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Saturday, April 17, 2021

Fei Protocol Locks Up ETH Worth $1B On Genesis

Fei’s launch, a stablecoin backed by Ethereum, has reportedly locked up nearly $1B worth of the cryptocurrency ETH in just its genesis. However, some of the stablecoin’s liquidity providers did not receive the expected reaction on the launch.

Details Of Fei Protocol Launch

The protocol had its event of genesis on 1st April. A partially ETH-backed stablecoin was introduced. Fei also makes use of bonding curves and pairs direct incentives with them to sustain the most appropriate peg. Price fluctuations are penalized or rewarded by the direct incentives depending on their move with relation to the peg.

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Ryan Walkers, a researcher at Messari, observed the event of genesis. The event also features an airdrop for liquidity providers. As such, in the mechanics of this protocol, more than a billion dollars was involved.

Walkers further noted that most of the early investors would look to liquidate their ETH and bring in the profit. He stated that FEI’s issue is this tendency. However, extreme penalties will be incurred for doing so. He continued that the protocol will eventually adjust its weight and bring back FEI to the peg. However, there’s no future to it and even less demand as most run to exit the protocol.

A burning system that is dynamic is used to influence the price involved in the mechanism of direct incentives. A significant penalty could be incurred should the stablecoin be sold in a short time frame while there is high pressure to sell.

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FEI will come with a supply that is uncapped and which tracks demand. The coins are to enter circulation through a bonding curve guided sale. The curve is to approach the peg of $1.

A group of early adopters called the “Genesis Group” was created to take part in the launch. The event also involved the airdrop of TRIBE, the protocol’s governance token. The launch has also upped the liquidity of Uniswap to as much as $8B.

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