- One of the largest decentralized stablecoins may soon cease to operate: Platform founder publishes compensation offer
Popular stablecoin project Fei’s (FEI) Ethereum (ETH) veteran Joey Santoro, creator and founder of Fei Labs, proposes a proposal to convert FEI tokens to DAI and distribute protocol-controlled value (PCV) among TRIBE holders published.
Fei (FEI) stablecoin project shuts down; Fei Labs is leaving the DAO
Santoro took to Twitter to announce the shutdown of the Fei (FEI) architecture due to “technical, financial and possibly future regulatory issues.”
“The past months have been tough for Tribe DAO. These difficulties and the results did not turn out as anyone had hoped.
After a deep consideration, Fei Labs recommends the following considering all stakeholders. We believe this is the most logical way forward.”
The past months have been difficult for the Tribe DAO. These challenges and outcomes were not what anyone hoped for.
After deep consideration, Fei Labs proposing the following after considering all stakeholders. We believe this is the responsible path forward. pic.twitter.com/TbzWeCdhEr
— Joey 💚’s ERC-4626 (@joey__santoro) August 19, 2022
The developer has released a proposal to convert the existing circulating FEI supply into the popular algorithmic stablecoin, Dai (DAI). If this proposal is approved, the remaining PCV reserves will be distributed among the holders of the TRIBE token, which formerly acted as a balancing act between the FEI and the USD to keep it steady at 1:1.
This upcoming decision to cease operations is presumed to be a sweeping attack from Fei Labs and Rari Capital following a devastating attack on their partner-related Fuse-based liquidity pools.
Decentralized finance (DeFi) researcher Ignas, who goes by the name @DefiIgnas on Twitter, adds that Fei’s (FEI) protocol-controlled value (PCV) vulnerability is the real reason the FEI team closed the project:
“Finally, another reason Fei was shut down is that the PCV model did not adapt to the product market. With DeFi yields falling and dangers increasing, the protocol has struggled to generate revenue.”
From Frax Finance (FRAX) Sam Kazemian criticizes compensation plan
The aforementioned compensation roadmap for victims of the hack has been the most controversial part of Santoro’s proposals and has sparked backlash in the crypto community. Prominent crypto entrepreneur and investor Sam Kazemian calculated that some affected DAOs will lose 98 percent of their investment:
“DAOs like Frax finance and OlympusDAO get pretty low paybacks. Literally about 2 percent of their funding was lost on Fuse because they supported the FEI/Rari early. This is blatant criminal robbery and fraud.”
DAOs like @fraxfinance and @OlympusDAO are getting repaid cents on the dollar. Literally ~2% of their funds lost in Fuse for supporting FEI/Rari early. This is truly criminal robbery and fraud.
— Sam Kazemian (¤, ¤) (@samkazemian) August 20, 2022
Following this controversy, the FEI lost its peg against the US Dollar. Today, August 20, 2022, it briefly rose above $1.04, while it fell to $0.95 as of the date of publication. Before the crash, FEI was one of the largest decentralized stablecoins. In early 2021, Fei Labs had raised over $1.4 billion in funding.
You can follow the current price action here.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.