Deprecate FEI Market

Overview

Fei Protocol is planning to be wound down in the near future. Based on current plans, all FEI will become redeemable for an equivalent amount of DAI, with surplus PCV used to reimburse losses from the Rari Capital hack and pay out TRIBE token holders.

To ensure an orderly wind down process for Compound’s cFEI market, I believe Compound should adopt the following changes:

  • Disable new FEI borrowing and supplying
  • Set reserve factor to 100%

Proposal Actions

comptroller -> _setBorrowPaused -> cFEI, 1 (True)

comptroller -> _setMintPaused -> cFEI, 1 (True)

cFEI -> _setReserveFactor -> 1E18 (100%)

Next Steps

After allowing time for community discussion and possible objections, I hope to push forward an on chain proposal for the above actions in the coming weeks.

If within 1 month of proposal execution the amount of FEI borrows outstanding is still large, the community could consider further changes such as interest rate model change (increasing borrowing rates) to ensure all cFEI users are able to withdraw funds and participate in the TribeDAO organized redemption process promptly.

4 Likes

A few notes for deprecating a market;

  1. When a market has a 0% CF and 100% Reserve Factor, the protocol allows all borrowing positions to be immediately closed. This is intended behavior (and makes sense in this situation), but users should be warned ahead of time.

  2. If there is a possibility that the asset is being globally deprecated, the community should decide whether to withdraw the reserves (which are no longer needed to cover bad debt in the market), and transfer them to another market. FEI, REP, and SAI all fit this framework (REP and SAI reserves were not offboarded either).

2 Likes

Good point. We would definitely want to give significant notice before putting FEI borrowers in a position where they could be liquidated.

Maybe it would make more sense to split the proposal into 2 parts.

Part 1:

  • Disable FEI borrowing
  • Disable FEI depositing
  • (Optional) Set FEI reserve factor to high, but less than 100% value

Part 2:

  • Wait at least 1 month from execution of part 1
  • Set FEI reserve factor to 100% (which allows for liquidation of outstanding borrows)
2 Likes

@monet-supply @rleshner Sorry for the late answer, I missed this post. I wonder if it would make sense to disable supplying only in part 2.

The market is currently illiquid on Compound so users that would want to withdraw immidiately are not able too. On the other side, users that are ready to take a larger illiquidity risk but benefit from the current high APY could supply FEI for the little bit of time left, enabling the first class of users to withdraw asap. With time, the borrowers left will repay, enabling everyone to withdraw.

Moreover, it would also simplify the FEI wind down on Morpho, the biggest Compound borrower (and second depositor) all markets combined this last quarter. Indeed, Morpho borrowers, to repay their positions, will sometimes trigger a supply on Compound.

This is not necessary for Morpho as there are workarounds for this specific case but it would simplify things. This is why, if there is any significant downside in disabling FEI depositing in part 2, I would suggest that we stick to the plan proposed by @monet-supply.

2 Likes

Thanks for your comment. I see no issues with moving freeze on new supplying to part 2 of proposal. So tentatively:

Part 1:

  • pause borrowing
  • (optional) set reserve factor to high value, less than 100%

Part 2:

  • pause supplying
  • set reserve factor to 100% (enables closing all remaining borrows)
2 Likes

Given the wind-down of Fei, Gauntlet is supportive of this proposal. We’d note that utilization of the market has reached 100%.

1 Like

FEI proposal here:

4 Likes

cc @monet-supply – is it feasible to move ahead with setting reserve factor to 100% so that lenders can exit the pool within the next few weeks? Volt Protocol is the largest lender left in the market and while it is a small portion of PCV and not impacting user liquidity, it will be good to consolidate lending activities into the DAI market.

Proposal was executed around 10 days ago, would like to give a bit more time for notice before borrows get force closed (and face potential liquidation fee). Would love to hear community’s thoughts on if 30 days would be enough time to wait before submitting the final deprecation proposal (setting reserve factor to 100% and disabling supplying)?

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I wanted to follow up here to confirm that there are no strong objections to submitting the next stage of the deprecation process 30 days after the initial proposal executed. That would be on October 10. As essentially the only lender left in the market from which Compound has both withdrawn the reserves and set the reserve factor to 99%, Volt Protocol would appreciate being able to clearly confirm our expected withdrawal date.

1 Like