FIP-XX: CRV Gauge Proposal for Fei Liquidity Pools with Convex Support
And
FIP-XY: Proposal to acquire CVX for Fei Protocol PCV
Status: DRAFT
Authors: @arcology; @DioDionysos; @fei.saver; @meertitan; @hawthorne
With input by: @eswak; @afirebrand; @incoomer
Executive Summary
This proposal will, in aggregate:
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Request Convex to vote on Curve in favor of a CRV gauge for the FEI-3CRV metapool.
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Request Convex to vote on Curve in favor of raising A factor in the FEI-3CRV metapool to 500.
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Request Convex to vote on Curve in favor of a CRV gauge for a new âFei PCV 1â pool that will contain stable assets held in the PCV, and where the protocol will be able to supply liquidity and farm CRV/CVX rewards.
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Acquire up to 1,000,000 CVX tokens (approx $30.0M) using the ETH from Compound and Aave deposits, to be held in the Fei Protocol PCV.
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Reduce TribalChief AP rewards on the FEI-3CRV metapool from 1000 AP to 0 AP over one month and redistribute TRIBE emissions to the following:
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Incentivize the FEI-3CRV gauge via Votium with 400 AP (~600k TRIBE/epoch of 2 weeks). With the 1:3 ROI of bribing, this should distribute the equivalent of >1200 AP of rewards on the pool in the form of CRV and CVX tokens. .
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Incentivize the âFei PCV 1â pool with 350 AP (~500k TRIBE/epoch of 2 weeks). The protocol could deploy liquidity there, and capture a ROI of approx 1:3 for DAO revenue.
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Incentivize the existing D3 pool via Votium with 250 AP (~350k TRIBE/epoch of 2 weeks).
Abstract
Fei Protocol is a decentralized, scalable algorithmic stablecoin collateralized by the âProtocol Controlled Value (PCV)â. It aims to be the stablecoin for DeFi, with upcoming improvements to the core protocol through its V2 framework, including 1:1 redeemability as the mechanism to hold its dollar peg; a more flexible and robust PCV portfolio management; as well as emergent business adjacencies such as its âLiquidity as a Service (LaaS)â offering in partnership with Ondo Finance and its PCV management system in partnership with Balancer. As of this writing, the PCV holds approximately $1.2B in assets with a collateralization ratio of ~350%.
Feiâs smart contracts have been audited by OpenZeppelin and Consensys Diligence.
Motivation
Fei Protocol is currently at a high growth trajectory with a robust rollout of new features in its V2 framework, and a potential merger in the works with Rari Capital. Nevertheless, the core product of Fei is its stablecoin and integrations are necessary for success and mass adoption.
Curve is a major player for stablecoin exchanges and for ensuring liquidity to other stablecoin assets and additional yield strategies. Defi Pulse ranks Curve at #2 with over $15B TVL. Fei Protocol deployed a Factory metapool on Curve under its TribalChief rewards contract and now has about $230M TVL and a daily volume of ~$3.5M.
Two Governance proposals for listing Fei on Curve did not meet quorum due to voter apathy. At this juncture, Convex has graciously offered to assist using their veCRV voting power to assist Fei Protocol to acquire a gauge, which allows the Fei pool to acquire CRV rewards, which would attract more liquidity into the pool as well as allowing for more advanced strategies (developed by other protocols) for yield using FEI.
As a participant in the Curve ecosystem, Convex acts as a de facto governance module for curve through its cvxcrv product, which allows vlCVX holders to vote to direct weekly Curve inflation to gauges and vote within the CurveDao. Convex Protocol has distributed over 400m in revenue to its holders over a 6 month period.
Votium is a gauge marketplace built on top of Convex that allows interested parties to incentivize players in the ecosystem to vote to increase their gauge weight, driving $3.35 for every $1 spent on incentives â an especially potent strategy for Fei Protocolâs immense PCV.
To drive more revenue (through inflation) to the proposed FEI gauge through Convexâs Flywheel, defend its gauge weight on weekly votes, and create deep liquidity for FEI through gauge incentivisation, Fei proposes to purchase and lock CVX tokens to boost its PCV and have âskin in the gameâ with one of defiâs most important primitives.
