Thoughts on $FEI: the stablecoin for DAOs.
Why I'm excited about Liquidity-as-a-Service and protocol-controlled value as a $TRIBE holder
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Why I'm excited about Liquidity-as-a-Service and protocol-controlled value as a $TRIBE holder
👇
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.
$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.
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
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.
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?
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.
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).
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".
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?
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.
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.
It seems like some projects are already starting to catch on to Fei's DAO-to-DAO angle.
https://twitter.com/OneTrueKirk/status/1457887643602018306?s=20
12/ A few other "DeFi 2.0" protocols also promise capital efficiency over liquidity mining.
Today, this is how the market is pricing $TRIBE based on TVL as a rough proxy for traction.
Today, this is how the market is pricing $TRIBE based on TVL as a rough proxy for traction.
13/ Many balk at TVL, and rightly so.
It's a deeply flawed metric!
But as @dcfgod pointed out, $TRIBE also seems mispriced on a P/B basis when we compare the actual operational treasuries of DeFi projects.
It's a deeply flawed metric!
But as @dcfgod pointed out, $TRIBE also seems mispriced on a P/B basis when we compare the actual operational treasuries of DeFi projects.
14/ This is because net any liabilities (outstanding user-held Fei), Fei is sitting on $900M of deployable treasury.
So what is it going to do?
One thing it's doing right now is initiating a $170M buyback of the $TRIBE token
So what is it going to do?
One thing it's doing right now is initiating a $170M buyback of the $TRIBE token
https://twitter.com/feiprotocol/status/1456754192668786690?s=20
15/ Other potential use cases that excite me:
> 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):
mirror.xyz/0x6507C1693c70…
> 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):
mirror.xyz/0x6507C1693c70…
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.
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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