Ethereum-Based Fei Protocol Stablecoin Aims to Limit Whale Games

A new stablecoin from Fei Protocol is preparing to launch with the aim of being truly decentralized while combatting some of the whale activity that hampers current dollar-pegged products.

Whale accounts arbitraging on automated market makers are one of the banes of the DeFi industry for the average user. It drives up transaction prices and increases peg volatility for what should be ‘stable’ stablecoins.

A new stablecoin from Fei Protocol aims to tackle this hindrance by introducing bonding curves and direct incentives for peg maintenance. The announcement labels FEI as “a decentralized, fair, liquid, and scalable stablecoin that exhibits a high fidelity peg,”

Fei Protocol Fighting Stablecoin Flaws

Fei justified its ambitions by pointing out the obvious flaws in existing stablecoins. USDT and USDC are both centralized and controlled by corporations which represent a regulatory risk and potential central point of failure. Furthermore, collateralized stablecoins such as DAI have scalability issues due to capital inefficiency, the blog post added.

FEI will have an uncapped supply that tracks demand, with coins entering circulation via sale along a bonding curve that approaches and fixes at the $1 peg. It uses a concept called ‘Protocol Controlled Value’ (PCV) which means that when users deposit collateral, it’s owned and managed by the protocol so that liquidity cannot just be pulled out.

Aiming to be completely decentralized, the FEI launch will contain only a single curve denominated in ETH;

“Therefore it is critical that no tokens issued by trusted third-parties (e.g. USDC, USDT, wBTC) be used as collateral on the bonding curve.”

It explained that the PCV is a subset of the concept of TVL (total value locked), in which a platform outright owns the assets locked into the smart contracts.

“PCV gives the protocol more flexibility to engage in activities that are not profit-oriented. These activities can align with more fundamental goals, such as maintaining stability in the peg.”

New Tokens to Launch in Q1  

The protocol will also launch its own governance token called TRIBE which can be used to vote on the addition of new bonding curves or adjusting the allocation of PCV for new incoming funding or existing PCV.

To bootstrap the project, there will be an IDO (Initial DeFi/DEX Offering) with attractive prices for FEI. There will be a genesis period of 2–3 days in which early adopters can pool their ETH in a ‘Genesis Group,’ which will also earn a portion of the TRIBE tokens.

The announcement added that the launch date has been planned for later this quarter.