Adding FEI as collateral in our Fuse Pool

I had the chance to speak with the FEI team this week about potential opportunities for collaboration across both SMART Yield and SMART Alpha. I’m excited about where that could lead, given their immense protocol controlled value and interest in added utility for FEI.

For those who don’t know, FEI is a stablecoin project that launched in April. It has a circulating supply close to ~$500M and has managed to hold its peg since May 24th. Note that, for the first month of its existence, it did struggle with achieving the peg in the first place.

This forum post is to serve as a temperature check on whether the community would be interested in adding FEI to our Rari pool. It has been indicated that, should we do so, potentially up to $1M in FEI would be deposited to the pool. Moreover, when FEI is supported by a SMART Yield-integrated lending market, they would be further interested in providing secondary liquidity for a FEI jToken such that it could be added to our Fuse pool as well.

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I’d be in favour of this, I admire the tenacity of the FEI team and appreciate the work they do.

Regarding their initial struggle to reach peg how would a loss of peg in future affect the Rari pool? Could it potentially leave the pool with bad debt?

Should the peg be lost, users who borrowed against FEI would not be inclined to pay off their debt (i.e., keep the money they borrowed and leave the worthless FEI unpaid).

In the case of something like FEI, which is backed by protocol-controlled value, it would require a catastrophic event for this to happen. Deviation from the peg is more likely, as seen in May 2021’s high volatility week where FEI dipped to $0.94.

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Hi from the Fei Community!

We’re pretty excited about BarnBridge and the collaboration potential between our protocols. The concerns around the peg are totally understandable as our v1 mechanism did have some issues for the first month. We’ve since transitioned away from direct incentives and have been relying on reweights (active secondary market peg defense) as the primary stability mechanism. Since their rollout, the peg has held up strongly. We are continuing to diversify protocol-contolled value and have added DPI and are discussing adding RAI and DAI.

FEI is currently over 300% collateralized, so I’d vouch for it to be included as a collateral asset. If there are still concerns, a safer way to roll it out would be as a non-collateral asset with an LTV of 0. This would bootstrap liquidity for BOND holders who may wish to gain some capital efficiency out of their tokens while maintaining long exposure.

As we have done in other pools, we would be add 1M FEI to help bootstrap. In the future it would be awesome to see other SMART alpha and SMART yield tokens in the pool such as a FEI jToken as @Ser_M noted.

Looking forward to more discussions regarding this and partnership opportunity!

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I’ve always liked the FEI team. I support this.

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Hello all, I am from Fei community. It would be awesome to have Fei in the BarnBridge Fuse pool so as we can add the 1M FEI.

It could be a first step for a promising partnership!

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