I’m a newbie trying to understand exactly how the FEI protocol works. I’m confused that the protocol PCV is currently significantly higher than the value of FEI outstanding.
My understanding the FEI are issued by the protocol to anyone (the issuer) that supplies the same value of ETH in return. In initial phases incentives existed to make supplying ETH more attractive.
The protocol then issues an additional amount of FEI equal to that given to the issuer. This additional issuance of FEI, together with the issuer supplied ETH collateral, is placed in a Uniswap liquidity pool. This means that the protocol has now issued FEI equal to twice the the value of ETH supplied by the issuer. (1/2 the Fei being held by the issuer and 1/2 by the liquidity pool)
This seems to imply that, on issuance, the amount of FEI going out always exceeds (by a factor of 2) the amount of ETH coming in.
I am confused therefore as to how the total PCV is so much higher than the outstanding amount of FEI held by users and by the protocol - $663mm PCV vs $560mm FEI outstanding.
Did the collateral rise dramatically in value, or (more likely) I have completely misunderstood something.
I would be most grateful to anyone that can explain.