[MIP #55] - Recovery Plan for Users Affected by Penpie Exploit

[Desmen]

This proposal seeks vlMGP holder input on whether Magpie should support Penpie’s recovery plan for users impacted by the recent Penpie exploit.

Key Components

• Penpie Recovery Token (PRT): The primary token used to support users affected by the Penpie exploit
• Direct Recovery Mechanism: A structured plan that provides both initial and ongoing recovery for PRT stakers through multiple sources, ensuring fair distribution over time.
• Stolen Funds Recovery: A process in place to return funds to users if stolen assets are recovered, with recovery amount adjusted based on the value of ETH or stablecoins at the time of the exploit.

Penpie Recovery Token (PRT)

The Penpie Recovery Token will be issued to support users affected by the recent Penpie exploit. Each PRT represents $1 in recovery value, providing a simple way for users to recover their losses.

Approximately 27 million PRT tokens will be created, representing the approximate total loss suffered by affected users. The exact number of tokens each user will receive will be determined by a snapshot taken at the time of the exploit. This ensures that every user receives recovery in proportion to the amount they lost. PRT is intended only to support users affected by the recent Penpie exploit, we do not in any circumstances encourage or support any trading or speculation in the value of the PRT token.

Direct Recovery Mechanism

This Recovery Mechanism ensures that users affected by the Penpie exploit receive recovery fairly and transparently at a 1:1 rate. The Recovery Mechanism is funded from an initial allocation of MGP tokens, ongoing rewards from vlMGP and vePendle revenues, and potentially recovered funds. By staking their PRT, users will receive $1 for every 1 PRT over time, with the total supply of PRT decreasing progressively as recovery is distributed.

• Sources of funds for Recovery Mechanism:
  • Initial Recovery: 1% of the MGP tokens (10M) from the Team’s allocation and 3.5% (35M) from the Magpie Treasury will be used to provide initial recovery to PRT stakers. This recovery amount will be distributed at a rate of $0.10 per MGP token. For every 10 vlMGP distributed, 1 PRT will be removed from the supply.
    The initial recovery will be available for two months, during which affected users can opt to exchange up to 12% of their airdropped PRT for vlMGP.
    • After the initial two months, if any vlMGP remains, users can exchange up to 30% of their airdropped PRT on a first-come, first-served basis.
    • After a total of three months, any remaining vlMGP will be proportionally returned to the Team and Treasury. There will be no further option for exchanging PRT for vlMGP.
  • Ongoing Recovery Amounts: 20% of vlMGP revenue and 20% of vePendle revenue will be allocated toward recovery for PRT stakers. These revenues will first be converted into stablecoins before being sent to the recovery contract for distribution.
  • Future Subdaos IDO Allocation: 10% of the private round allocation for future SubDAO IDOs will be allocated to vlPNP (no impact to the usual vlMGP allocation). This option remains available until the PRT recovery process is completed.
• PRT Staking and Dollar-for-Dollar Recovery: PRT holders can stake their PRT tokens in the recovery contract. As funds are gathered from vlMGP and vePendle operating revenues, for every 1 PRT staked, users will receive $1 in recovery amounts over time.
• PRT supply: For every $1 distributed, whether through the vlMGP and vePendle revenues, initial MGP recovery or recovered funds, 1 worth of PRT will be removed from the supply. This process helps to track outstanding recovery amounts as users receive their recoveries.
• Dutch Auction (Early Recovery): To allow affected users to potentially exit early, the Penpie team will allocate $500K USDT for early recovery of PRT tokens through a Dutch auction mechanism. Under a Dutch auction, users can submit bids to sell their PRT, and as the auction progresses, the price adjusts to meet demand, ensuring fair value. (note that auctions will likely be settled at a discount to the full recovery amount). This approach replaces the initial plan to provide liquidity on PancakeSwap.

Recovery of Stolen Funds

If the stolen funds are recovered, they will be sent to the recovery contract. Affected users who have staked their PRT tokens in the recovery contract will receive their portion of the recovered assets proportional to the staked PRT. Once all PRT tokens have been fully removed from circulation, any additional recovered funds will be allocated to the Penpie treasury.

