Reserve Stabilization

Really appreciate the thoughtfulness of your reply. Thank you very much.

| Inaniel
April 10 |

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It’s hard to tell. What I’m about to say is a simple analysis of what would happen in one extreme scenario. There’s a lot I can’t take into account because it’s a very complicated system, given all the psychological forces that affect it.

So here’s the question I’ll try to answer: what will the price of tribe be if all of the circulating FEI is bought by the protocol at $0.9 or $1 and the price of tribe reaches the floor that protects us against 51% attack?

Note, before anything, that this floor is only theoretical at the moment because most of the Tribe is timelocked or in possession of the DAO. This explains why the price of tribe has often been below this price floor in the past week.

Ok. At the moment I estimate there are 813M - 290M = 523M circulating FEI. This number could grow as people speculate that they’ll be able to sell at $0.9 or $1, creating an incentive to buy FEI from uniswap. But let’s assume for simplicity it’s 523M.

  • If FEI is bought at $1: then the remaining PCV will be 1024 - 523 = 501 M. In this case the market cap of tribe would have to be at least 1002 M to be protected against a 51% attack. This would value each tribe at about a $1. That said, though $1 would be near the market price, it’s redeemable value if we, as a community choose to abandon the project as the FEI holders want to abandon at the moment would be around $501M/138M = $3.63. Of course, no individual will be able to choose to sell at that price, but the community might choose to vote to do so all together. I don’t think that’s a desirable outcome, but it’s an important one to consider when we consider how much we lose if we adopt this proposal. In one sense, the tribe of price might drop to around 66% of its current value. On the other hand, it’s redeemable value if we choose to abandon the project is around $3.63. That means we could all still profit upwards of 25% on our genesis investment and also return seed investments.

  • If FEI is bought at $1: then the remaining PCV will be 1024 - 523 = 553 M. In this case the market cap of tribe would have to be at least 1106 M to be protected against a 51% attack. This would value each tribe at about $1.106. It’s redeemable value if we choose to abandon the project is around $4.00. Again, I think that would be extremely undesirable outcome. But it paints a clear picture of the situation we’d be in.

What all this is to say is that, despite all of the scaremongering we’ve witnessed over the last week, the Fei Protocol remains in a rather strong position. We can indeed afford to pay out every single FEI holder. Whether we should is another matter. I think we shouldn’t because it won’t solve the problem that we’re all most concerned about: the incessant attacks against the team and the project. My take is that those attacks are more so based on people’s inability to accept their responsibility and competitor’s fears that Fei Protocol will be tremendously successful. Needless to say, the picture I paint above shows that neither of those concerns will disappear after passing options 1 or 2. After all, those that leave might eventually realize they made a mistake and lost money relative to staying with us. And our competitors will do the very same computation I just did and realize that the Fei Protocol remains in an extremely strong and promising position.

Ask Bitcoin, Ethereum, or Avalanche: the path of disruptive technologies is riddled with catastrophic mistakes from its users and resistance from the legacy infrastructure it threatens.

1 Like

I agree with you about not offering exit at $ 1. But what about exit at $0.9? There is no short-term profit for FEI investors. The protocol and PCV would be in a better position to grow and it would benefit long term holders of TRIBE.

Look the clear answer to this mess is this - release all the PCV $ETH to $TRIBE holders. Let $FEI burn down to $0. I think this VOTE WOULD PASS!!

$TRIBE would triple in value…

Let us go through a thought experiment, with the ideal outcomes in genesis. Perhaps the situation would be:

  1. USD value in ETH raised at ~200m USD
  2. Day 1 integrations with various DeFi protocols (CRV pool, your pick of lending protocols, yield farms, etc.)
  3. Sufficient external demand to maintain peg with infrequent direct incentive and reweighting imbalances

In this dreamland, the peg is held, TRIBE holders got it for cheap, the PCV is overcollateralized, TRIBE has pretty much unlimited upside if ETH does not retrace 50%.

