Why I'm excited about Liquidity-as-a-Service and protocol-controlled value as a $TRIBE holder
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1/ The most important thing about a stablecoin is its peg. The second is liquidity.
$FEI is not just a stablecoin - it's the *most* liquid stablecoin on Uniswap v2.
2/ It's so liquid because it uses Protocol Controlled Value (PCV): i.e. the protocols *owns* its TVL - to provide liquidity for itself.
This is a concept @feiprotocol championed around the time that @OlympusDAO $OHM also came up with a similar idea.
3/ Instead of mercenary TVL, where traders say bye bye to your protocol the moment you stop paying them millions a day in inflationary rewards, Fei owns its TVL.
It does this by making a trade with you:
> You deposit 1 ETH
> They give you 1 ETH worth of $FEI
4/ Fei then takes that ETH to do whatever they want.
For now, it's mostly providing liquidity to their own protocol, which explains how liquid $FEI is as one of the largest Uni v2 pools.
5/ But if the collateral is used to do whatever the protocol wants and not "backing" $FEI Maker-style...
What's actually backing the value of the stablecoin?
6/ Today, $FEI is overcollateralized. But it also had a complicated design involving incentives for selling below peg/ reweighing of their Uniswap pool.
As you may recall, that didn't work at all.
Shortly after closing the largest auction in DeFi, $FEI peg broke dramatically.
7/ What most people don't realize is $FEI actually recovered and has maintained its peg since May.
It did this by stripping away all the convoluted mechanisms and adopting a simple seigniorage model (enabling redemptions with the protocol).
8/ But to me Fei as a stablecoin is probably the most boring aspect of the project.
Its 0 to 1 idea is Liquidity-as-a-Service, which is the core focus of "DeFi 2.0".
9/ Recall earlier how I mentioned Fei uses its PCV to provide liquidity for itself.
What if it did this for other protocols?
10/ Fei + @OndoFinance allows new projects to provide liquidity for their own token by only contributing their own token to a liquidity pool.
Fei then provides the other half of the pool with $FEI, and bears the IL for the project.
11/ This is a 2-10x capital efficiency over a protocol seeding its own pools completely / paying out liquidity mining rewards to trading firms.
It seems like some projects are already starting to catch on to Fei's DAO-to-DAO angle.
> Treasury swaps (currently underway with $BAL)
> Earmarking 5% for a Fei-ecosystem fund
> Governance mining to hyper-grow DAO-to-DAO integrations (here's a great article from the king @JacobPPhillips):
16/ Over time, I see $TRIBE as not only reflecting the adoption of $FEI, but as buybacks are dependent on protocol equity, $TRIBE also has the potential to be a DAO index play, as more DAOs begin to integrate deeper with Fei.
17/ As a final note - two things I'm bullish on:
a. Projects that recover from catastrophic events then thrive, and b. Young energetic founders willing to try new things.
@Joey_Santoro and team fit both buckets and I'm excited to see where the project goes.
18/ Stay tuned on @theBlockcrunch for an upcoming episode, where we break down the nuances of Fei v2, and what it means to be a stablecoin for DAOs.
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How to Get Rich in Crypto (without getting lucky):
Inspired by @naval's timeless thread, here are some lessons from 100s of convos I had as an investor and as an interviewer on @theBlockcrunch speaking to people in crypto who "made it".
Whether you're a founder, investor, trader, operator, developer - most people in crypto get rich by the same thing: owning assets that appreciate in value over time.
✅The idea of onboarding billions while preventing sybil via biometrics is powerful.
🚩If profitable enough retinal scans could probably be spoofed and operators have no incentives to stop fraud as they earn commission (ht @richardchen39). Wells Fargo anyone?
✅Using ZKP to preserve biometrics <> address privacy is reassuring.
🚩If biometrics data is stored in a central repository could be a massive honeypot?
0/ Disclaimer: predictions are mostly done for fun and are not necessarily my investment theses. Timelines are mostly arbitrary just so I have some sort of benchmark.