Yes, the protocol’s original staking is based on Uniswap, so we have no choice but providing tokens in a 50/50 dollar value mix.
The other way to do it would be a TRIBE-only staking contract, where the protocol would mint matching FEI to the TRIBE staked. In that case there would be no way to stake only FEI tokens, but that use case can be taken care of by a separate proposal, like @redball’s FEI savings account, or the upcoming DeFi protocol integrations.
To go further on this topic, here is how that would work for an initial price of FEI = 1$ and TRIBE = 1.5$:
- Someone provides 1000 TRIBE tokens, for a value of 1500$
- Let’s say that is 1% of the staking shares
- The protocol mints 1500$ matching FEI (1500 FEI)
- Liquidity is provided on Uniswap
- LP tokens are staked to collect rewards
If the value of TRIBE increase two-fold:
- FEI = 1$ and TRIBE = 3$
- The original (1000 TRIBE, 1500 FEI) LP tokens are now redeeming for (707 TRIBE, 2121 FEI)
- On withdraw, 1% of the share of LP are taken out of Uniswap, which is now worth ~4242$
- 2121-1500 = 621 FEI are swapped to 207 TRIBE
- The user gets back 707 + 207 = 914 TRIBE = 2732$
- The user would have 1000 TRIBE worth 3000$ if they didn’t stake
- The protocol burns the remaining 1500 FEI
If the value of TRIBE drops by half:
- FEI = 1$ and TRIBE = 0.75$
- The original (1000 TRIBE, 1500 FEI) LP tokens are now redeeming for (1414 TRIBE, 1060 FEI)
- On withdraw, 1% of the share of LP are taken out of Uniswap, which is now worth ~2120$
- 586 TRIBE are swapped back to FEI, to pay back the protocol 1500 FEI (that burn them)
- The user gets back 1414 - 586 = 828 TRIBE = 621$
- The user would have 1000 TRIBE worth 750$ if they didn’t stake
As we can see, in both cases, the TRIBE staker is losing tokens & dollar-value, because they are carrying alone the impermanent loss (on a 2x leverage since protocol provides half the liquidity & is made whole in every situation). But they are also receiving the staking rewards on a 2x leverage (the protocol provide half liquidity, but does not take a share of the profits from staking besides what is required to make it exit without loss).
But those are the worst-case situations, where TRIBE value changes overnight & the staker withdraws directly after it. In practice, with the staking rewards, stakers should win in all situations. For instance, assuming a 50% APY and 3 months of staking (no compounding), the 1000 TRIBE staker will exit with…
- 1090 TRIBE if value doubles (36% APY in TRIBE, 72% APY in USD)
- 1181 TRIBE if value halves (72% APY in TRIBE, 36% APY in USD)
- 1250 TRIBE if value stays the same (100% APY in TRIBE & USD)
Problem: if TRIBE price drop by more than 75%, the protocol could be at risk :
- At 1$ FEI, 0.375$ TRIBE (75% drop)
- LP tokens are redeemable for (2000 TRIBE, 750 FEI)
- LP tokens are worth 1500$ (what the protocol matched, so it should sell all TRIBE to get back its 1500 FEI)
In that situation, I see 2 options : the position could be liquidated (but the TRIBE staker lose their tokens), or the staking position could be “locked” (impossible to unstake) while we wait for more TRIBE rewards to cover the missing value, or wait for impermanent loss to go in the other direction, but in these cases, the protocol emits more FEI in circulation than what is covered by the locked TRIBE, so that is not a good situation. Some TRIBE tokens could be locked forever, too, if the price never recovers and staking rewards end.