June 21, 2021

Fei Protocol struggles with a bug as holders are mostly unable to sell the token

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Wednesday’s crypto market correction put a heavy burden on the FEI project, the latest attempt at creating an algorithmic stablecoin that would remain stable in the face of market turbulence. Due to the particular mechanics of the protocol, the FEI token became impossible to sell as its main liquidity pool quotes a negative price for the token.

The Fei protocol is a recently-launched project that has immediately attracted billions in liquidity and total value locked by selling its FEI token, an algorithmic stablecoin using the concept of Protocol-Controlled Value to maintain a peg with the U.S. dollar.

Crucial to the protocol’s functioning is the ETH-FEI Uniswap pool, which is largely controlled by the protocol. The pool has been expressly designed to track the price of the ETH-USDC pool as closely as possible. The protocol sends most of the Ether it receives from FEI buyers to the ETH-FEI incentivized pool, ideally supplying plenty of liquidity to facilitate trading.

To maintain the peg, the protocol limits how much selling can occur through the incentivized pool. This happens by burning a significant fraction of FEI tokens used in the sale, which has the resultTitle: Fei Protocol struggles with a bug as holders are mostly unable to sell the token
Sourced From: cointelegraph.com/news/fei-protocol-struggles-with-a-bug-as-holders-are-mostly-unable-to-sell-the-token
Published Date: Wed, 07 Apr 2021 18:25:29 +0100