Vladislav Sopov
Fei (FEI), one of the largest decentralized stablecoins, could go out of business: Founder of Fei Labs publishes compensation proposal
contents
- Completion of the stablecoin project Fei (FEI); Fei Labs leaves DAO
- Frax Finance (FRAX)’s Sam Kazemian criticizes the compensation plan
Ethereum (ETH) veteran Joey Santoro, founder of Fei Labs, published a proposal to redeem FEI tokens to DAI and distribute Protocol Controlled Value (PCV) between TRIBE holders.
Completion of the stablecoin project Fei (FEI); Fei Labs leaves DAO
Mr Santoro has announced on Twitter that the Fei (FEI) architecture is being retired due to “technical, financial and potential future regulatory risks”.
The past few months have been difficult for the DAO tribe. These challenges and results were not what anyone had hoped for.
After careful consideration, after considering all stakeholders, Fei Labs proposes the following. We believe this is the responsible way forward. pic.twitter.com/TbzWeCdhEr
— Joey 💚s ERC-4626 (@joey__santoro) August 19, 2022
He published a proposal to repay the existing circulating RDI supply to Dai (DAI), the largest algorithmic stablecoin. Should this proposal be accepted, the remaining PCV reserves will be distributed among the holders of the TRIBE token, which previously served as a balancing tool to maintain a 1:1 peg between FEI and USD.
The exhausting aftermath of a devastating attack on Fuse-based liquidity pools involving Fei Labs and its Rari Capital partners is another reason for the imminent shutdown of operations.
To sue
Decentralized finance (DeFi) researcher Ignas, who goes by @DefiIgnas on Twitter, adds that the vulnerability of FEI’s (FEI) Protocol Controlled Value (PCV) itself is the real reason that prompted the FEI team to abandon the project to complete:
Another reason for the closure of Fei is that the PCV model was not suitable for the product market. As yields in DeFi have been low and risks have risen, the protocol has struggled to generate revenue.
Frax Finance (FRAX)’s Sam Kazemian criticizes the compensation plan
The compensation roadmap for the victims of the aforementioned hack is the most controversial part of Mr Santoro’s proposals. Prominent crypto entrepreneur and investor Sam Kazemian has calculated that some affected DAOs will lose 98% of their investments:
DAOs like @fraxfinance and @OlympusDAO get paid back cents on the dollar. Literally ~2% of their funds were lost in Fuse for supporting FEI/Rari early on. This is really criminal robbery and fraud.
— Sam Kazemian (¤, ¤) (@samkazemian) August 20, 2022
After this discussion, the FEI lost its peg to the US dollar. Today, August 20, 2022, it briefly rose above $1.04 while its price fell to $0.95 at press time.
Before the drop, FEI was one of the largest decentralized stablecoins; Only DAI, FRAX and MIM had larger capitalizations. In early 2021, Fei Labs raised over $1.4 billion in funding.
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