not really observed how the existing buybacks also preserve/improve token prices. Furthermore buybacks should only be executed when the market conditions are favorable. Currently I think buybacks are more like ‘discretionary spending’.

I would suggest also putting in a review period at 3 months to see whether we should continue the moratorium or change the buyback policy at that future date.


After calculating the above stats I’m solidly against keep it as is, and would vote for 5%. I’m very against pausing buybacks entirely as it’s a major feature of our protocol and was voted in as part of V2.

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We should be open to fully pausing imo, buybacks are at the will of tribe holders and 0% APR is perfectly acceptable for the time being.

As a tribe holder, I’d personally feel much better using those assets to defend the peg and preserve PCV.


Open to this, though if we made this process more automatic that’d be great.

Right now APR% is a fixed amount that has to be changed via governance. Buyback amounts are reactive to protocol equity only.

If we made APR% reactive to CR, we could automatically shrink (or pause, with a floor function) buybacks in a contractionary period, and grow them in an expansionary period (with a ceiling function to limit maximum APR)


@klob thanks for running the numbers. I’m in favor of reducing the buybacks to only 5% APR. And, if needed, totally pausing the buybacks. I also really like your idea to automate the process to make APR percentage reactive to CR.

Moving to last call.

I’d also support a scheme for algorithmic management of the buybacks with control levers for emergency pause and target CR and APR percentages.

Until we know we are not in a bear market, we should completely pause buybacks to preserve protocol equity.


Snapshot is live!