• ETH Recovery: If ETH is recovered, the recovery amount will be calculated based on the price of ETH at the time of the exploit. For example, if the price of ETH at the time of the exploit was $2400, then for every recovered ETH sent to the recovery contract, 2400 PRT will be removed. This ensures a fair and accurate distribution of recovered assets.
  Example: If you hold 1% of the total PRT supply and 5000 ETH is recovered, you would receive 50 ETH. A total of 120,000 of your PRT removed in exchange for your recovered amounts.
• Stablecoin Recovery: If stablecoins are recovered, recovered amounts will be handled on a 1:1 basis. For every $1 in stablecoins recovered and distributed, 1 PRT will be removed from the recovery contract.

Future of Safupie

The Safupie concept has been placed on hold following community feedback. It may be introduced in the future as an independent SubDAO designed to provide decentralized cover (insurance) for DeFi protocols. If Safupie is launched, additional private round IDO allocations will be provided to both vlMGP and vlPNP holders. A Dune dashboard will be used to calculate future IDO allocations.

Summary of Key Points

• PRT Tokens: ~27 million PRT tokens will be distributed to affected users as recovery for the Penpie exploit. Each PRT represents $1 in recovery amount, with distribution proportional to each user’s losses
• Early Recovery in MGP: To provide immediate relief, 1% of MGP tokens (10M) from the Team’s allocation and 3.5% of MGP tokens (35M) from the Magpie Treasury will be used for early recovery. These will be distributed to PRT stakers at a rate of $0.10 per MGP token via the recovery contract.
• Ongoing Recovery: 20% of vlMGP revenue and 20% of vePendle revenue will be directed to the recovery contract. PRT stakers will receive $1 for each PRT over time, as funds are gathered. vlPNP holders will receive allocation on future Subdao IDOs.
• Reduction of supply of PRT: For every $1 distributed to stakers through the recovery contract, 1 worth of PRT will be removed from the supply, reducing the total supply of PRT over time.
• Recovered Funds: If stolen funds are recovered, they will be distributed through the recovery contract. 1 PRT will be removed from the supply for every $1 recovered and distributed. Recovery for ETH will be calculated using the price of ETH at the time of the exploit.
• Safupie: Currently on hold, but if launched as an independent SubDAO, future private round IDO allocation will include vlMGP and vlPNP holders.

Disclaimers and waivers

The proposal to provide recovery amounts is purely a goodwill gesture in order to support users affected by the recent Penpie exploit. Nothing herein or payment of any recovery amounts shall be deemed or construed as an admission of liability by any person or entity associated with the Penpie team. The recovery plan and payment of recovery amounts shall not be used or construed in connection with any other suit or other proceeding, either now pending or as may be brought, as an admission or concession of liability or otherwise on the part of any person or entity associated with the Penpie team.
The receipt of recovery monies (or any part thereof) by any user shall be accepted by such user without reservations in full and complete settlement and satisfaction of all claims, demands or causes of action of any nature whatsoever in connection with the Penpie exploit, including without limitation claims for performance, fees, payment, repayment, interest and costs which such user may now have or may have against any person or entity associated with the Penpie team.
In consideration for the payment of the recovery monies (or any part thereof), each user hereby: (a) agrees to discharge and release all persons or entities associated with the Penpie team from all liabilities, obligations, claims and demands whatsoever, howsoever and whenever arising, relating to or arising from the Penpie exploit, (b) waives all rights which it may have against any person or entity associated with the Penpie team in respect of any accrued claims or liabilities whatsoever in relation to the Penpie exploit, (c) agrees that it is fully estopped from, and undertakes to refrain from bringing any claims, demands, suits, actions or proceedings of any nature whatsoever, including without limitation claims for performance, repayment, interest and costs against any person or entity associated with the Penpie team resulting from, arising out of or in any way whatsoever connected with the Penpie exploit.
Each holder of PRT confirms that it is not a resident or citizen of a jurisdiction where access or interaction with digital assets or PRT tokens would be prohibited or restricted in any manner.
By interacting with the recovery contract (whether through the Penpie website or otherwise), you acknowledge and accept that hackers, individuals, other malicious groups or organizations may attempt and succeed to interfere with these recovery smart contracts, the underlying blockchain network, your wallet application or other mode of accessing the recovery smart contracts, in a variety of ways, which may lead to a loss of your PRT or recovery amounts. Transactions on public blockchains are irreversible.