The Fei Protocol aims to keep a deep, liquid market where ETH/FEI quotes stay closely aligned with the ETH/USD rate. It accomplishes this with a stability approach called direct incentives. Direct-incentive stablecoins apply shifting mint rewards and burn penalties tied to DEX trade activity to help preserve the peg. At launch, FEI will rely on Uniswap as its incentive-driven DEX. Through governance, new DEX integrations and additional incentives can be added or updated over time. New FEI supply is introduced through a buy-only bonding curve priced in ETH. The ETH collected from bonding-curve purchases is called Protocol Controlled Value (PCV). PCV refers to any value that is entirely owned and governed by the protocol, with no IOU claims attached; it is a subset of Total Value Locked, but with a more direct purpose. The Fei Protocol puts its PCV to use solely as Uniswap ETH/FEI liquidity at the protocol’s genesis. This "liquidity-collateralized" design avoids relying on an overcollateralized debt position. As issuance expands, the bonding curve’s price moves toward a stable peg relative to the oracle. With a fixed-peg bonding curve, there is a built-in arbitrage path when Uniswap’s ETH/FEI price is higher than the peg. When Uniswap trades below the peg for a sustained period, the protocol intends to use its PCV liquidity to support the price.