As I shared in the Resume TRIBE Buybacks thread, I believe Tribe should focus more effort of making FEI a great product and increase adoption.
Indeed, a cool narrative would be to have each Tribe being fully backed by stacked ETH + the yield of additional investments. You can see my work on Asset Liability Management for stablecoin issuer here. Most of those idea are also discussed in my article Crypto Banking 101 (published almost one year ago).
Part of achieving this magic place is to get a lot of leverage from the stablecoin issued, i.e. FEI. A stablecoin is usually a quite stable source of funding and a cheap one at scale (MakerDAO pays only 1bps on DAI and there is too much demand).
I see two “simple” actions to provide FEI users a better value:
- Be first class at keeping the peg
- Provide a native risk-free interest rate
Happy to hear more thoughts about how to make FEI more competitive and used (one idea is to provide payment rails for web3 merchants but that’s way more complicated).
Be first class at keeping the peg
It is no surprise that FEI being a stablecoin it is pegged on the US Dollar. Yet the question how good the peg should be. I made a Twitter poll, and the anser is 22% for 0bps and 63% for 10bps (the rest for bigger spread).
Recent history shows that FEI was quite good at keeping the peg after the changes of FIP-72. Yet those last few days, it’s below the 10bps bar. Part of that is the 1bps FEI-USDC pool that is greatly incentivized but fully drained now.
One corrective action would be to decrease the fees for the PSM from 10bps to 3bps. I use 3bps and not 5bps (range of the USDC-FEI pool) because there should be a buffer to execute trades (the PSM is based on DAI, but that can be swapped to USDC without cost). I would personally even go to 0bps as to be on par with DAI and FRAX (FRAX is not that hard pegged but have insane liquidity in Curve with an insane A factor so the result is a very good peg). It’s not like this PSM is providing much revenues (I guess around $20k for the last 2 months).
Provide a native risk-free interest rate
The whole idea of a stablecoin issuer is to issue low cost liabilities (FEI) and put that to work to generate revenues. In a competitive market, there is a need for providing value to your users. I understand you get 15% with governance reward by providing GUNI LPs on Fuse. While it’s good for people in this forum, it’s not good for real users. A simple stacking contract for FEI would provide a simple interaction for other smart contracts (Compound is integrated with MakerDAO DSR for instance) and even for exchanges (CeDeFi). The idea was already mentioned here.
Even a simple 2% would provide a great step in this direction as it would decrease the spread between the supply and borrow rate on money markets for instance (and integration of this feature on Fuse would be great putting FEI as the best stablecoin there to be deposited). in fact, this solution would be great for both FEI and Fuse (as other protocols will take more time to implement it).
To grow, you simply allocate for of your profits to FEI holders (not arguing about going as wild as Anchor).
What do you think?