The Fei protocol employs a number of novel approaches to balancing the stablecoin peg price and protecting collateral from price fluctuations. To begin with, it is a two-coin algorithmic stablecoin, with one coin, FEI, attempting to maintain the peg while the other, TRIBE, is used to absorb volatility.
When a course deviation is prolonged, Fei's rebalancing mechanism kicks in. The protocol then uses its asset holdings (PCV) to purchase and burn FEI tokens. This advantage allegedly distinguishes FEI from other algorithmic stablecoins, all because they lack a built-in function to buy back tokens in the event of a drop in demand.
Second, FEI is based on a model known as protocol controlled value (PCV). PCV is a subset of TVL (total value locked), in which a platform owns the assets locked into the smart contracts outright. This is a very novel and, to be honest, questionable approach, because traditionally stablecoins function as a sort of IOU, with the user having the option to demand the return of his collateral at any time.
Third, the Fei Protocol employs direct incentives to penalize trades away from the peg while rewarding trades towards the peg. This is supposed to cause a deflationary effect by modulating the FEI supply.
By design, when the demand for the coin is high, to create new FEI coins a user has to put their assets into a Uniswap pool and basically mint new coins, everything is simple. When the demand is low, selling the coin back will burn it automatically correcting the price. Unfortunately the underlying model failed the founders to predict that by penalising the seller selling the FEI below the peg with burning more coins than he intended, it penalises the buyer as well, virtually killing all demand for the coin alongside the supply.
Fei Protocol Price Prediction
Fei Protocol price equal to $0.95 USD on May, 22nd 2021 here’s a price prediction on ( FEI )
Furthermore, By the end of 2021 we believe the price of ( FEI ) will be around $1.02 to $2.72 USD.
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