Penpie Compensation Plan - Draft 02

Penpie 3. Community Ideas
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This post outlines the updated compensation plan for users affected by the recent Penpie exploit. After gathering community feedback, the Penpie team has refined the plan to ensure transparency, direct compensation at a dollar-for-dollar rate, and long-term sustainability of the ecosystem.

Key Components of the Compensation Plan

Penpie Recovery Token (PRT): The primary token used to compensate users affected by the Penpie exploit

Direct Compensation Mechanism: A structured plan that provides both initial and ongoing compensation to 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 compensation 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 compensate users affected by the recent Penpie exploit. Each PRT represents $1 in compensation, providing a simple way for users to recover their losses.

Approximately 27 million PRT tokens will be created, representing the total compensation of this plan. 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 full compensation in proportion to the amount they lost.

Direct Compensation Mechanism

This Mechanism ensures that users affected by the Penpie exploit are compensated fairly and transparently at a 1:1 rate. Compensation will come 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, while the total supply of PRT is gradually reduced through a burning process.

  • Compensation Sources:

    • Initial compensation: 1% of the MGP tokens (10M) from the Team’s allocation and 3% (30M) from the Magpie Treasury will be used to provide initial compensation to PRT stakers. This compensation will be distributed at a rate of $0.10 per MGP token. For every 10 vlMGP distributed, 1 PRT will be burned.

      The initial compensation 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.

    • Ongoing Compensation: 20% of vlMGP revenue and 20% of vePendle revenue will be allocated toward compensating PRT stakers. These revenues will first be converted into stablecoins before being sent to the compensation contract for distribution.

    • Future Subdaos IDO Allocation: 10% of the private round allocation for future SubDAO IDOs will be allocated to vlPNP. This comes with no impact to the usual vlMGP allocation. This option remains available until the PRT compensation process is completed.

  • PRT Staking and Dollar-for-Dollar Compensation: PRT holders can stake their PRT tokens in the compensation contract. As funds are gathered from vlMGP and vePendle revenues, for every 1 PRT staked, users will receive $1 in compensation over time.

  • Burning PRT: For every $1 distributed, whether through the vlMGP and vePendle revenues, initial MGP compensation or recovered funds, 1 PRT will be burned. This process helps ensure that the total supply of PRT tokens decreases over time and users get fully compensated.

  • Liquidity for PRT: To provide liquidity for PRT tokens, the team will seed a $500K USDT liquidity pool on PancakeSwap for the PRT/USDT pair. This mechanism allows affected users to exit early if they prefer to sell their PRT tokens on the secondary market.

    The liquidity seeding process works as follows:

    • The team will provide 500K USDT as part of the liquidity seeding mechanism.
    • Affected users will have the option to pair their PRT tokens with this 500K USDT.
    • The combined PRT and USDT will then be seeded into the PancakeSwap V2 PRT/USDT pair, creating the liquidity pool.

    For instance, if 500K USDT is paired with 1M PRT and 500K LP tokens are minted, each LP token will represent 1 USDT and 2 PRT. Of these, 250K LP tokens will be distributed proportionally to participating PRT holders.

    Additionally, to further incentivize liquidity for this pair, the Magpie Treasury will allocate up to 5M MGP to reward liquidity providers. This ensures a steady pool of liquidity and provides additional benefits for those participating in the liquidity pool.

Recovery of Stolen Funds

  • Compensation Upon Recovery: If the stolen funds are recovered, they will be sent directly to the compensation contract. Affected users who have staked their PRT tokens in the compensation contract will receive their portion of the recovered assets proportional to the staked PRT.

  • ETH Recovery: If ETH is recovered, compensation 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 compensation contract, 2400 PRT will be burned. 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. For each ETH distributed, 2400 PRT would be burned, meaning a total of 120,000 PRT burned for your compensation.

