[Discussion] Fei Protocol FEI/mUSD fPool

Hi everyone,

Before kicking things off, I just want to note that almost all credit for this thread goes to @derc for having composed and compiled the original post for an extremely solid feeder pool discussion framework, and building upon our recent Alchemix Feeder pool deployment, it might make sense to widen our audience by working on further integrations, and Fei Protocol seems to be on top of that list with a massive ecosystem and liquidity behind their FEI algorithmic stablecoin product.

TLDR :

  • Deploy FEI/mUSD feeder pool on mStable
  • Opening up a FEI/mUSD fPool provides interesting arbitrage opportunities with low impermanent loss risk while helping to keep FEI close to peg, all the while earning swap fees and MTA for LPs who want exposure to both mUSD and FEI
  • Get introduced to the Fei Protocol core team, and build a solid foundation for potential future collaborations with the team (I would imagine a highlight of this being the possibility of having an mAsset included in the PCV as a long-term north star collaboration goal to work diligently towards)

Abstract :

  • Fei Protocol is an algorithmic, reserve-backed, community-owned stablecoin project that uses an underlying PCV in order to maintain its peg via reweighing process, and a bonding curve for minting FEI, as well as the option to always redeem one FEI token for $0.99 worth of ETH on the website via their reserve stabilizer.
  • Their community has recently opened up the possibility for deploying TRIBE (their native governance token) to more liquidity pool collaborations outside of their internal flagship FEI/TRIBE pool on Uniswap, and deploying a FEI/mUSD feeder pool might provide us with the opportunity to approach them for a potential co-incentivization on our platform
  • A detailed overview of their current peg and PCV health can be found on their analytics page
  • More information about the algorithmic workings on how Fei maintains its peg can be found here, as it can get quite technical to explain in a few words, but do keep in mind that the direct incentives mentioned in the article have since stopped as per this Snapshot
  • As of today, 21st of September 2021, there are over 250M Fei in circulation, with over 175M held in the protocol itself on top of this, and over 750M collateral locked in the contract.
  • With our newly reduced swap fees, there is a real opportunity for mStable to capture the market for FEI liquidity, while potentially being able to kick off a co-incentivization from Fei governance.
  • Assuming swap volumes for FEI range between US$5m to US$10m per day, a 0.02% fee capture will accrue between US$1,000 to US$2,000 per day to Savers and LPs

With FEI gaining quite the momentum due to their new TribalChief Staking Rewards Upgrade, this feels like the perfect time to get the token onboarded to mStable for a mutually beneficial result.

Benefits

  • Exposure to a very strong and professional community-owned protocol, and potentially US$250M and growing liquidity of FEI to be invited to our platform
  • Fei is overcollateralized by many DeFi primitive tokens and ETH, so definitely a safe bet considering the alternatives in the space, especially when it comes to algorithmic stablecoins
  • The community and core contributors seem very keen on maximizing decentralization in their ecosystem, so should be very well aligned with the vision of our own group of Metanauts and community members

Risks

  • The protocol previously had to deal with some initial launch-hiccups, where too many users tried to exit the system, causing the system to “lock-in” users that wanted to leave, unless paying a hefty penalty fee. This has since been rectified, and Fei has been trading around peg ever since.
  • We’re definitely up against some farms that are already utilizing Fei on their end, of particular note here being an already existing Fei/3pool on Curve

In order to gauge interest in the community for this, please vote below, and leave any relevant comments or feedback for other members and the core contributors to see and consider:

Should we deploy a FEI/mUSD Feeder Pool on the platform?
  • Yae
  • Nay

0 voters

3 Likes

I am looking into this. Do you think we could get some Tribe rewards going for this pool? This would tremendously help to bootstrap liquidity?

2 Likes

This was an excellent write up! I am in support of allocating TRIBE incentives and I am sure other memebers of the Tribe feel the same way!

Would be great to see a post on our forum requesting the allocation.l to allow our community to give their input.

2 Likes

I’m really excited about this FEI feeder pool collab. :fire: Looking forward to the FEI community having access to our Save yields :muscle:

Great to hear Brianna, as a DAO signer I’m in support of this. Looking forward to seeing the collaboration take shape.