PCV Diversification Primer

Creating a post here to kick-off discussions around PCV diversification for FEI PCV.

PCV diversification seems to be a good strategy that aligns the interest of both FEI users (stability) & TRIBE users (pcv value is locked on a base layer of tokens). Additionally, I feel like its’ very important that TRIBE is able to preserve PCV value while FEI stablizes. As it stands PCV volume has a very high intrinsic value and more impactful than any 30-40% collateraization ratio changes and its important that we not give that away as we move towards FEI stablization with reweights & auctions.


  • Helps lock down PCV value (there by providing incentives to arbitrageurs for stablizing FEI).
  • Helps decouple specifically against ETH volatility
  • Additional diversification opportunities to farm governance token of symbiotic projects
  • Better optics on bear market as effectively prices required for sub 100% collaterization will be very low.


  • Upside of ETH is not captured as PCV value
  • Additional risk of multiple projects

Poll: Here’s a quick poll to get an initial view of what general sentiment looks like when it comes to pcv diversification (Only blue-chips projects (btc/eth) & stablecoin (usdc) has been included):

PCV Diversification Ratios:

What should be pcv split ratios?

  • ETH 100%
  • ETH 75% USDC 25%
  • ETH 50% USDC 50%
  • ETH 50% USDC 25% WBTC 25%
  • ETH 80% USDC 10% WBTC 10%
  • ETH 75% WBTC 25%
  • ETH 50% WBTC 50%

0 voters

PCV Diversification Timing

When should PCV Diversification occur

  • Along with FIP-3 (reweights/DI re-open)
  • After FIP-3 is implemented
  • In place of currently planned FIP-3 (instead of reweights/DI re-open)
  • PCV diversification is bad
  • Lets hold off on this until EIP-1559!

0 voters


As a short term way to protect from volatility, I’d support getting some USDC in the PCV (DAI/SUSD would be better), but I’d prefer more decentralized tokens that have weak correlation to ETH (we can run the numbers to establish a list of candidates… but surely that stat is available somewhere).

I’m pretty sure too that once PCV generate yields, we can use some of it to buy ETH options & protect from a sharp drop in the value of ETH this way.

WBTC doesn’t provide much value because of the correlation between ETH & BTC.


Hey @Eswak, I agree ETH options chould be a consideration long term.

Short of stablecoins like DAI/FEI/USDC or RAI I doubt it will be possible to find less co-corelated crypto coin during periods of high volatility outside of real world assets (perhaps we can consider avenues like silver index implemented by Maker recently!). If you do find something that has survived macro down trend (like the 2k18 to 2k19 bear) I would be quite surprised.

WBTC is that one coin that is historically is able to survive downtrends with less volatility compared to eth (% changed) which is why it’s a suggestion. If you check the prices ETH has almost 30x’d in the last year where as the number for btc is around 5x.


Thanks for the post @redball and I love the idea of diversifying the PCV. Similar to @Eswak, I’d prefer Dai over ETH due to the decentralization characteristics. One of the key benefits of Fei is that it is fully decentralized and personally I’d like to stay away from centralized stablecoins.

I don’t hate the idea of swapping for Dai and depositing Dai into Aave, particularly due to the Aave’s recent AIP-16 proposal (https://app.aave.com/governance/11-Qmf1JeXiw8BDUoKJ89VmUJ8wy22D2udqL4HxprCG7DZ5zG). PCV would earn whatever the variable interest rate is for Dai plus stakedAave rewards, thus diversifying PCV even further.

Here’s a whacky idea that is probably not ideal for the short-term…write far out-of-the-money call options on ETH and use the proceeds from selling options to deposit into a lending protocol to earn yield. If ETH rips up, PCV maintains a strong collateralization even if options end up in the money. And if ETH is slightly up to down significantly, PCV keeps the premium. Opyn is an options protocol but it doesn’t have enough liquidity or Dai options to do this today.


50 ETH/ 30 Dai/ 20 WBTC

I’m a big proponent of a proposal like this for short term diversification. There are so many good long term ideas on the discourse about diversification of PCV, but implementation will take some time. Like @Eswak loan program.

I think this is the perfect way to poll the community to get a quick diversitfication effort included into one of the many FIPs that are coming down the pipeline. Hopefully we can find some consensus through these polls. I’d encourange @redball if possible to add options to the poll(if possible) as people suggest them in the replies.


Synthetix recently launched some synthetic stocks (sFB, sAAPL, sAMZN, sNFLX, sGOOG, sTSLA), not sure how that would work at a large scale (the PCV is a big whale :stuck_out_tongue:) but maybe it’s worth investigating.


