Stablecoins are a staple of DeFi. Users want to access dapps like Compound and Aave without worrying about volatility. However, each existing stablecoin model has a critical fault. Fiat-collateralized stablecoins like USDC and USDT are centrally controlled. This represents a regulatory risk and a point of failure for apps wishing to be truly decentralized. Crypto-collateralized stablecoins like DAI have scalability issues due to capital inefficiency. In other words, generating crypto-collateralized stablecoins requires an excess of collateral. They also require demand for debt or leverage to grow. Seigniorage models like ESD and Basis Cash centralize supply expansion rewards. This creates an unfair distribution in the growth of the stablecoin. In addition, liquidity providers are incentivized to withdraw at the first sign of danger. Fei Protocol was born in an attempt to solve all these issues. The inspiration for the vision of Fei Protocol comes from an ancient stone currency — Rai, or Fei, of the Micronesian island of Yap. We hope that the FEI stablecoin exhibits the same stability, simplicity, and ubiquity as its stone counterpart. The FEI stablecoin has an uncapped supply that tracks demand. FEI enters circulation via sale along a bonding curve. This curve approaches and fixes at the $1 peg. When new demand for FEI arises, users can acquire it by buying on the bonding curve. The price function will start low to reward early adopters for purchasing FEI. Fei Protocol will support the creation of bonding curves denominated in any ERC20. The launch will contain only a single curve denominated in ETH. The mission of Fei Protocol is to create an entirely decentralized stablecoin. Therefore it is critical that no tokens issued by trusted third-parties (e.g. USDC, USDT, wBTC) be used as collateral on the bonding curve. This is a stance the development team hopes will be shared by the governance community post-launch. The ETH bonding curve will have a target FEI supply for bootstrapping before fixing the price at $1. This target is known as Scale; reaching Scale will denote the end of the bootstrapping phase. Scale will be set to 250,000,000 FEI, to be large enough to merit integration with other DeFi protocols. We also believe it is small enough to hit within a short time frame to minimize the bootstrap period. Post-Scale, the bonding curve price will fix at a governance-able buffer above the peg. This price creates a ceiling throughout the ecosystem. Arbitrageurs can buy on the bonding curve and sell on secondary markets if the price is higher elsewhere. Users cannot sell FEI on the bonding curve. Instead, the protocol retains the incoming ETH as Protocol Controlled Value (PCV). Fei Protocol deploys the PCV to create a liquid secondary market where users can sell FEI back into ETH.