FIP-20 Lido Staked ETH (Part 2) & PCV Dripper Re-allocation

Discussion

https://tribe.fei.money/t/fip-20-lido-staked-eth-steth-part-2/3454

Basic Summary

This proposal will fully deploy the ETH in the Dripper:

1. Invest 14,611 ETH (approximately 6% of PCV) from PCV into Lido stETH;
2. Allocate 75,000 ETH to the Compound Finance Supply Market;
3. Allocate 75,000 ETH to the Aave V2 Supply Market.

Motivation

This proposal is modeled after FIP-9 (https://tribe.fei.money/t/fip-9-staking-eth/3331) and intends to build upon it, based on the success of its execution.

An additional investment into stETH will allow the PCV to grow in value and to assist to protect FEI’s peg and to lay the groundwork to drive utility and adoption. Per the PCV Investment Guidelines, the total proportion of the PCV in stETH will be at about 10% of PCV, within the parameters described therein. Fei Protocol’s vision remains the same - to strengthen our positioning in the stablecoin sector and to remain optimistic in the long term value of ETH.

Lido allows users to stake ETH on the Ethereum beacon chain to earn daily rewards. The stETH is a token that represents staked ether using Lido and is pegged 1:1 to the ETH. Its value is the result of initial deposit plus staking rewards less penalties. The daily staking rewards are paid in stETH and will accrue in the PCV.

The second purpose of this proposal is to more effectively activate capital that is currency underutilized in the PCV Dripper. Fei has been successful in maintaining its peg through reweights, and therefore it will be more productive to deploy this ETH into highly liquid lending markets. As of this writing, after the 14,611 ETH for stETH there is approximately 150,000 ETH remaining in the PCV Dripper. This proposal will remove 150,000 ETH from the Dripper and allocate them 50/50 into both Compound and Aave to be available to be borrowed. This trade also has the benefit of also accruing COMP and stkAAVE tokens, which will be currently stored in the PCV.

The proposal includes new code for a PCV Drip Controller that can drip straight from a PCV deposit like Compound or Aave to be more capital efficient. For this reason we can completely empty the existing dripper. For compatibility reasons we will need to deploy a new reserve stabilizer contract, but it can use the same parameterization unless another vote changes that.

An adjustment to the Redemption policy and its backstop level will be proposed separately. Any redeployment of the accrued COMP and stkAAVE tokens will be proposed separately.

Specification

This proposal will:

• Re-utilize the EthLidoPCVDeposit (https://etherscan.io/address/0xAc38Ee05C0204A1E119C625d0a560D6731478880) and hold a further 14,611 ETH as stETH. For how this contract works, refer to the FIP-9 specification (https://snapshot.org/#/fei.eth/proposal/QmWraPkBtnNVB5jsGKweUivxA7TwfJw9KuJ5XWvG2PibcM).
• Create a new ERC20CompoundPCVDeposit contract for depositing ETH in Compound, along with an associated PCVDripController
• Create a new AavePCVDeposit contract for depositing ETH in Aave, along with an associated PCVDripController

Access control changes:

• Grant Burner to new EthReserveStabilizer and revoke from old stabilizer
• Grant PCVController to two new PCVDripController contracts

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:

1. 14,611 ETH to Lido stETH and Redeployment of PCVDripper ETH to Compound (75,000 ETH) and Aave (75,000 ETH)

2. No further deployment on LIDO stETH, no redeployment of PCVDripper ETH to Compound and Aave

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.