Fei Labs has raised 639,000 ETH or roughly $1.27 billion at the current prices for its Fei protocol stablecoin. Over 17,000 unique addresses participated in the Genesis event of the Fei stablecoin, according to Fei Labs. The ETH raised will be used as collateral to mint Fei stablecoins. Some analysts are calling the event the biggest launch in DeFi’s history.
The Biggest Launch in DeFi’s History
The raised money will be locked inside the Fei Protocol Controlled Value (PCV), or the protocol’s ‘total value locked’ (TVL). Fei’s PCV also includes treasuries, insurance funds, and other assets that are not redeemable by users.
Investors who participated in the Genesis Event will receive a pro-rata percentage of FEI coins in exchange for their contributions:
“Users that participate at Fei Protocol Genesis can commit ETH as part of the Genesis Group to bootstrap the protocol. By doing so, this entitles participants to a pro-rata percentage of FEI generated from the bonding curve.”
The project’s whitepaper described the stablecoin:
“FEI uses a new kind of stablecoin mechanism called direct incentives. It is more capital-efficient, has a fair distribution, and is fully decentralized. The protocol uses the value it controls to maintain liquid secondary markets.”
The project includes backers such as Andreessen Horowitz, Coinbase, Nascent, Framework, Variant, and Buckley Ventures.
Fei’s Method of Pricing Its Stablecoin Is Algorithmic
Like any other stablecoin protocol such as DAI, Fei’s method of pricing its stablecoin is algorithmic. The only difference is that it’s called ‘PCV’, or ‘Protocol Controlled Value,’ where it maintains the price balance by acting as an automated central bank to maintain its $1 price.
Furthermore, to ensure that the protocol has the means to buy back the tokens, it requires some underlying assets, or ETH, as collateral. This is where Fei’s Genesis launch comes in. Given the demand for FEI falls and the price plummets, the ETH acquired from the launch will go towards buying the tokens to push the price of FEI back to $1.
There are also mechanisms in place to penalize trading beyond the $1 price. For instance, traders attempting to sell FEI stablecoin below $1 will face huge fees. This makes it overall favorable for the FEI protocol.