Hi Joey ! Can you explain why you keep expecting the the reweight to happen soon ? The sell pressure keeps delaying it, as the further away we are from the peg, the bigger the window grows. Then some form of buying pressure at very low levels is also enough to delay the reweight too. It could repeatedly move from 15% burn to 3% burn without ever reaching incentive parity (we’ve seen this play out already).
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Currently burn incentive is a lot higher than mint incentive, so the arb you describe probably couldn’t really happen.
To get to the peg, several changes are requires. To suggest only say option 1 or 3 will irreversibly damage the project reputation, there is only 1 shot at restoring the peg. We need a combination of:
- Restructuring the direct incentices. Remove exponential burn - there is too much to lose now that we are regularly in the 20% burn area. also cap burn
- Use PCV now - force reweights when you are overcollaterized. There is simply too much use
- Token utility. Push for Aave and Compound asap.
Could there be a simple change to allow the reweights to actually happen? The more time fei spends <0.99, the more damaging for the project reputation.
I agree and for moving forward I probably like 4 the most combined with some tuning of reweighting conditions.
May I suggest to further strengthen 4 by somehow using the burn fees as buying power. If instead of burning the FEI from the selling fees they go to the reserve, there will be more resources available for keeping the peg stable. They can’t be used directly though since you can’t buy FEI with FEI…
Another idea can be to use the eth that the buyer is not getting and immediteally execute a buy with it. For example if I want to sell FEI and I am supposed to get 1 eth according to the current price of FEI but because of penalties I get only 0.9, after my sale the PCV will execute a buy order with he remaining 0.1 . In this way every sell with a high burning fee pushes the price up. I might be missing something but it sounds interesting 
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The burn rate should be reduced as much as possible. This is the price drop factor of the secondary market.
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After you start staking, you must increase the apy of the tribe. This may be the price increase factor for the tribe. Currently, the Tribe holders who conducted pre-swap are suffering.
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re-purchase and incineration of fei & Tribe in the secondary market through community funds, etc.
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Work with partners who can build multiple use cases, such as fundraising platform through fei.
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Absolutely, but the exponential burn needs to to away for most protocols to add this, I believe.
exponential burn is there only for incentivized addresses, protocols that are interested can be allowed to use non-incentivized trading addresses
This is the issue I am taking an emphasis on these two days.
I agree. Currently the issue is that Fei has no demand/use. Since things are overcollateralized, start like makr and establish the peg. Get demand for Fei happening in various applications and then gradually move back to PCV
- start collateralized like makr to stabilize peg to $1
- once peg is anchored to $1, work on demand for Fei to be used in various applications
- gradually move to the current system of Fei once steady state is achieved through above.
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How does this matter in current situation though? Until FEI has real utility, secondary markets reflect the burn, as no one likes to hold FEI. And at the same time, the utility integrations can come only when the asymmetric burn rewards are gone, as they are too dangerous for 3rd party protocols too. So again, big changes are needed to get to the peg which should be achieved with 1.3bn in the bank.
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we are deeply burnt, how about you?
first important priority, do whatever to get FEI back closer to the peg as soon as possible, then we can talk about future! manual trigger the re-weight, the slower we do this, the situation is going to get worse. Don’t wait till even manual trigger does not help.
Hi Joey,
I want to first say congratulations and I think many are underestimating TRIBE’s potential tith the US$1.3bn of ETH that we are sitting on. Think about the yield we can achieve from systematically selling upside option structures while at the same time protecting collateral via purchasing downside protection. The US$1.3bn of ETH puts us in a highly advantageous long ETH position - this is the largest algo stablecoin rerserve in the ecosystem right now and also a far superior position than MKR as MKR’s reserves are debt collateral. Our reserve on the other hand, we own and is an appreciating asset.
As such my suggestions will be premised on protecting this golden goose of ours, ie. we should not have proposals that would drain our ETH reserves (ie. capping burn) or highly inflationary to FEI (reduce our collateralization ratio).
Suggestion 1 - I highly do not recommend as it goes against the grain of us trying to build a self-sustaining product.
Suggestion 2 - I agree and would like to further suggest that the buy reward incentive should be accelerated as FEI goes away from the peg and decelerated as it approaches the peg.
Suggestion 3 - This is the suggestion that I think we need to push through ASAP. Arbers need to know that there exist a window for them to close their arb and end-product users of FEI also need to know that there are several time-zone friendly windows during the day for them to get out if need be. It will greatly restore confidence to the system. Another concern that FEI holders might have is bots front running them in this window, so perhaps an auction system to redeem FEI for US$1 and pro-rated based on demand/supply would be helpful.
Suggestion 4 - Agreed price floor and it helps FEI become deflationary. Our reserves will be buying FEI cheap.
