Fei lost hundreds of millions of dollars after closing the burn mechanism, and the future of the algorithmic stable currency is uncertain

On the morning of April 8th, Beijing time, when the algorithmic stablecoin project Fei was involved in huge controversy, Fei Labs founder Joey Santoro decided to close the controversial burn mechanism. His announcement stated:

And last night, after ETH fell below $2,000, the price of Fei displayed on Uniswap once fell below $0.9, and according to the previously set burn mechanism, users selling Fei on Uniswap at this time means that their All the funds will be lost, and in the secondary market, the trading price of Fei has also dropped to around $0.73, and panic has begun to spread in the Fei community.

Regarding the recent performance of the FEI agreement, rekt also wrote an article to report, and it wrote at the beginning of the article:

The launch of FEI has received financial support from big-name institutions such as Andreessen Horowitz, Framework, and Coinbase. However, in the DeFi field, it is not very meaningful to obtain the support of big-name players. It is difficult for us to regard the project as a success.

The Partisia Blockchain Foundation appoints Hinrich Pfeifer as Chief Operating Officer: On August 23, the Partisia Blockchain Foundation announced the appointment of Hinrich Pfeifer, the former Secretary-General of the Cardano Foundation, as the Chief Operating Officer (COO). Pfeifer will be responsible for overseeing Partisia Blockchain’s operations as well as the long-term vision and strategy. (Businesswire) [2022/8/23 12:43:55]

FEI has failed to maintain its $1 peg, and the protocol’s governance token, TRIBE, has fallen about 30% since its launch.

Fei's mechanics were designed to keep its users incarcerated, and the project was widely seen as a disaster.

What is the future of Fei, and what is the future of algorithmic stablecoins?

In 2014, the researchers published two academic papers that elaborated on the two main concepts on which most current algorithm stabilization algorithms are based.

MDEX.COM has added MDX/FEI TRIBE/USDT liquidity mining and transaction mining: According to the official announcement of MDEX.COM, the total reward for each block mining will be 80 at 23:00 on April 4 (UTC+8). With MDX unchanged, the list of liquidity mining and transaction mining is added. The details of the liquidity mining list are as follows: MDX/FEI: reward 0.20935MDX per block,

TRIBE/USDT: 0.27825MDX per block reward. The details of the transaction mining list are as follows: MDX/FEI: 0.107MDX per block reward, TRIBE/USDT: 0.107MDX per block reward.

After the DAO management is enabled, the weight adjustment plan will be decided by the community vote. Please check the original text for the cross-chain bridge URL. Remarks: You need to enter the URL in the browser or mobile wallet, and select the Ethereum main network to cross-chain assets [2021/4/5 19:45:43]

Ferdinando M Ametrano's "Hayek Money" paper proposed a rebase model in which the aggregate supply of money changes with demand.

The decentralized trading platform DODO announced the listing of FEI and TRIBE tokens: The decentralized trading platform DODO announced the listing of FEI and TRIBE tokens. [2021/4/4 19:45:05]

Seigniorage Shares, proposed by Robert Sams, is a two-token mechanism, the stable asset itself and a fluctuating "seigniorage share" whose owners benefit or suffer penalties based on the supply and demand of the stable asset.

These two seminal papers laid the groundwork for many later attempts to build decentralized non-volatile cryptoassets such as ESD, Basis, RSR, Frax, and now FEI.

Most stablecoins considered “successful” are based on collateral reserve types, and these models work well, but the problem with decentralized versions is that they are capital inefficient and put collateral assets at risk. The adoption of these stablecoins is also somewhat limited due to the required overcollateralization.

Ampleforth and Empty Set Dollar (ESD) attempt to create a sovereign stable currency without relying on any collateral, however, the currency they create cannot achieve stability at all.

LBank Blue Shell completed the FEI Protocol fundraising today, with a total of 2600ETH: According to official news, LBank Blue Shell completed the Fei Protocol (FEI) sale today, with a total of 2600ETH in total. All the ETH has been put into the official subscription pool. After the official subscription is over, FEI and TRIBE will be issued in the same proportion according to the ETH that the user participated in. The specific release time is subject to official information.

FeiProtocol (FEI) supports the creation of decentralized, scalable and fair stablecoins based on Ethereum. There is no upper limit to the supply of FEI stablecoins, which can track demand and enter circulation through sales along the bonding curve. Among them, TRIBE is the governance token of the protocol. For more information, please log in to the official website of LBank. [2021/4/3 19:43:37]

Arguably the most successful decentralized stablecoin protocol remains Maker (DAI), which relies on user-owned collateral to create a non-volatile decentralized asset. However, it is not perfect and cannot perform closed-loop arbitrage on DAI, so its price is not completely stable, and the protocol faces scaling problems.

From the beginning of 2020 to the beginning of 2021, the total market capitalization of all forms of stablecoins has grown from $5.9 billion to over $40 billion, an increase of 577%.

Along with concepts like ESD 1.5 and Frax, Fei represents the second wave of algorithmic stablecoins. While the launch of Fei is far from perfect and casts doubt on the project’s future success, it’s easy to see why people are still trying to conceive of the so-called “perfect stablecoin.”

FEI uses a bonding curve and "direct incentive" token model to maintain a liquid market, the purpose of which is to allow the trading price of ETH/FEI to be close to the market price of ETH/USD.

In the Fei genesis token launch event that happened a few days ago, users can deposit ETH to get Fei at a discounted price, and get an airdrop of additional governance tokens. Address participated in this campaign.

However, there are conditions for this discounted price. Only when the participating funds are less than 250 million U.S. dollars in ETH, Fei in the founding stage will have a discount. In the final stage, a total of 1.3 billion U.S. dollars worth of ETH participated in the founding stage. This means that the discount has been cancelled, and these ETHs are irreversibly transferred to the project's PCV contract address, which will initially be used to establish a Uniswap liquidity pool.

After going live, the liquidity of the Uniswap FEI/ETH pool once exceeded $2.6 billion, which was created by the ETH raised in the founding stage.

However, these numbers did not play a positive role for the FEI project, as Fei was quickly detached from the anchor price and its reputation took a tumble along with it.

The initial unanchoring was mainly due to a large amount of TRIBE selling pressure, and the Fei protocol will punish those who sell FEI and reward those who buy FEI underwater, and to convert TRIBE to ETH, participants must face punishment.

To make matters worse, although Consensys Diligence and Open Zeppelin audited the Fei protocol contract, there was a loophole in Fei’s incentive calculation, which forced the team to close the minting reward for buying Fei underwater. The official also issued a statement saying:

In this regard, @bantg recorded the impact of FEI reweight with the following chart.

As Emin Gün Sirer commented on Twitter:

When one of the Fei founders proposed allocating part of the PCV to Yearn, the idea was criticized on Twitter, with Karoo joking:

Banteg stated in a public panel:

However, Julien Bouteloup may disagree with this statement, as he publicly released a “blacklist” of Fei holders, which he suggested should not be accepted for future airdrops.

The Fei project is an overfunded disaster, with extreme opinions from its proponents and detractors alike, many calling it a failed experiment, others proposing "all ETH should be refunded", others just Reaffirming their confidence in the project, Compound founder R. Leshner tweeted:

Perhaps the most sensible stance would be a little less extreme.

So far, the experiment has not been successful, and on the other hand, it is completely unnecessary to raise so much money, as Fiskantes tweeted:

For future financial experiments, will we continue to see this level of funding, or are we reaching an inflection point?

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