  • Stablecoin Recovery: If funds are recovered in stablecoins, compensation will be handled on a 1:1 basis. For every $1 in stablecoins recovered and distributed, 1 PRT will be burned within the compensation contract.

Future of Safupie

The Safupie concept has been placed on hold following community feedback. While it remains a promising initiative for the Magpie ecosystem, the primary focus at this time is to address the needs of the Penpie users affected by the exploit.

Safupie may be introduced in the future as an independent SubDAO designed to provide decentralized insurance for DeFi protocols. If Safupie is launched in the future, additional private round IDO allocations will be provided to both vlMGP and vlPNP holders. A Dune dashboard will be created to track the total funds from Penpie and Magpie used for compensation. This data will be used to calculate future IDO allocations.

Summary of Key Points

  • PRT Tokens: Approximately 27 million PRT tokens will be distributed to affected users as compensation for the Penpie exploit. Each PRT represents $1 in compensation, with distribution proportional to each user’s losses
  • Early Compensation in MGP: To provide immediate relief, 1% of MGP tokens (10M) from the Team’s allocation and 3% of MGP tokens (30M) from the Magpie Treasury will be used for early compensation. These will be distributed to PRT stakers at a rate of $0.10 per MGP token via the compensation contract.
  • Ongoing Compensation: 20% of vlMGP revenue and 20% of vePendle revenue will be directed to the compensation contract. PRT stakers will receive $1 for each PRT over time, as funds are gathered. vlPNP holders will receive allocation on future Subdao IDOs.
  • Burning PRT: For every $1 distributed to stakers through the compensation contract, 1 PRT will be burned, reducing the total supply of PRT over time.
  • Liquidity: Liquidity will be provided on PancakeSwap and will allow PRT holders to exit early by selling their tokens on the secondary market if they choose to.
  • Recovered Funds: If stolen funds are recovered, they will be distributed through the compensation contract. 1 PRT will be burned for every $1 recovered and distributed. Compensation 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.

We encourage the community to actively engage and share their feedback under this thread. Your input is essential in refining the compensation plan to best serve everyone involved. We aim to post an official proposal in about one week, so please use this time to share your thoughts and suggestions.

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The current compensation plan is clear and easy for everyone to understand. However, I believe that if you have access to a treasury or future revenue, a fairer distribution method should be considered. Some of us have lost a significantly higher percentage of our funds compared to others. I suggest creating a compensation plan that allows those who have lost more to accrue compensation faster.
Delta Prime post hack strategy provides a clear example of this approach; they utilized their treasury to mitigate the higher smart contract losses and ensure everyone experienced similar percentage losses. If you don’t have a treasury, you could emulate this by providing faster fund accrual to the pool that suffered greater losses until parity is achieved. I personally lost 76% of my funds, as did others, and I believe there should be preferred tokens or mechanisms to help us recover more quickly. The risk we have is that if the protocol won’t be used as much as before, post hacking, we will never recover anything from our lost.

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Is there a simple way to improve this just to have a weighted initial compensation ?
Some pools are down 100%
Others are only down 10%
I don’t think its fair to start compensation for everyone on the same level.
It could be done via more initial vlMGP allocation to highly affected pools.

Thank you

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I think having a weighted system might be exploitable (someone with split wallets; or people with a very small loss but 100% compared to who lost 5M but “only” 25% of his wallet).
Dollar value, if any, is a good balancing point

I have just the following notes:

  • The 1% team allocation is very small compared to the issue you created. Even 1,5% would be a nice gesture
  • Valuing MgP at 0.1 means a 50% premium. Unless you know something we don’t, it’s quite an high value. Lower the price a bit, please
  • Most of the losses are in Eth, and you are taking the $ value of eth to create a starting point that, i understand, must be done to make life easier. But you are pointing to eth value of the day of the hack. That’ very convenient; we all agree that in few years the eth$ value should be higher than it was that day. People already suffered lifechaning losses. Make an avg of all days in the past x days (like, hack to snapshot), so we might at least get a fairer evaluation. Right now you are giving us a 10% discount on $value, and it will get much worse (2400 vs 2640 current). So maybe “print” like 30M PRT or so with a pro-quota increase for ETH exploited
  • The proposed streamflow is probably going to repay in 10y or so, unless we get the money back. So i find them very negligible compared to the loss. What about a 5% more?