Controlled diversification would be highly beneficial to the PCV. Sticking to altcoins, without venturing out into the world of something like SNX could be a loss, With the amount we currently have to work with, It seems safe to assume that acquiring some of these in small numbers for study, could yield great results, and be potentially more stable than delving into altcoins.

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Another question about the diversification. Would this process happen all at once or would we buy out other assets on a steady basis until it hits the target weighting? I would propose the latter to DCA, unless we can time the market.

Something I have been working on is a system for people to submit proposals and petitions, specific to the PCV. right now, our forums are set up in a way that is very generalized. Moving forward, I am going to try to encourage user groups to collaborate on ideas and projects. This could be anything from diversifying the PCV, to leading the charge on internal projects. Community is incredibly important to me, and building something powerful here is a goal of mine.

I dont think moving a massive amount of ETH quickly into target asset groups is wise, carefully considering what the best return for the PCV, and then acting from there through governance seems best to me.

in terms of DCAing, I agree with you, moving funds to safely acquire other assets over time is a good move.

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That would be dope :slight_smile: and is needed to introduce new diversification options (e.g. “I suggest we add a Balancer pool with 50% WBTC 50% DAI” => forum discussions => community supports it in snapshot vote & decide the initial %PCV allocation => it gets implemented => onchain vote => deploy). We need the forums for that.

Down the road, to discuss reweights between the collateral allocations of the PCV, we can have something like the Curve gauge weight voting where every week the weights of various allocations are decided on chain by governance voters. But that assumes everything can be done on chain and the PCV can be swapped from one collateral to another, which is not possible today (and IMO that’s priority number 1 because any diversification choice will involve converting some of the ETH PCV to other assets).

Other ways to diversify in the short term would be introducing new bonding curves in addition to the ETH one (e.g. send DAI, get FEI), but that is only working when new capital wants to get some FEI. We need a way to swap chunks of PCV from one asset to another.

I’m currently looking at Curve x Synthetix cross assets swaps. Because the PCV is such a big whale that wants to move millions at once, not getting rekt by slippage is going to be a challenge. Curve is “designed for whales” and can process large transactions with very low slippage (even cross-asset ones). I think we should interface with Curve for that. Right now, on Curve x Synthetix, 367 ETH gives 1M DAI. On Uniswap, it would cost 373 ETH.

Honestly, even moving “just” 100M$ of ETH isn’t straightforward :sweat_smile:


I like this idea. As in the beginning of the bonding curve there is a discount on buying FEI, we can have a demand for that. What will be a good next bonding curve? DAI, COMP, AAVE, etc?

hahahaha that`s true, I would prefer to use its size in our favor. Instead of just investing and holding other tokens, it is more interesting to create new pools with FEI, providing liquidity to them. It facilitates FEI usage.

To help stabilizing the peg, the next pool created could be a stable pool. The benefits of this idea are detailed here.

Exactly, and it allows the protocol to “farm on a 2x leverage” : when the protocol is market making, the FEI its mints to provide liquidity comes from nowhere & is destined to be burnt. That’s what the protocol is doing in the FEI/ETH pool. It earns transaction fees with 2.5B$ liquidity, with only 1.25B$ of collateral. At least that’s one way to see it.


If Balancer v2 is not ready (or we deem that “new protocol” not mature enough), there is also the Curve pool factory.


I’m curious about one thing. Is there any benefit to include TRIBE as a percentage of the PCV reserve?

Hey @arcology it would be similler to token buybacks/token burning. The net result would be it inadvertently rewards initial investors at the cost of protocol treasury PCV stability.

Technically for longevity of the project locking to stables or other diversified would be better move than buying back tribe but I could see bigger tribe holders favoring your suggestion.

I think the next two logical bonding curves would be something like DAI and RAI.

While having mostly ETH in PCV and having an issue of not being able to convert large amounts into other assets easily I think we can lean into ETH yield assets like stETH, Yearn, and Alpha Finance for example.

I think having a generic treasury contract which can hold assets and exchange using DCA on various AMMs would be a great central place that can allow for a wide variety of integrations. We can have whitelisted actions that can be taken by a community held multisig which operates under the direction of some kind of investment charter or snapshot votes.


Had a more in-depth look & that won’t work for us because to make cross asset swaps on Synthetix we need synthetic ETH (sETH) & the Curve pool to start from ETH is already imbalanced with too many ETH :frowning_face:


I’ll start to work on that, but I’d suggest to build more modularly. We can have multiple DCA contracts of various types (Uniswap swapper, Curve swapper, Balancer swapper, Synthetix swapper…) each selling one type of asset to get another. When we need to make some conversions, their “queues” are filled, and over time, they acquire the desired tokens until the chosen repartition of assets in the PCV is achieved. Then of course we can have a central orchestrator that takes decisions based on some metrics, but in the short term we can do movements with simple DAO votes.