Stablecoins are a popular and versatile cryptocurrency in the world of decentralized finance. They help reduce the level of price volatility for cryptocurrencies in general, thus reducing risks and providing hedging opportunities in the industry. However, existing stablecoin models are still plagued by a number of problems. The two main disadvantages of current stablecoin systems are that they are often backed by other volatile cryptocurrencies or managed by centralized third parties. Thus, existing solutions are often not truly decentralized, cannot scale, and are potentially inefficient due to over-collateralization.
The Fei Protocol was developed to address these existing problems.
By investing in the Fei Protocol, Advanced Blockchain AG is supporting the development and use of this improved stablecoin model that combines price stability and complete decentralization.
What is Fei Protocol?
Fei Protocol is a fully decentralized stablecoin project developed by Fei Labs Inc. The project aims to improve the concept of stablecoins by introducing various innovations. It uses a stability mechanism called Protocol Controlled Value (PCV) as well as many other mechanisms to maintain a pool of liquidity uniswap and the FEI, its native stablecoin, at a level close to the US dollar. A governance token called TRIBE is also being introduced.
Fei Protocol managed to raise $ 19 million in March 2021 from large industry venture capital firms. Users who wanted to support the Fei project during its launch could buy tokens at a discounted price of $ 0,50. The primary release target was set at FEI 100 million as the development team decided that this would be enough to integrate the FEI into other DeFi
Decentralized Finance (DeFi) takes the decentralized blockchain concept and applies it to the world of finance. Building ...
protocols. After the end of the rebate phase, users had to invest $ 1,01 in ETH in order to issue a $ 1 FEI. This approach has allowed Fay to amass large reserves of ETH and to provide its users with a stablecoin quickly and efficiently.
It is important to know how the ETH token is used. The project forms a pool of FEI / ETH liquidity on Uniswap (the largest decentralized exchange on the Ethereum blockchain), which immediately provides the stable token with a liquid secondary market. The Fei protocol itself is the primary liquidity provider for its stablecoin, which sets it apart from other algorithmic stablecoins that attract third parties through token inflation.
What is the FEI?
FEI is an ERC20 stablecoin based on the Fei protocol. It is a decentralized stablecoin that uses various mechanisms to (theoretically) maintain a more efficient and fair allocation of capital compared to other projects. The goal of the Fei protocol is to create a liquid market where FEI/ETH can trade close to the ETH/USD pair.
Unlike most other tokens, the FEI token supply is essentially unlimited. It is governed by miner and burner contracts, which control token issuance through link curves and trade incentives. The FEI token demonstrates some non-standard ERC20 functionality, but only for a subset of transactions.
The ETH bond curve will have a target supply of 250 million FEI set as the initial target. This target, also known as the “Scale”, will be the benchmark when the FEI price stabilizes at $1.
FEI binding is governed by two main elements of the Fei protocol, namely:
- Protocol Controlled Cost (PCV) and
- Direct incentives
Although the project will launch with only one ETH-denominated anchor curve, it will allow other curves to be generated over time.
What is steyblecoin?
A stablecoin is a cryptocurrency that is pegged to another asset class, such as a national currency. This usually stable and quite predictable equivalent value provides an equally stable price for the cryptocurrency. Therefore, stablecoins are considered investments with relatively low risk and low volatility, especially when compared to other types of cryptocurrencies.
Most stablecoin projects have developed their own stability mechanisms. Their value is usually tied to fiat currencies or other cryptocurrencies. They are called fiat and cryptocurrency stablecoins, respectively. However, there is another interesting category called unsecured stablecoins, which get value from algorithms that adjust the supply of tokens based on the demand for the tokens themselves.
A fiat-backed stablecoin derives its value from a single fiat currency or a basket of currencies. This model is used by companies like Tether. In this case, the centralized company holds assets and issues tokens based on its assets. These tokens represent a kind of bill of exchange (IOU). This mechanism gives the tokens value because they represent the right to claim another asset with a certain value. However, the problem with this approach is that it is centralized. With this model, a certain amount of trust in the party issuing the tokens is required. Token holders must trust that the token issuer owns the corresponding assets to pay out the tokens. This model introduces significant counterparty risk for token holders. Tether highlights the problems with this model, as the company's solvency and legitimacy have been publicly questioned several times in the past.
Cryptocurrency stablecoins derive their value from the underlying cryptocurrencies. Thus, these stablecoins are backed by other trusted assets on the blockchain. This model was originally developed by BitShares and is also used by other stablecoin projects. In this case, the security and stability of stablecoins is supported by another cryptocurrency. The main advantage of this approach is decentralization. The collateral is stored in a smart contract, so users do not have to rely on a third party. However, the main problem with this approach lies in the ability of projects to cope with the volatility of the underlying cryptocurrency. If its value falls too quickly, the issued stablecoins may no longer be sufficiently backed. While simply over-collateralizing could be the solution to this problem, it would lead to an inefficient use of capital and large sums of money would have to be frozen compared to the fiat model.
Uncollateralized stablecoins use algorithms to adjust their value based on supply and demand. Depending on the current price of the coin, more stablecoins are issued or taken to the free market. This mechanism is designed to provide counter-regulation and keep the price of the token as stable as possible. Thus, the system is independent of other currencies and assets. It is also decentralized as it is controlled solely by the algorithm. However, this model also has its drawbacks. The system needs constant growth to remain stable. In addition, it is difficult to analyze and predict to what extent a system can remain functional, and therefore determine at what value the system will collapse - as well as how much it can withstand.