More information can be found with Eswakâs proposal to Enter the Curve Wars.
Specification
FIP-XX
This proposal will begin a voting post and âtown-hallâ type thread on Convex Governance for a minimum period of 7 days. We will then propose a snapshot vote for CVX holders to vote on whether they support using the veCRV holdings of Convexâs DAO to proxy vote on Curve.
Once this snapshot vote passes, a new sCIP and CIP (snapshot signal vote and then DAO vote) will be created for the purpose of activating a CRV gauge for the FEI-3CRV pool and the Fei PCV 1 pool. The amplifier (A) parameter of the FEI-3CRV pool will also be increased from 10 to 500 to optimize for swaps/slippage given the deep liquidity in the pool.
From Fei Protocolâs perspective this strategy will override the existing TribalChief rewards into the current FEI-3CRV pool as a far superior use of capital.
The protocol currently deploys 1000 AP on incentivizing the FEI-3CRV pool which amounts to about 750k TRIBE per week. The proposal will gradually reduce these rewards to 0 AP, and replace this reward stream by Votium bribes at a 3:1 ROI. This will drive more rewards than are currently distributed on the Fei metapool, and we will also be able to incentivize 2 more pools that increase FEI liquidity and strengthen our partnerships with FRAX and Alchemix.
Subsequently the rewards will enter one of the following streams using Convexâs Votium platform for incentivization:
- Fei will use approx. 600k TRIBE / 400 AP per Votium epoch to incentivize the existing FEI-3CRV metapool, given that a gauge can be acquired. However, Fei will not be able to deploy liquidity there as there is a risk avoidance with centralized stablecoins making up a majority of 3CRV. It is calculated that the ROI will be about 1:3.
- To counteract the effects of #1 above, Fei proposes to create a new âD3â pool of decentralized stables comprising FEI, DAI and LUSD. Fei has proposals put forward to acquire (or has already acquired) positions in both DAI and LUSD. The protocol aims to deploy a liquidity of at least $250M due to these positions. Fei will use approx. 500k TRIBE / 350 AP per Votium epoch to incentivize the creation and maintenance of a gauge. It is calculated that the ROI will be about 1:3.
- The existing D3 pool will continue to be incentivized by deploying approx. 350k TRIBE / 200 AP per Votium epoch.
FIP-XY
This proposal will spend up to about 3% of the PCV, drawing from the Compound and Aave ETH reserves to acquire 200,000 / 500,000 / 1M (based on DAO vote) CVX tokens of an approximate value of up to $30M as of this writing.
The method to acquire CVX to be finalized, but a preference to be via an OTC swap due to the high value amount of tokens being exchanged. In the scenario that the lowest amount is chosen, the required tokens can be purchased at spot price from the market.
CVX can be locked for 16 weeks to be able to vote on gauge weights, and drive even more CRV/CVX incentives to our desired pools. In the last Convex snapshot vote for gauge weights, 22.3M CVX voted.
The vote-locked CVX could be used as a diplomatic tool (weâd usually vote for pools with FEI in them, but we could also offer to vote for a partner protocolâs pool from time to time).
Voting Options
- In Favor of FIP-XX and FIP-XY with 1M CVX purchase
- In Favor of FIP-XX and FIP-XY with 500k CVX purchase
- In Favor of FIP-XX and FIP-XY with 200k CVX purchase
- In Favor of FIP-XX, Against FIP-XY
- Against all (do nothing)
The vote will be a single-choice voting. If no option receives the majority of votes (>50%), the amount of CVX purchased will be determined by the dot-product of the total number of each votes for each option by the list of options: A(1,000,000) + B(500,000) + C(200,000) + D(0) + E(0). If an option earns the majority, the winning option will be put to an on-chain vote.
- A - In Favor of FIP-XX and FIP-XY with 1M CVX purchase
- B - In Favor of FIP-XX and FIP-XY with 500k CVX purchase
- C - In Favor of FIP-XX and FIP-XY with 200k CVX purchase
- D - In Favor of FIP-XX, Against FIP-XY
- E - Against all (do nothing)
0 voters