Fei Labs presented last Wednesday October 6, through its Twitter account, its V2 version, a “huge” update of the Fei mechanism.
“The vision of the Fei Protocol is to be a highly scalable and fully decentralized stablecoin. Fei v1 started this journey with (many) lessons learned. Now, we are proud to announce Fei v2, an update that dramatically improves FEI’s stability, efficiency, and scalability. We are pleased to provide you with an overview of upcoming v2 features”, he said through an article posted on the Medium platform.
The company explained that Fei v1 introduced the concept of Protocol Controlled Value (PCV) into the DeFi space. PCV has proven to be a major value driver by actively championing the FEI linkage and deploying hundreds of millions of dollars in DAO-to-DAO partnerships with companies such as Aave, Compound, Rari Capital, Lido, and Index Coop. V2 will duplicate these DAO-first use cases and create new ones, such as Liquidity as a Service (LaaS), the subject of a future post.
In his view, Fei v2 puts FEI at an advantageous point in the stablecoin design space by bringing substantial improvements including:
• Robust pin maintenance by 1: 1 swap
• Efficient risk, liquidity and performance management through algorithmically controlled Balancer v2 PCV pools
• Incentives aligned between TRIBE and FEI holders through TRIBE buybacks and backstop
Stability: one-to-one swap
According to the company, in Fei v2, the entire FEI can be exchanged directly for PCV reserves. This is the key to enabling FEI to scale effectively while remaining decentralized. If a stablecoin can always be bought for $ 1 and sold for $ 1, it can scale to arbitrary supply and meet the demands of a growing DeFi ecosystem. Transparent on-chain redemptions offer a key value boost over centralized alternatives like USDC or USDT.
“Fei v2 initially aims for a reserve ratio of 100% to be able to defend parity with direct exchange for all the FEI in circulation. Governance can lower this target ratio after the risk model and mechanism have been battle tested. In any case, the newly minted FEI will always bring the reserves closer to 100%”, he added.
TRIBE Incentive Alignment: Buybacks and Caps
The company indicated that Fei is a community-driven protocol, and the owners of TRIBE are the collective administrators of the PCV and the FEI ecosystem. In Fei v1, this relationship was limited to governance.
However, in Fei v2 TRIBE, incumbents will have their skin in the game as direct beneficiaries and risk carriers of PCV performance.
The company assured that Fei v2 introduces the concept of “protocol equity”, which is the amount of PCV that would remain if all the circulating FEI of the users were exchanged for PCV guarantees.