Fei Stablecoin Has Achieved Price Stability After Initial Failure

The stablecoin is now trading at $0.97 after previously falling to $0.70.

Key Takeaways

The Fei Protocol team has restored the value of its stablecoin, as the coin’s market value now sits at $0.97.

The team is conducting an audit so it can reinstate price stabilization mechanisms that were halted due to a vulnerability.

The governance community has voted to allocate 300,000 ETH to users, and it will also double staking rewards.

The Fei stablecoin (FEI) has achieved price stability following various failures that followed the project’s initial launch.

Fei Proposal Fixes Price Instability

Fei is an algorithmic stable coin. Unlike centrally managed stablecoins such as Tether, it achieves price stability by automatically adjusting its supply based on price and collateral amounts.

Initially, users committed over $1 billion in ETH and minted the token via Uniswap’s FEI-ETH pool. The team hoped to peg the coin to the price of the U.S. dollar through direct incentives and reweights.

However, Fei failed to achieve price stability after its Apr. 3 launch. Now, as a means of mitigating the project’s rocky start, the project has implemented the FIP-2 redemption proposal, allowing the stablecoin to be redeemed at $0.95 in ETH.

Various Issues Led to a Price Crash

According to the project team, many users wanted to participate quickly for the governance token airdrop and immediately exit. This created significant selling pressure and affected prices.

Soon after, a critical vulnerability was found in the direct incentive system, which forced the team to remove the function. Following this, the protocol’s price stabilizing mechanism (Peg Reweights) could not operate and had to be paused as well.

Those issues caused prices to crash further. But thanks to the new proposal, the community has voted to establish a minimum price for exchanging FEI and ETH within the protocol.

“In order for the system to get close to the $1 peg, the team proposed that we would artificially set the floor at 95 cents. This would allow us to release the selling pressure as we move towards reinstating the direct incentive system,” Brianna Montgomery, Business Lead at Fei Protocol, told Crypto Briefing.

“The purpose is to move FEI closer to the peg while the fixes to the direct incentives mechanism are audited,” she added.

Source: CoinGecko

More Improvements on the Way

Now that the latest FEI redemptions have taken place, the stablecoin is currently trading at nearly $0.97. By contrast, on Apr. 20, the stablecoin was priced at approximately $0.70.

Fei Protocol has also allocated 300,000 ETH to users from its treasury, which can be redeemed on the project’s website. The governance community has also voted to double FEI staking rewards to further incentivize adoption of the stablecoin.

The team is additionally conducting a full code audit so that it can reinstate price stabilization mechanisms that were previously halted.

Disclosure: The author did not hold crypto mentioned in this article at the time of press.

Disclaimer Read More Read Less

The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.

You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.

See full terms and conditions.

Source: cryptobriefing.com