This proposal seeks to get consensus on whether to resume TRIBE Buybacks and at what APR.
FIP-74 paused buybacks in January as a sudden and significant market decline caused Protocol Equity to dip and a corresponding decrease in Collateralization Ratio. With no clear bottom in sight, this was an appropriately cautious move to conserve dry powder to protect the peg even if the market situation significantly worsened.
Our current Protocol Equity stands at ~$450m and a Collateralization Ratio of ~240%. At no point in the past 30 days has our Protocol Equity fallen below $300M nor has the Collateralization Ratio been less than an overly abundant 190%.
- Acquire more TRIBE for the protocol treasury to support continued deal-making and deeper alignment within the ecosystem via treasury swaps with other protocols.
The current timing of resuming buybacks is especially enticing, as the price of TRIBE in the past 30 days has reached new all-time lows in both stablecoin and ETH terms.
- Price support of TRIBE by increasing buying pressure and reducing circulating TRIBE. While market price is of little relevance to long-term holders, a higher price lets us perform treasury swaps with other protocols on better terms.
Or to put it another way, when we perform treasury swaps based on the current market price of TRIBE, Fei protocol is selling treasury assets at historically low prices. We are selling low, buying high relative to our swap partner protocols.
- Buybacks are a major feature of our protocol that was heavily promoted and voted in as part of V2.
20% APR $450m Protocol Equity: ((450m * 0.2) / 52)= `$1.73m in TRIBE buyback per week`
10% APR: $860k per week
5% APR: $430k per week
Credit to @klob, I have shamelessly plagiarized from their comments and calculations on the previous FIP regarding buybacks.
I litterally thought about posting this 3 days ago, thanks for taking the time to write something
We can do an approval vote:
- 20% APR
- 10% APR
- 5% APR
- More discussions needed
Then the most approved option gets an onchain vote if >0 ?
The current CR is high because user FEI is not growing fast enough. Capital is king and shouldn’t be wasted. After many years of using profits for buybacks, MakerDAO is now planning a capital raise (and yes, it made buybacks above the current price on average last year).
I also don’t see a real point on treasury swaps. It’s the flavor of the day in DeFi but again quite useless.
As a TRIBE holder, I want the return of TRIBE equity (RoE) to be the biggest and get a leveraged exposure on ETH. FEI is core to get cheap leverage.
If investing in TRIBE is getting 200%+ exposure to ETH and 30%+ non ETH RoE (incl. reward costs), I can assure you that it will not trade below the net asset value like today, it will trade at least 2-3-4x.
Optimization of the asset part is under way.
What is lacking is how to improve FEI footprint. There is no sliver bullet here, but that’s why I’m obsessed about getting the peg right. It’s far from enough, but it’s something easy (and FRAX is still better).
I would say work is needed. If we want to reward ourselves, let’s unwind all the PCV and just keep enough for FEI user to redeem other stablecoins.
I tend to agree with Seb. If we do reintroduce buybacks it should be at a conservative APR to fund the xTRIBE emissions in a sustainable perpetual manner. I’d rather spend that equity on getting more FEI demand. One idea @state (I hope this is the right handle) had suggested is to make a FEI savings rate similar to the Maker Dai Savings Rate. This is a true sink for FEI that can’t get multiplied in other lending markets
Very in favor of resuming buybacks. An approval vote sounds great to me.