Stablecoins and The FEI Protocol

Stablecoins seek to replicate the advantages of traditional, stable currencies via some form of digital money. This means that, in general, a stablecoin is a cryptocurrency collateralized by the value of a specified underlying asset.

In practice, stablecoins allow market participants to avoid the volatility of digital assets like Bitcoin and Ethereum (ETH) without converting to fiat currency. The ability to minimize volatility and move in and out of fiat is critical and thus stablecoins are becoming a large part of the decentralized financial ecosystem (DeFi).

FEI is a new algorithmic stablecoin that attempts to solve the problems that have plagued existing stablecoins thus far.

Investing in the TRIBE governance token which controls FEI via a Decentralized Autonomous Organization (DAO) which is similar to Compound may represent a compelling way to capitalize on the growth of stablecoins.  

Largest Stablecoins

Tether: lack of transparency; centralized single point of failure and control

USDC & Binance Coin: Centralized, controlled by a single entity

Dai: Decentralized, expensive b/c overcollateralized 150%, complex

Empty Dollar Set (EDS): decentralized, algorithmic, highly volatile

Dynamic Dollar Set (DDS): decentralized, algorithmic, highly volatile

The FEI Protocol

The Fei protocol issues the FEI stablecoin. This stablecoin has an uncapped supply that grows with demand. The FEI stablecoin will enter circulation via a bonding curve sale. The curve approaches and fixes at the one-dollar peg. The protocol will enable users to create bonding curves denominated in any ERC20 token eventually, but at launch only ETH can be used to purchase FEI.

The initial bootstrapping phase will last until 250 million FEI has been distributed via the ETH bonding curve. After this period known as “Scale”, the bonding curve price will fix at a governance determined buffer above the peg, thus creating a price ceiling for the FEI stablecoins.

Most DeFi platforms use a user owned Total Value Locked (TVL) model. This model often requires large rewards to incentivize users to keep their money in. There is always a risk of a large user pulling out and crashing the system and money leaving for greener pastures overtime.

Fei Protocol developed a Protocol Controlled Value (PCV) model to solve these issues. PCV is a subset of the concept of TVL, in which a platform outright owns the assets locked into the smart contracts. This allows more flexibility to direct capital as needed and better maintain the peg.

Fei Protocol also plans to implement “direct incentives” in which trading activity and usage of FEI are incentivized in such a way that traders naturally help drive FEI price back to its peg.

Coupled with the FEI stablecoin, the team will also launch a fully decentralized autonomous organization (DAO) from the get-go. The Fei Protocol DAO will be governed by holders of the TRIBE token. Token holders can vote to add new bonding curves, adjust price functions, and adjust the allocation of the PCV.

Key Terms:

  • Community/Team/Investors split is 80/15/5.
  • Community liquidity is instant. Investors have a linear time-lock. Team has back-weighted time-lock.
  • The majority of the TRIBE will be controlled by the DAO.
  • Genesis Group gets early access to the Initial DEX Offering. FEI earned in the Genesis Group can be converted to TRIBE before others bid the price up.

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