DEFI

Parrot Protocol initiates token buyback proposal, unlocking team and VC token allocations ahead of schedule.

share
Parrot Protocol initiates token buyback proposal, unlocking team and VC token allocations ahead of schedule.

The lending liquidity protocol Parrot Protocol initiated its first governance proposal, sparking significant controversy. With the protocol's Total Value Locked (TVL) and token price continuously decreasing over the past two years, the team proposed to use the treasury funds to buy back all tokens and transition to a token-less protocol. However, the team bypassed the governance process in November last year, unlocking tokens for the team and VC investors. This indicates that they not only hold a significant amount of voting power but also attempt to cash out their tokens by passing this proposal with absolute dominance.

Parrot Protocol

Parrot, based on the Solana public chain, aims to create liquidity for assets locked in Uniswap and AAVE.

Users can mint stablecoin PAI by providing LP tokens obtained from liquidity provision on other platforms on Parrot, or use LP tokens as collateral for secondary lending in Parrot's lending market.

2021 Funding Exceeds $80 Million

During the bull market, Parrot raised close to $90 million through coin sales and IDOs, but did not make much progress in protocol adoption:

Community Comments: Classic Soft Rug Project

After completing the IDO in mid-September 2021, Parrot's total TVL reached a new high of $476 million in October, but has since declined to only $9.18 million.

The token PRT followed a similar path, reaching a high of $0.02 in late September 2021, and is now only $0.0043.

Although the protocol is still functioning, the community generally views this situation as a Soft Rug.

Parrot Protocol PRT Token Price Trend

New Proposal: Token Buyback, Transition to Tokenless Protocol

On July 21, Parrot released a new proposal, suggesting a $50 million buyback of all PRT tokens at $0.0045 using the $73 million in funds earned from IDOs, transitioning Parrot to a tokenless protocol.

While this proposal seems friendly to retail investors, it actually benefits the protocol team and VC investors.

Parrot Pre-unlocks Team and VC Investor Tokens, Holding Significant Voting Power

In November 2022, Parrot announced the early unlocking of tokens originally subject to a 12-month lockup period for the team and VC investors, giving these stakeholders significant tokens and voting power.

Note: This was not decided through a governance vote.

As a result, the team could easily pass the above proposal with an absolute majority, while the treasury funds would be used to repurchase the team's unlocked tokens.

This proposal essentially allows the team and stakeholders to cash out their tokens under the guise of governance, ensuring that the team will not face community criticism due to lackluster token performance in the future.

Why Did Parrot Issue Tokens?

If the team ultimately decides to transition to a tokenless protocol, why did they issue tokens in the first place?

According to the team's initial statement, PRT was intended to be a governance token, allowing users to maintain and promote protocol development by holding PRT, with more rewards released based on the duration of token holding.

Ironically, this proposal was Parrot's first formal governance proposal, with a staggering 96.2% in support.

Only two people voted on the first two proposals

Parrot's Response: Team Token Holdings Overstated

The project team responded to the controversy by stating that the community's claim that the team holds 5.4 billion tokens and misappropriated 6.4 billion tokens from the treasury is incorrect.

They emphasized that the team will not misappropriate tokens from the treasury or use them for voting, and that the community has greatly exaggerated the team's holdings by twice the amount.

However, despite this, it appears that the development team and VC investors are still the ultimate winners.