Suggestion 5 - I highly disagree with capping the burn. Like I said TRIBE’s golden goose is the US$1.3bn of ETH we are sitting on. A run on that means we lose the golden goose. At the same time, I understand that a non-functioning product would also be the death of us. Perhaps a better suggestion is for the burn to be less exponential and perhaps even linear to 1 between 1 to 0.95, ie. 1-0.95 it is what it is and maybe a factor of 2 from 0.95-0.9 and a factor of 3 etc.
Happy to discuss more. Discord me at blueb0ttl3.
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I feel we should do a forced reweight ASAP. It doesn’t matter whether it helps just a bit or nothing at all - it is important to see that feature used and its consequences. If we are afraid to use it, then it’s better not to have it at all.
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It has been mentioned in some of the previous comments. Option 3) would be deadly for the protocol. It would provide arbitrageurs with a profit opportunity without or very low risk:
- Buy FEI below peg with incentive.
- Wait for reweight
- Sell FEI after reweight
- Repeat 1)-3) forever
This would create price volatility and empty the reserves of the protocol.
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(especially since you can buy TRIBE at a discount in the TRIBE-ETH pool without ever having to touch FEI)
→ can you explain how this can be done? I thought it’s not possible currently to buy it at a discount, as you can buy FEI at a discount for ETH, but then if you want to buy TRIBE you have to sell that FEI you bought for ETH and this incurs a burn penalty currently which makes the whole thing not profitable?
What is an Algorithmic Stablecoin?
It must has a rebase mechanism (in FEI’s case, reweight) to constantly set the price to peg.
Now what FEI has?
A coin you dare not to sell because of the high burn rate.
A staking. (not yet)
then What is FEI without the re-weight?
Right now FEI needs to fix the reweight bug. As in real world condition, a reweight will almost NEVER happen.
For those you do not know how it works because it’s too vaguely described in the doc, you can open Fei Protocol this page, let me explain when a natural re-weight will happen.
Only when Sell Burn Rate = Buy Reward Rate, the re-weight will happen. And the projected time to reweight = (sell burn rate - buy reward rate ) / reward increment per hour.
This mechanism is flawed. When price dropped sharply, sell burn rate will increase quickly, leading to (sell burn rate - buy reward rate) increases → delays the reweight.
if prices rises, buy reward rate decreases, reward increment per hour decreases, WOW, (sell burn rate - buy reward rate)/ increment also delays the reweight.
I can see why the reweight happens in testing environment, only when the price of FEI is stable for like (8 hours) during which nobody buys or sells it, the PCV will happen.
I do think, for a project that holds 1.3 billions USD value, we expect more testing crews in the pilot testing phrases. Rather than letting 1.3 billion USD to test for your flawed design.
With those being said, I think as long as the re-weight mechanism is fixed, there is still HOPE. But it needs to be fast. The staking would NOT do much for FEI. As long as the sell burn rate goes beyond 30% and actual FEI prices dropped to 0.7$, people will no longer to wait for FEI anymore.
They will rush out at every Reweight, if there are any manual ones.
For the options mentioned by Joey, I personally think 1, 3, 5 can all work. And can be fast.
If you want to save the project, act fast.
– Adding comments from Auditors. We should noticed this before. That reweight will never happen naturally.
“Moreover, since performing a buy operation in the first place will either decrease or reset the time-weight function, other users may not have enough incentive to move the price back to the peg, and since there will no longer be incentive parity, the EthUniswapPCVController will not be able to do a conventional reweight, instead having to use the force reweight function.”
According to Joey, he is waiting for Staking to alleviate some sell pressure before a force reweight. But please note TIMING is also very important.
Like if you did a force reweight y’day at $0.97, maybe only 10% wanted to get out and 90% will stay.
Right now it’s $0.95, maybe 30% wants to get out, If staking does not help, which I think it won’t as the tribe price is low, the APY won’t be too high. The price will dump, and by $0.9 the real FEI price will be at $0.7 something. Nobody will stay.
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I am thrilled to see this level of discussion and engagement from the community. Love this, it is great for the project. There have been a lot of great points, I have tried to read them all. Given that the goal is to maintain the peg as close as possible to $ 1 (stable) while also keeping the reserves stable, I believe we could implement a combination of the different options that could help both in the short term but also create longer term sustainability.
I agree that FEI needs to be incorporated into other DeFi protocols and adopter, used, and for this is critical that the peg can be maintained and that the measures that we implement, generate enough confidence that the peg will be kept long term.
Let’s gather some more data once staking rewards start in a few hours, but I believe that with the feedback provided by the community there is enough light to write a more formal proposal, with changes that can be implemented right away and others that could take a little bit longer but would help for longer term stabilization (for example, option 4 above).
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If we are worried about front-runners when broadcasting a reweight – we can partner up with taichi network to hide the transaction until it is mined.