FIP XX: FEI Savings Rate Lockups

Ideas
1

Right now the TRIBE DAO has a lot of exposure to short term ETH price volatility. The DAO holds ~$1 in stablecoins for every $2 of user FEI, so large FEI redemptions flow during ETH price decline would likely result in equity losses.

At the same time, the DAO is paying ~10% in TRIBE emissions for external DEX liquidity, higher than ecosystem standard cost of capital for borrowing against ETH or stablecoins. This liquidity can vanish at any time and does little to help in the scenario of an ETH crash coinciding with high redemptions demand.

There are several initiatives underway to address this, such as:

The combination of using MakerDAO as the TRIBE’s liquidity provider of choice and a FEI savings rate to provide a highly efficient FEI sink will already go a long way to lower the protocol’s cost of capital and secure the peg.

I would like to suggest another element that can complement these changes, adding a lockup component to the FEI savings rate using the TribalChief or other mechanism. Debt on a 3 month, 6 month, or 1 year lock greatly reduces risk to short term ETH volatility. Immobilizing ~20% of the FEI supply in longer dated debt would make the FEI peg substantially more stable and the need to sell ETH in a down market less likely.

Volt Protocol would take a keen interest in participating in such a program.

Given that little to no novel code would be needed to implement lockups, it is reasonable to consider this within the initial scope of the Fei Savings Rate program under the authority of the Treasury Pod.

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2

Fixed rate borrows of stablecoins on other platforms using FEI collateral are another strong consideration.

3

im not opposed to this. but I would like to see the TRIBE maintain it’s ability to adjust FSR parameters, especially in the beginning when the details are still being hammered out. longer term lockups can limit flexibility here, which would be my main hesitation. there might be benefits to remaining nimble, not sure yet

the numbers of how the lockup duration would interact with the yield rate also matter a lot

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4

Agreed, there are a lot of details to think about but I see major advantages to a longer lockup from a stability perspective. The FSR can have separately adjustable parameters from those of the locked portion of the supply.

The way I am imagining, you have ibFEI token which has floating/adjustable Fei Savings Rate, and can also do some kind of veibFEI or zero coupon ibFEI bonds and earn an additional fixed yield in FEI, TRIBE, or both.

The initial scale of locking should definitely be modest compared to the liquid portion however it is implemented, and could be ramped up gradually.

5

100% in support.

I would prefer a bond approach than a lockup period as it would be more useful in DeFi as collateral and providing the basis for a yield curve.

One option is to have the bond backed by the TribeDAO/Fei Protocol balance sheet, but another can be to use ETH/stETH in a trustless self liquidating bond issuance. The later should get a lower yield as it is more secure.

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6

Do you envision that the 3,6, or 12 month fei bearer bonds (thats what they essentially would become) having different interest rates? In which case does the DAO need to set these interest rates? or can they be floated on some kind of bond market to achieve price discovery?