What is Fei Protocol?
Prior to delving into Fei Protocol, I'd like to discuss the current state of stablecoins in the market.
Due to the convenience and popularity of USDT, USDC, and BUSD stablecoins, we, as retail users, primarily interact with them in almost all DeFi activities. But these stablecoins are issued by centralized entities.
As a result, this stablecoin concept is diametrically opposed to the blockchain's original concept of decentralization and there are concerns about these stablecoins; thus, a "more" decentralised stablecoin is required to address this issue.
DAI is the first solution. It's a type of over-collateralized stablecoin that's issued entirely on-chain. A user needs to deposit assets like ETH or BTC in order to mint a portion of DAI that can be used for various purposes. However, there are still some issues. Over-collateralization of DAI leads to problems with capital efficiency. Consequently, large-scale expansion for DAI is challenging.
Fei Protocol introduced the FEI stable coin in January 2021 as a brand-new concept aimed at resolving the problems listed above.
Fei Protocol also gave DeFi at that time a new direction in the concept of Protocol-Controlled Values (PCV).
For those who are unfamiliar with the term “PCV", Protocol Controlled Value is the mechanism that the Projects will “own" liquidity instead of “borrow” it from users. Let’s compare it to the Maker DAO stable coins (DAI) minting mechanism
- Maker DAO: Users deposit their assets as collateral to mint DAI.
- Fei Protocol: Users "sell" their assets such as ETH in order to receive FEI stable coins back. In this case, all ETH will belong to the Fei Protocol, which will have complete control over those assets → This is the main concept of Protocol Controlled Value (PCV).
How does Fei Protocol work?
Mint & Redeem Mechanism
In order to interact with FEI stable coins, users must follow these steps:
- Mint: Deposit your assets (ETH in v1 or DAI in v2) to Fei Protocol and receive the respective FEI stablecoins.
- Redeem: In contrast with the above action, return your FEI stablecoins back to Fei Protocol and receive your initial assets back.
The assets' price in the minting and redeeming process will be supported and determined by Chainlink Oracle.
The Peg Maintenance
FEI stablecoins are backed by assets in the Treasury. Overall, the maintenance process will occur following the two cases:
- If FEI > $1: Mint FEI on Fei Protocol at $1 and sell it in the market.
- If FEI < 1$: Buy FEI in the market and redeem at $1 price on Fei Protocol.
Fei Protocol x Ondo Finance
In the past, Fei Protocol partnered with Ondo Finance to offer liquidity as a service (LaaS), a prevalent term recently. I will take an example to illustrate the benefit of this partnership event.
Many new projects are born every hour in the crypto market, and these projects require adequate liquidity to run the protocol when they first start out.
- Old method: To achieve enough liquidity, some projects will choose to offer users their native tokens through “liquidity mining” rewards at a “crazy” APR. As a result, the tokens earned are continually dumped onto the market, which has a negative effect on the protocol.
- New method: With the Liquidity as a Service that Fei Protocol and Ondo Finance provide, new projects only need to deposit their native tokens into the Ondo liquidity vault with a flexible duration, and Fei Protocol will match their deposit with an equivalent amount of newly minted FEI stablecoins to form a liquidity pair. The tokens get paired in an AMM such as Uniswap or SushiSwap.
→ This method will remove all upfront capital costs. Therefore, Fei's Liquidity as a Service (LaaS) is a quick and cheap way to get USD-denominated liquidity for a project.
Fei v1 & Fei v2
On December 15, 2021, Fei Protocol officially launched Fei v2 with these main changes:
- Stability: In Fei v2, the redeem fees have decreased from 1% to 0.5%. This helps spectaculars arbitrage FEI easily and earn more profit.
- Incentive Alignment: In Fei v1, TRIBE tokens are used for governance and as an incentive for FEI stablecoins only. However, Fei v2, TRIBE holders will have skin in the game as direct beneficiaries and risk bearers of PCV performance.
- Effective PCV Management: Assets in PCV will automatically be managed through the Balancer v2 Investment Pool to manage risk, deploy liquidity, and earn yield with greater capital efficiency.
FEI & TRIBE Token Information
What is FEI Stablecoin?
The FEI stablecoins are uncapped. The amount of newly-minted FEI will be determined based on the amount of assets deposited in the Fei Protocol.
What is TRIBE Token?
Tribe is the governance token of Fei Protocol
TRIBE token metrics
- Token Name: Tribe
- Ticker: TRIBE
- Blockchain: Ethereum
- Token Standard: ERC-20
- Contract: 0xc7283b66eb1eb5fb86327f08e1b5816b0720212b
- Token Type: Governance
- Total Supply: 1,000,000,000 TRIBE
- Circulating Supply: 455,015,530 TRIBE.
TRIBE Token Allocation
- DAO Treasury: 40%
- IDO: 20%
- Fei Core Team: 13%
- Genesis Group: 10%
- Staking Rewards: 10%
- Fei Core Team Investors: 5%
- Grants: 2%
TRIBE Token Sale
Fei Protocol released TRIBE and FEI to users on March 22nd, 2021, through the Genesis Group event, which happened in two phrases:
- ETH commitment: All participants in the Genesis Group received a share of 10% of the initial TRIBE supply, which was 100M TRIBE.
