I am wondering,
So lets say we vote option 1 or 2.
What is stoping arbitragers, whales, or people that want this project to fail to come in and buy FEI for cheap and then sell at the buy back event?
The current price of FEI is unlikely to drop and if the vote passes for 1 or 2 then it definatelly wont drop before the vote. So then the risk for arbitragers to buy FEI before the buy back is minimal, but they will easily and surely make profit after selling it at 1 dollar.
Nothing. That’s why option 1 & 2 are a bad idea. It rationally rewards people to scoop up any FEI for less than $1 and then dump with zero risk. It will be a rush for the exits. It’s also not clear to me that all scenarios for Oracle-based manipulation and flash loan attacks have been considered. Genesis Undo Button is the only fair way that prevents bot or arb hacks and aligns incentives correctly.
Worse, the scenario doesn’t even guarantee that all FEI bagholders that want to exit will be compensated. Theoretically this number could be higher than arb opportunity + PCV allocation. You will end up with a vocal number of people that didn’t get to exits fast enough. Then, as soon as you end the redemption window, you’ll get FEI buyers complaining about the volatility and arguing for the PCV purse to be opened again.
If ETH price tanks at any time in this process…it will create a really tough scenario.
The very same arbitragers will race with each other to make a profit, and driving FEI’s price back to to $1. The market relies on arbitraguers to keep the prices of things at balance. FEI needs arbitragers in order to keep both upper half and the bottom half of the peg.
This is not a lose-win, this is a win-win. A good stable coin makes it so that market incentive drives the price towards the peg.
That’s a problem, because it will give the market the illusion that FEI’s price issues have been solved for the long term, and there will still be excess supply on the market, and as soon as PCV redemption window is closed, FEI price will crash…because the mechanics have not been fixed yet. So you’ll have other market buyers complaining that the $1 FEI they bought is now 0.75 cents. This scenario could get worse if ETH price tanks 50%. All of PCV collateral is in ETH right now. The DAO risks undercollateralization if any market event harms ETH’s price. We are playing a dangerous game right now, the UNDO BUTTON is the only rational way to fix this.
There are a lot of integration that will happen before the redemption ends. the selling pressure will be over when the redemption is done. and the integrations will drive FEI demand.
Agree that FEI’s problem is not solved and needs tweaking. The way to find out is to release selling pressure and improve the protocol
Buying a token and then selling it at a higher price at a later date is not an “arbitrage”. I don’t know why this is so hard to understand for so many. Also, a lot of people seem to be painting “bots” as the enemy, when literally anyone can take this risk (buy, hope for redemption price that is higher).