Fei Protocol

Fei protocol is an algorithmic stablecoin for DeFi. The aim of Fei is to propose a technological solution in a sweet spot between rigid overcollateralized traditional stablecoin and unpredictable but centralised existing algorithmic stablecoins.

Fei Protocol runs on two crypto assets: FEI stablecoin and TRIBE governance token.

FEI is based on a novel kind of stablecoin mechanism called direct incentives. It aimed to be more capital efficient, feature a fair distribution and to be fully decentralized. The protocol uses the value it controls to maintain liquid secondary markets.

The project was founded in December 2020 and immediately attracted significant interest in the crypto community. It resulted in $19 million VC investment in early March 2021. Among the names that have entered this project are Andreessen Horowitz (a16z), Coinbase Ventures, Nascent and Framework Ventures.

The FEI genesis launch event was held as an IDO (initial defi offering) at the end of March and was finished by Apr. 3, 2021. During the event a total of 639,000 ETH was committed to the minting of the FEI stablecoin, or nearly $1.3 billion.

Shortly afterwards it started to drop in price catastrophically, revealing a critical misjudge of incentive structure multiplied by the general public’s misunderstanding of the protocol’s ways and means. Moreover, each time the algorithm tried to adjust the rates to discourage FEI selling, it only made the matters worse. At the peak of the crisis it was traded pennies on a dollar. Weeks after the event FEI has not reached the 1:1 peg leaving the future of FEI protocol in question.