- IDO: Occurred after Genesis' completion. 20% of Tribe tokens (200M TRIBE) were sold through IDO.
TRIBE Token Release Schedule
TRIBE Token Use Cases
TRIBE token has these main roles:
- Governance: Manage the PCV of Fei Protocol and vote for proposals.
- Incentives: Support and incentive users joining DeFi activities on Fei Protocol.
- Buybacks: 20% of the protocol’s equity will be used to buyback TRIBE tokens. The buyback procedure will be carried out automatically by Balancer Smart Pool.
How to buy TRIBE Token
You can buy TRIBE Token through these exchanges:
- DEXs: Uniswap,...
- CEXs: Binance, Gate.io KuCoin, BKEK,...
Alternatively, you can use Coin98 Exchange to swap other tokens for BICO by clicking the Swap button at the end of the article.
Learn more: How to use Coin98 Exchange
How to get TRIBE Token
You can get TRIBE tokens through various ways, including:
- Stake TRIBE tokens in the FeiRari Fuse Pool to earn more TRIBE.
- Provide liquidity for the TRIBE-FEI LP pair.
How to store TRIBE
You can store TRIBE token on Coin98 Wallet with these simple steps:
Step 1: Open Coin98 Wallet & click Receive on the home screen.
Step 2: Search TRIBE Token.
Step 3: Click on the correct result, copy the wallet address and send TRIBE to this address.
Team, Investors, and Partners
Fei Protocol has received funding from many well-known venture capital firms, including a16z, Coinbase Venture, Framework, and others.
Because Fei Protocol provides Liquidity as a Service (LaaS), every project that needs liquidity from Fei Protocol will be a partner of this project.
Moreover, the Fei Protocol & Ondo Finance collaboration, which has been mentioned above, is also a great win-win partner event for both two projects.
Roadmap and Update
Protocol Upgrade (finished)
- Chainlink integration.
- TRIBE backstop.
- Security Upgrade.
Core Lending Integrations (finished)
- Expand the partnership range with 4 lending projects, including Rari Capital Fuse, CREAM, Aave, and Kashi.
Other initiatives (finished)
- stETH purchase for yield generation.
- Revisiting DAI/stablecoin opportunities with additional clarity on deployment strategy.
The major feature, algorithmic PCV management will launch following Balancer's release of the managed pools.
Is Fei Protocol a good investment?
I hope that you have understood what Fei Protocol is with the information mentioned above. This article should give you a deep insight into the project, so there is no financial advice. You should Do Your Own Research before conducting any investment and be responsible for your own fund.
However, Coin98 Insights will provide some notable points about the project to give you the best overview to make your own decisions.
From a Retail Investor’s Perspective
Fei Protocol has already managed over $750 million in value with a collateralization ratio of 240% (the collateralization ratio is calculated by the total value of PCV divided by the value of user circulating FEI). As a result, the User Circulating FEI of this protocol is now $313 million.
As you can see now, the net income of Fei Protocol is now $439M, a huge value! As mentioned above, a part of the PCV profit will be used to buy back TRIBE tokens. In this case, more than $13M in value will be used to buy back TRIBE, providing great benefits for holders.
Another method of investing is to join Fei Protocol’s activities, such as providing liquidity to earn yield.
The highest APR in Fei is to stake TRIBE and earn 26.9% APY, or a more stable way with the FEI-DAI pair with an APR of 20.9% (higher than farming many stablecoin pairs in the market, which only offer 5-10%).
From Projects' Perspective
Fei Protocol’s customers are not only retail users, but also thousands of projects on the market that need liquidity. This picture will compare some features between Fei Protocol, Olympus Pro, and Tokemak, one of the leading DeFi 2.0 projects.
- Olympus Pro: Projects own liquidity in perpetuity, but this liquidity must be purchased up front at a capital cost.
- Tokemak: Projects can borrow free liquidity from Tokemak, but only a small number of projects are eligible.
- Fei x Ondo: Projects only need to deposit their native tokens, Fei Protocol will add respective FEI stablecoins to form a trading pair. In this case, Fei offers projects adequate liquidity and projects just need to pay a small fee of borrowing liquidity from the Fei Protocol (5-10% APR, quite reasonable).
Some projects that also work in the stablecoin sector are Ample Forth or Basis Cash.
Other DeFi 2.0 projects which use PCV (Protocol Controlled Value) or POL (Protocol Owned Liquidity) are Olympus, Tokemak, Wonderland, etc. For further information, you can see the DeFi 2.0 stack here.
Coin98 Insights hopes you have gained all of the important information about Fei Protocol including its features and highlights throughout this topic.
If you have any questions about TRIBE or want to know more about TRIBE, please feel free to leave a comment below and join Coin98 Community for further discussions about Crypto.