[Proposal] Non-algorithmic stablecoin + TRIBE dividend

Ideas
1

Background
I’ve take a first shot at squaring needs of FEI, TRIBE, and team. This includes short-term: restoring FEI mechanisms, compensating TRIBE pre-swappers, and containing execution risk. It’s worth keeping in mind long-term value is derived from unblocking the protocol’s evolution, restoring goodwill, and ultimately restoring a truly stable stablecoin in a timely, durable, and orderly fashion. Let’s discuss.

Note: Collateralization ratio is the amount of collateral (reserves) which back a stablecoin. For FEI, it’s currently at 130%. This is considered good.

Proposal

  • Operate FEI as straight (non-algorithmic) fully-backed stablecoin for 7 days.
  • Distribute any excess Collateralization (>130%) to TRIBE holders as a one-time dividend

Mechanism

  1. Set a period of 7 days.
  2. Protocol buys and sell FEI at $1. No DI. No burns/penalties. Straight fully-backed stablecoin.
  3. After 7 days, snapshot TRIBE holders. Dividend any collateralization > 130% to TRIBE holders. Offer in ETH or the difference minted in FEI.

What does it accomplish?

It clears the decks.

TRIBE gains immediate short-term distribution of “genesis profits” by dividend and long-term value from the cloud being lifted from the project.
FEI holders gain predictable liquidity to buy, hold, and sell.

  • Restores confidence and confidence equals value.
  • Rebases FEI as a stablecoin as intended
  • Allows integrations to proceed to build value
  • Rightsizes project in an orderly fashion
  • Buys time to figure out algorithmic stabilization.
  • Zeros out the arb opportunity in FEI for now
  • Maintains collateralization ratio.

Aligns incentives. Separates short-term and long-term interests in an orderly fashion.

What’s in it for everyone?

  • FEI holders - Confidence to buy, hold, or sell FEI
  • TRIBE holders - Dividends out the “profits” from genesis. Long-term value. Mitigates some losses.
  • FEI protocol - Rebases the protocol to a manageable size. Still overcollateralized.
  • FEI Team and investors - A way forward. Buys time. Buys goodwill. Execution safety. Gets long-term holders on board. Leaves people not feeling sour. Your project doesn’t implode. Long-term $$$. You’re heroes not villains.
  • Partners - Integrations, confidence.

Risks

  • There are are coding risks, mechanism risk.
    Recommend this paring this solution to the simplest elements.

  • We’re exposed to a disorderly exit should ETH value quickly fall 20%.
    Recommend spending a few % of PCV to hedge ETH risk.

  • The biggest risk is taking too much time (makes everyone mad, exposes us to market risk) or engineering overly complex solutions.

  • To the extent that FEI wants to continue as a stablecoin, it will eventually have to peg at $1. Any “foot-dragging” or trying to outsmart the market in valuing with random reweights or complex “undos” is going to get arb’d out of the PCV.

What won’t some people like?

  • Doesn’t bring back the past
  • Doesn’t “punish profiteers”
  • Not fancy

Why should the community vote for this?

  • It aligns FEI, TRIBE and long-term stakeholders.
  • It separates out long-term and short-term holders in an orderly fashion.
  • It can be explained simply.
  • It can be executed quickly.
  • Predictable over a time period. No arbing. No panic.
  • It has less risk than untested algorithms made in the heat of battle.
  • The alternative is to bleed slowly. Genie is out of the bottle. Everyone is mad.
  • It’s the least bad solution
  • Everyone gets something and is better off than they are now.

I can answer questions below. Thanks for time, looking forward to feedback.

3 Likes
2

These are some example scenarios. Obviously subject to market forces.

  • Examples

    • Starting: $1B PCV, $750M circulating FEI.

    • 550 FEI exits. Ending $200M FEI, $260M PCV, $190M dividend to TRIBE holders

    • 300M FEI exits - Ending: $450M FEI, $580M PCV, $120M dividend to TRIBE holders

    • 0 FEI exits - Ending: $750M FEI, $1B PCV, $0 dividend to TRIBE holders

3

Of course, this would work, yes. You could run FEI at peg with it being backed 100% by centralised stable coins. One thing is for sure it would completely go against the slogan “The Stablecoin for DeFi”.
What I am interested in are other models with slight backing by centralised stable coins and other uses for the PCV.

Also, I would have to read more about the dividend distribution(maybe some other users have some ideas), I am not sure how that would play out. However, it is an interesting concept to align the goal of FEI and TRIBE holders.

4

I’m curious whether we can use part of the PCV to farm or invest in a basket of stable coins. The yield given can perhaps then be distributed back to TRIBE owners as a continuous dividend on a vesting schedule similar to TradFi?
Or perhaps have anyone looked into whether stablecoins have interest-bearing elements so that the value is continuously maintained?

5

Thanks for the feedback. FEI remains backed by ETH (decentralized).

The proposal suggests to temporarily replace the direct incentives and reweights (which have so far had difficult to predict side effects). with a mechanism to achieve the goal directly - simply buy and sell at $1.

That both releases the sell pressure and removes the arb opportunities which drain the PCV. There’s no question as to the value of the token - $1, which allows integrations to continue and value in the ecosystem to build.

The goal is to align TRIBE and FEI and make everyone better off than before. This gives TRIBE holders an upside to FEI holders exiting which is what was previously missing.

As far as the dividend, after the 7 day period, snapshot the chain, compute the dividend. TRIBE holders could either claim the dividend in ETH. Or, if the team wants the value to stay in the system, mint the difference in FEI and the TRIBE holders could claim in in FEI.

6

The crux of the proposal is: what’s the advantage of reweights versus just setting the peg at buying at it?

The reweights simply cause bots to sell, causing panic. There’s no buy pressure (because why buy if the price will be driven down). Then when buy incentives kick in, bots purchase knowing the system will eventually reweight which drains the PCV slowly. It only makes regular people angry when they miss the window.

The main disadvantage of a fixed peg is when an attacker doesn’t believe the system can truly maintain it. If the reserves are proveably adequate, it takes the panic buying and selling out of the system. Which is success! People want a stablecoin.