I think the reweights is an inefficient mechanism to keep the peg and possibly make the PCV prone to attacks in cases of ETH volatility
Inefficient mechanism to keep the peg!
any stable coin that seeks to be adopted by the masses need to be real stable
the more unstable it gets and the longer the lost peg last the worst it harm its adoption as a stable coin
the reweights is not an efficient mechanism to keep the peg at exact 0 with no lost time
so the reweights mechanism is bad for Fei adoption
I think a better mechanism to keep the peg is something like the Maker’s PSM it was successful at keeping DAI peg at exactly 1$
we can use 10% of the total PCV reserves in the PSM and replenish or absorb from it on need
and use the rest of PSM reserves to Farm with and generate income for the protocol
with PSM you can buy and sell FEI directly from the protocol for another stable coin
for example USDC or USDT
if FEI get above the peg any one can instantly deposit USDC to the protocol and get FEI and thus increase FEI supply and lower its price to the peg
if FEI get below the peg any one can instantly deposit the cheap FEI and get USDC from the protocol this will lower FEI supply and increase its price to the peg
we have now almost 1.3 billion ETH
we can sell 100 m ETH for USDC and build our own PSM (or just fork Maker PSM)
and use the rest 1.2 B ETH to generate an income to the protocol
this way we will have a strong FEI that is always on peg and a big income for the protocol
Take a deep breath and be patient. The incentives work perfectly, they keep FEI between 0,85$ and 1$ (burn taken into account), which is exactly what the market wants right now!
So now, you’re wondering: why is it working well, but fails to be pegged to 1$?
It’s pretty simple: smart money didn’t pre-swap and got something around 15% bonus in TRIBE. The current peg is sitting between 0,85$ and 1$ because no-swappers are leaving the boat with a small benefit.
Conclusion: it’s working well. It’s just that the market forces don’t want a FEI at 1$ right now. The protocol will slowly enforce the peg to 1$ in the comings days and weeks.
Interesting, but it we would provide a way out for FEI holders without any penalty. It not seems to be fair. By this way, people can “sell” their FEI below the peg without penalties. Seems that is not sustainable.
I was thinking about other use of ETH reserve, an auction mechanism:
People can say how much discount on $ 1 they accept, if any. And you pay first the ones with the high need to sell FEI right now. Actually this is how central banks work in exchange markets.
Auction to buy FEI
We define how much FEI we would buy for testing
people send the accepted discounts
FEI fills the orders of high discount first, until we reach the amount defined for this auction.
no it isn’t working well and even if Fei price is 0.99$ it won’t be good enough
a good stablecoin that seeks massive adoption need to be 1$ all the time otherwise these price flactuations will hurt its adoption
the reweight mechanism is simply poorly designed for this purpose
I think there is a high sell pressure but with PSM if we burned 100 - 200m FEI we will restore the peg and it will be a very good move for Fei reputation and future adoption… the no. 1 factor in stable coin adoption is keeping the peg
look at DAI once it restored its peg using the PSM its supply grow 10 times in few months
It’s not the stabilisation mechanism that doesn’t work. I’m pretty sure it should and will be twicked a bit, but that’s not the issue right now. By enforcing a peg to 1$ you would automatically give me a 15% bonus because I didn’t preswap (thanks!).
Where does the issue come from then? It comes from the genesis event design: the event allowed smart money to buy 1$ of FEI with 0,85$ of ETH, making a latent risk-free profit.
So now, any no-swapper can make a small profit by selling FEI between these 2 boundaries. Once profit takers will be out of the game, FEI will slowly move back to 1$.
The genesis does not matter anymore. The price that was paid during the genesis is sunk cost. FEI has to be pegged to function as a stablecoin, and the reason why it’s not pegged right now is because the reweight mechanism is flawed.
the stabilization mechanism doesn’t work… I am a member of the Maker community for more than 2 years and DAI was always off peg until they deployed PSM although they used to have much stronger mechanisms to keep the peg in comparisom to the reweight mechanism yet they failed to keep DAI peg
The genesis does not matter anymore. The price that was paid during the genesis is sunk cost. FEI has to be pegged to function as a stablecoin, and the reason why it’s not pegged right now is because the reweight mechanism is flawed.
Right now DAI peg is always 1$
if it fluctuates in any exchange then it is due to poor liquidity in this particular exchange not because of DAI global peg
It’s barely a couple days old and meant to be a fully decentralized global stable coin. It’s not going to just flash back to a dollar. And it’s damn close to a dollar!
Re weighting is built into the system to happen over time. And it relies on sellers right now, which many don’t want to yet. Again, it’s days old.
Also, how are we supposed to let the team see how the protocol works if we just fix it by hand like this? It’s not going to let us improve the tech. It’s a bandaid.
We should increase the functionality of tribe, push up the price of tribe, and make many people want to enter DAO, in order to resist the selling pressure of Fei. The current selling pressure is not the selling pressure of tribe, but Fei, so that tribe has more functions to have the holder of Fei to buy tribe, so that Fei can describe a dollar.thanks.
People needs to understand that we are only day #2 after genesis… the team are probably already working on integration where fei will be use as collateral on their plateform or on different plateform… etc
One important missing thing here is the way people should do proposal… we need the step to follow to be able to write down proposal… and see if the participant are there and the dao doing is job