EDIT: updating this with more options from discussions in #governance
There is quite a lot to discuss overall, especially higher level things such as integrations and PCV diversification. We’ll be able to leverage the position of the protocol into some successful integrations and stabilizing the peg over the coming weeks.
For this discussion I’d like to focus on the short term situation regarding the launch and the peg:
- The PCV and circulating FEI are massive
- The only current use cases for FEI involve supplying it as liquidity on AMMs or trading it for ETH/TRIBE
- There is a lot of sell pressure - secondary spot price of FEI is ~.90
- Oracle price movements also affect the incentives and time to reweight
Direct incentives are working as expected. The buy and sell pressure are converging on the secondary market price of FEI between .88-.90c. This is keeping the reweights from happening because buying pushes the reweight into the future.
Overall I think it would be healthy to allow a lot of the built up sell pressure out so the reserves and price can stabilize. Here are some options arranged from shortest term to longest term:
Force reweights using the Guardian to allow people to sell. Will be a bit clunky because it would slingshot up and down, but this can be done immediately and communicated via twitter etc.
Increase the growth rate of incentives. This could end up in a situation where there is a lot of buy support and inflation but keeping the price low around .90. Can be taken straight to a DAO vote.
Setting a pre-defined cadence for reweights such as every few hours, or every time the price goes below some %. Requires a minimal contract change and DAO vote.
Using the reserves to stabilize the price more directly by selling ETH for FEI with some spread below the peg price. Requires more substantial contract changes but can likely be written, reviewed and voted on within 1-2 weeks. This creates a price floor on FEI and could be low like .95.
Capping the burn % to something like 2-5%. This leads to faster reweights and makes integrations easier.
I think it will be good to gather some more data on the mechanism especially after the staking rewards kick in tomorrow.
Lets open up the discussion and see how people feel about the above options.