Ethereum (ETH) veteran Joey Santoro, founder of Fei Labs, published a proposal to redeem FEI tokens to DAI and to distribute protocol controlled value (PCV) between TRIBE holders.
Fei (FEI) stablecoin project closing; Fei Labs leaves DAO
Mr. Santoro has taken to Twitter to announce that the Fei (FEI) architecture will be shutting down due to "technical, financial and potential future regulatory risks."
The past months have been difficult for the Tribe DAO. These challenges and outcomes were not what anyone hoped for.— Joey 💚's ERC-4626 (@joey__santoro) August 19, 2022
After deep consideration, Fei Labs is proposing the following after considering all stakeholders. We believe this is the responsible path forward. pic.twitter.com/TbzWeCdhEr
He released a proposal to redeem the existing circulating supply of FEI to Dai (DAI), the largest algorithmic stablecoin. Should this proposal pass, remaining PCV reserves will be distributed between the holders of the TRIBE token, which used to act as a balance instrument to keep a 1:1 peg between FEI and USD.
Exhaustive aftermath of a devastating attack on Fuse-based liquidity pools associated with Fei Labs and its partners from Rari Capital is another reason behind the upcoming discontinuing operations.
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 makes the FEI team close the project:
On the final note, one more reason for Fei closing is because PCV model did not find product market fit. With yields in DeFi low and risks increasing, the protocol had hard time earning revenue.
Frax Finance's (FRAX) Sam Kazemian bashes compensation plan
The compensation roadmap for the victims of abovementioned hack is the most controversial part of Mr. Santoro's proposals. Prominent crypto entrepreneur and investor Sam Kazemian calculated that some affected DAOs will lose 98% of their investments:
Following this discussion, FEI lost its peg to the U.S. Dollar. Today, Aug. 20, 2022, it briefly spiked over $1.04, while as of press time, its price dropped to $0.95.
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.