Forum Discussion

https://tribe.fei.money/t/proposal-buying-defi-pulse-index-dpi/3348 Author: Bruno Rodrigues and Matthew Graham

Basic Summary

The following is a proposal to invest 10M FEI, which represents ~2% of PCV, into the DeFi Pulse Index (DPI).

The DPI is a capitalization-weighted index that tracks the performance of the top DeFi tokens. It is currently composed of 14 popular DeFi tokens available on Ethereum.

Motivation

The main purpose for purchasing $10M of DPI is to grow PCV through having exposure to the DeFi sector. By diversifying the PCV FEI Protocol intends to better protect the peg and help drive FEI utility and adoption.

DPI is an efficient way to get exposure to the DeFi sector. The index gives exposure to all the underlying protocol tokens while only having to hold one single token. The top 7 tokens of DPI represent ~90% of the Index portfolio (Uniswap, Aave, Maker, Compound, Sushi, Yearn and Synthetix). The 95 basis point streaming fee is more capital efficient for Fei compared to replicating the product in-house and then incurring regular rebalancing costs.

DPI is also listed on CREAM and soon to be listed on AAVE which has the added benefit of enabling DPI to be deployed productively.

This DPI investment does not exclude investing in other DeFi projects. Having individual positions in other DeFi protocols offers governance influence and the ability to pair the token with FEI in providing on-chain liquidity. This is viewed as a complementary approach to holding DPI.

Fei has been working with Index Coop which lead to FEI being included in Rari’s Fuse pool #19. Both DAOs are looking forward to growing the relationship between the two communities. A $10M purchase of DPI would make Fei one of the larger DPI holders and will further strengthen the two communities.

After acquiring DPI, Fei can provide liquidity for FEI-DPI pair across Fuse, CREAM, UniV2 or Sushi.

Considering the poll on PCV Guidelines, the proposed allocation for DPI would leave space for this other DeFi tokens allocation (up to the limit of 10% of PCV).

Our risk analysis of DPI is available in the forum post.

Specification

A DPI bonding curve will be created with a $10M FEI fundraising target. DPI holders are able to deposit DPI tokens into a contract and receive between a 1% discount and up to a 2% premium to the Chainlink oracle feed paid in FEI. All the transaction costs are borne by DPI depositors. Depositors are expected to arbitrage the bonding curve premium leading to an increase in the supply of DPI via the exchange issuance mechanism offered by Index Coop.

Given the exchange issuance mechanism provided by Index Coop and the DPI/ETH being monitored by flashbots, DPI’s price is expected to continue tracking the Net Asset Value. The history of DPI’s price relative to NAV can be seen on the Index Coop Dune DPI Dashboard.

Voting Rules

Voting will last 2 days. This is a non-binding signal vote. Please keep in mind that snapshot votes can be changed but not withdrawn until the end of the voting period.

The two options to vote on are:

• FOR Open a Bonding Curve with $10M FEI funding target

• AGAINST Do Not open a Bonding Curve with $10M FEI funding target

This is a single choice vote, if option 1 wins the majority, we will submit a DAO proposal 24h after the end of the snapshot vote.