Who is the founder of the Fey Protocol (FEI)?
The Fei Protocol was launched on March 31, 2021 by Joey Santoro, Brianna Montgomery, and Sebastian Delgado (left to right in the image below).
How does the FEI protocol work?
Fei is based on two innovative ideas - Protocol Controlled Value and Direct Incentives.
Protocol Controlled Value (PCV) is a subset of the User Owned Total Value Lock (TVL) model used by numerous stablecoin projects. In the TVL model, users receive IOUs on their deposits and can withdraw them whenever they want (outside of the lock-up period). Projects using the TVL model are forced to rely on token distribution rewards, which means that the contributed capital stays there for as long as the rewards are active.
PCV solves this system in a rather peculiar way. Unlike the aforementioned model, the Fei protocol keeps the funds deposited by the user forever. This allows the protocol to focus on important tasks, such as maintaining the $1 peg.
This protocol owns the escrowed ETH and locks it into LP FEI/ETH from Uniswap as the “official market”. There are two main scenarios that force the protocol to adjust its work:
- When the FEI is below the fixed price, the PCV removes 99% of the protocol liquidity from the LP for the FEI purchase, bringing the price back to the fixed level. Any remaining PCV will be replenished with liquidity and the excess FEI will be burned.
- When the FEI price exceeds the fixed price, the PCV will determine the difference between the current and target prices, which will result in an additional FEI stamp. Increase in circulating supply
The circulating supply is the number of cryptocurrencies or tokens that are publicly available and circulate in cryptocurrency…
will push the FEI price back to an equal level.
The protocol reweighs Fei at 4 hour intervals, with a minimum distance below the fixed point of 0,5% before reweighing Uniswap prices to maintain the fixed PCV price.
The direct incentive feature of the Fei protocol is a feature that, as the name suggests, incentivizes the use and trading activity of the FEI stablecoin. It ensures the stability of the exchange rate, thereby discouraging investors from selling their tokens when the price falls below $1. When investors sell FEIs, a portion of the FEIs they sold is burned up.
The most important part of the direct incentive mechanism is the use of rewards and penalties to achieve the desired FEI price. Protocol uses Mining and burning tokens to maintain $1peg.
While the incentive handles cases where the FEI price is below the $ 1 mark, arbitration takes care of the cases where the FEI is trading above the above mentioned price. In this way, the ecosystem provides full FEI price support.
How much does the FEI cost?
At the time of writing, one FEI costs $ 0,9993.
Source: Coin Market Cap | Fei Protocol
FEI vs TRIBE
The Fei development team has created their Decentralized Autonomous Organization (DAO).
Decentralized Autonomous Organization (DAO), being open source blockchain accounting, is defined by a clear set of rules ...
) with TRIBE as the control token. TRIBE's total supply is limited to one billion, of which 100 million is reserved for members of the Genesis group.
TRIBE token holders gain the right to vote on future proposals for managing the Fei protocol, as well as the opportunity to receive a share of transaction fees on the DEX, contributing to the Uniswap FEI / TRIBE liquidity pool. TRIBE holders can also place their FEI / TRIBE tokens to earn more TRIBE without blocking the tokens listed on the exchange.
How many FEI is in circulation?
At the time of this writing, there are 437 FEI in circulation, market capitalization which is
The market capitalization (or market value) of a cryptocurrency is a measure of its market value. In other words, this is...
is $ 434 753 328.
The FEI stablecoin does not have a maximum offer. Its supply increases or decreases depending on demand. Coins enter circulation using return curves, which are used to peg the FEI price to $ 1. When the demand for the FEI increases, users can redeem it along the anchor curve. Entry prices were initially set low to reward those who supported the project early on. In addition, the Fei protocol supports the creation of new bond curves. However, the main bond curve will be denominated in ETH. Even though ETH will not be traded on crooked bonds, a secondary market (PCV) will be created and users will be able to return to ETH through this market if they so choose.
The goal of the Fei protocol is to create a fully decentralized stablecoin that will not suffer from the problems that many modern stablecoin projects face. Therefore, there will be no printing of tokens by third parties, nor excess collateral to securely maintain the peg of tokens.
Is the FEI a good investment?
The Fei protocol has three main advantages:
- Guaranteed Liquidity: FEI holders do not need to worry about crypto whales because the protocol itself is the primary owner of liquidity. It is funded by the FEI Yield Curve and trades at ETH / FEI parity on Uniswap.
- Balancing Support: If FEI Pricing Support is insufficient, Fei Protocol may adjust the Uniswap price and restore support.
- Control: The areas in which PCV is used can also vary. The PCV can set interest rates and pave the way for borrowing FEI tokens.
In the long term, the FEI's inherent usefulness, especially in the DeFi space, makes it a good investment.
Stablecoins form the backbone of Decentralized Finance (DeFi). Users want to use Dapps like Compound and Aavewithout worrying about price fluctuations. However, most – if not all – existing stablecoins are currently inadequate. Fiat stablecoins like USDT are highly centralized as their collateral is held by a single entity. Meanwhile, crypto-currency stablecoins face scalability issues. In addition, such stablecoins are heavily leveraged and leveraged to secure transaction volumes.
However, through the use of proprietary mechanisms, the Fei protocol can provide stability, simplicity, and ubiquity that other stablecoin projects cannot.