Fei Protocol – a new decentralized & scalable stablecoin platform – has come out of stealth mode and revealed it’s launch plans for early 2021.
With Fei, the core team hopes to solve the issues that plague the decentralized stablecoins that are currently on the market. Debt-backed stablecoins such as Dai are not capital efficient whereas many of the popular algorithmic stablecoin projects seem extremely volatile and often behaves more like a casino bet than a stable asset.
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 in this case approaches and fixes at the one dollar peg. The protocol will enable users to create bonding curves denominated in any ERC20 token but launch there will 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 stablecoin.
One key thing to note is that users will not be able to sell FEI back to the bonding curve. Any ETH that you use to acquire FEI is retained by Fei Protocol as part of their Protocol Controlled Value (PCV). The team states that PCV used in many ways to support the protocol, including being used to create liquid secondary markets where users can exchange FEI for ETH.
While most DeFi projects measure themselves with the metric of total value locked (TVL), the Fei team is proposing a different model with PCV. The Fei team believes that the PCV model gives the protocol more flexibility to engage in activities that are beneficial to the community. Some use cases of the PCV might include governance treasuries, insurance funds, or even guaranteed liquidity on decentralized exchanges.
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. See the graphic below for an overview of this mechanism.
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.
To read more about Fei Protocol’s planned launch in Q1 2021, read here.
Keep up with Fei by following their Twitter.