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Fei Protocol struggles, what's next? How are people evaluating it?

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Fei Protocol struggles, what

Fei Protocol, an algorithmic stablecoin project backed by prominent institutions such as Andreessen Horowitz (a16z), Framework Ventures, and Coinbase Ventures, completed its fundraising launch on the 3rd. However, its opening results did not meet expectations. What are the reviews from netizens?

Fundraising Success but Disappointing Debut

Fei Protocol launched a fair distribution event and raised approximately 639,000 ETH. Around the time of the event's conclusion, the price of Ether was at a high of about $2,040 to $2,060, valuing at least $1.3 billion. Ultimately, its algorithmic stablecoin FEI was distributed to all participants at a price of $1.01, while the governance token TRIBE was sold at $3.22. This event even boosted Uniswap's liquidity by nearly 50%:

However, after the official launch, FEI is currently valued at only $0.94, a decrease of nearly 7%, while TRIBE is now at $1.75, down nearly 46%.

Official Plans for the Future

Regarding the token price, the official team did not provide any specific response. Instead, they announced details for the upcoming staking program. At 3:00 AM GMT+8 on April 6th, liquidity providers for the FEI-TRIBE pair on Uniswap can stake their LP tokens on the Fei Protocol platform to earn rewards. As of the deadline, the APY is 85%.

According to the announcement, the reward distribution will last for two years, with the distributed TRIBE accounting for 10% of the total supply. Staking rewards will be unlocked linearly on a weekly basis and distributed based on the staking ratio.

Community Disappointment - Can it be Saved?

Fei Protocol has a strong community following, with 21,600 followers on Twitter and over 2,500 members on Discord. However, the debut results have led to criticism within the community.

Twitter user bubby_io stated that Fei Protocol underestimated people's greed. By raising a significant amount of ETH, everyone who invested in FEI could receive airdropped TRIBE tokens, leading to a substantial dilution of its value. The team initially aimed to raise 100,000 ETH but significantly exceeded this target. Due to its rules, the more funds that are invested, the fewer tokens each unit can purchase.

TRIBE and FEI were quickly sold off after the launch. FEI is supposed to be a stablecoin pegged to one USD, but it immediately fell below that value. This means that FEI needs capital inflows to restore its pegged price.

bubby_io believes that while it is too early to judge success or failure, the issuance appears to be a failure. He noted that there are three types of participants: those who invested solely in TRIBE, those who invested solely in FEI, and those who split their investment for liquidity provision. It seems that the first two types of participants suffered significant losses, while those participating in liquidity mining may have an advantage.

bubby_io mentioned that he himself holds the airdropped TRIBE tokens and hopes that FEI can recover to $1. He also hopes that ETH does not experience a significant drop, which could impact FEI's price stability mechanism. He has also provided both tokens to Uniswap's liquidity pool, hoping that the free token rewards can offset some losses, but he is concerned about further price fluctuations for FEI.

He believes that there is some consolation as FEI has a penalty mechanism for selling below the pegged price and a reward for buying. Even after the price plummeted post-launch, some people still chose to buy FEI to receive the Buy Reward Rate.

The following data was recorded before the deadline when bubby_io made the comments, with a Buy Reward Rate of 8.871%.

He thinks that such a mechanism might be useful, but he still feels puzzled about this experiment with algorithmic stablecoins.