We have no idea whether the direct incentives or reweightings would be enough to give the market confidence, but perhaps the external liquidity would be enough to stabilize. It’s an experiment that could have gone right. Right now, the crypto world is quite short USD to go all out long everything crypto, so you can imagine that there is significant demand.

There is currently very little trust in the system that FEI has provided. Unfortunately the project raised too much ETH, and it has turned into a full blown liquidity crisis. It seems clear to me that this trust, the thing that decentralization aims to distribute through systems instead of people, needs to be rebuilt. There is no option to trust the system since supply and demand is so imbalanced at the moment.

That leaves us the only option being trusting the team to execute the best plan for all parties. My personal take on TRIBE holders demanding any portion of the PCV is that this will significantly weaken the entire project. The only reason to have a stablecoin is to avoid the volatility of crypto. The longer the current situation drags on, the weaker the FEI brand becomes and the less likely the project is to succeed over time.

The $1 redemption is an immediate fix to the supply/demand problem, and you will immediately have a usable product again.

1 Like

The Fei Labs team will be voting “no change” on this proposal.

We see short and long term tradeoffs between $1 and no change.

For $1 redemption:

+immediate peg restoration
+setting precedents of TRIBE maximally voting for the FEI peg
-Reduction in PCV to deploy towards FEI integrations

For no change:
+focus on integrations and mechanism improvements
+more PCV to deploy towards FEI demand generative use cases
-sets a precedent of TRIBE not voting maximally for the FEI peg

This vote has been divided, with either decision favoring certain stakeholders in the short term. Most importantly, we are building Fei Protocol for the long term, and we hope to create unity around that ideal.

The voting numbers are split across all sizes of participants. It is not just about whales vs average users or pre-swappers vs short-term flippers.

We believe that it is possible to find a solution that compromises between these two positions, like the spirit of the “The Undo Button.” If no change wins, we’d like to explore sentiment and further develop this option and other popular community proposals.

The team will be voting “no change”. We will focus on proposals to reinstate peg maintenance in the short term.

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Congratulations. You’ve killed your own project by choosing ‘no change’ instead of ‘$1’.

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How soon can you restore the reweight mechanism?

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Agree with no change. Glad you made your position public. there is a better way forward than just paying out $1. It doesn’t even guarantee the peg holds after paying out $1.

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People who own fei don’t belong to the community, do they?

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I agree with your sentiment. Your singular focus should be the longterm interest of the protocol. I think you made the right choice.

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The long term interest of a stable coin project is to be. . .stable. Every day the stable coin is below peg it loses credibility in the eyes of the wider market.

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That’s right, screw the people who bought FEI below the peg and who are supporting its current value.

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To the Team, I appreciate your thoughtful response on this vote, and your well-reasoned explanation. If we are thinking two or three steps ahead; that we need a mechanism to create a stable coin, then we need as large a PCV as possible to create a long runway.

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They have destroyed $FEI, but $TRIBE controls (i.e. OWNS) that $ETH. $TRIBE holders v. $FEI holders - it’s family warfare but $TRIBE has all the votes… So unfortunately $FEI is worthless in the long-run and $TRIBE gets the $ETH value…

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Thanks for the transparent update @joey.

This has been a rocky start, but I trust you and the rest of the team are holding the community’s best long term interests at heart. Keep pushing and I’m sure we can get FEI back to $1 while preserving as much of the PCV as possible.

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NO CHANGE, YOURE RIGHT! Because the first two options is not a good solution. Brainstorm people let’s do it, fei and tribe holders, this is a revolution. Calm down and we will see good results in the future! Fei n tribe to the moon! :rocket::rocket::rocket::rocket::rocket:

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you are wrong… if you dont believe this project… sell all and get out please :slight_smile: thanks

Well written post ! I commend you for that. We all want this. Even the TRIBE holders want this immediate fix ! But can you give us a guarantee that the peg will hold ?

@rock-the-blocks I agree - we just needs longterm stability vs short term. I’ve lost a ton; however, I still think that a functioning protocol vs a quick fix will serve all stakeholders better. “If you’re going through hell, keep going” - Churchill

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