I don’t understand the Eth portion of the recovery. Say i have 1% of the PRT. You recover 5000 ETH, now valued 4000$. What i can claim? 50 ETH? Or (2400x50)=120K$? Or (4000x50)=200K$?

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vlMGP should not be allocated on a first come, first served basis, but rather fairly stake and then allocate the remaining resources，What I mean is that FCFS should not be implemented even after two months… We are just ordinary users and we don’t know how to deploy contracts to grab the remaining vlMGP…

In addition, the 20% income distribution ratio is too low, and it may even take more than ten years to repay the debt. Can we consider increasing the ratio a bit?

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Hello all,
As others say, 1% of the MGP tokens (10M) from the Team’s allocation and 3% (30M) from the Magpie Treasury is low, especially at $0.10 valuation wich represent a premium and more with the locked period, penalty fee, and liquidity in the market. But why not if it is just an option.

And no word about why not compensate in ETH.
" * Recovered Funds: If stolen funds are recovered, they will be distributed through the compensation contract. 1 PRT will be burned for every $1 recovered and distributed. Compensation for ETH will be calculated using the price of ETH at the time of the exploit."
=> so, if funds are recovered and at this moment ETH is $6000, what will happen ? You keep the $40M différence between the 27M stolen and the 66M recovered ? Users who lost USD will get a bonus on the backs of those who lost ETH ?

Thank you for reading.

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I simply can’t understand why USD victims also share ETH price increase in the current plan(when ETH is restored), so they only lose 10% of their money but have a change to grab ETH victim’s compensation? Very weird logic to me.

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I get that it’s easier to represent all losses in usd at time of loss (2400$/ETH).
However, that seems very unfair, what if funds are recovered right now? Price is at 2600, would you just keep the difference?
Also, if this takes 10 years as some people have stated, that would obviously be terrible. Penpies revenue would be crippled for the whole time. Maybe other subdaos can chime in? The faster this is sorted, the better for the ecosystem.

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TL,DR
10years or so to get compensation is insane, distribution should be fair and proportional to what was lost, not something that is destined to fail and that will only instigate affected investors to fight against each other for scraps. That’s miserable. In the ends, it’s almost as if the team really isn’t willing to compensate anyone and just wants to save their face, it almost feels like it was our own fault.

This proposal is miserable, there’s no other way to put it. If this is what you’ve been working for a month and a half, then I’d rather have received the bad news that we were not going to get any compensation from day 1. Breakdown:

  • receiving any other token rather than the one that was lost is bad. It’s bad for the obvious reasons that whoever lost ETH is going to lose the almost certain gains in the near future but also because of several other features of the plan laid out below;

  • the initial compensation is ridiculously low, symbolic I’d say. Then what’s the purpose of staking PRT? getting compensation over the years? But there’s going to be a liquidity pool for people who want to exit early so I suppose anyone will be able to buy PRT from the market, thus benefiting from the compensation. And if they don’t, what will 500k cover? it will be drained in no time and having “the option to pair it with the 500k liquidity” - is this a joke? Seriously?

  • a plan that will take several years to eventually compensate investors but we’ll only be able to swap 12% over the course of 2 months and then we have 1 month only, if any amount remains, to swap up to 30%, FCFS?? Are your serious? What is this, Battle Royale? The Hunger Games? Everyone fighting for crumbles? And then any remaining funds are returned to treasury?!?!

  • now the recovery of funds, which should actually be the easiest part but that will most likely never happen, is where it actually gets incomprehensibly messy: “If ETH is recovered” then ETH is to be sent back in the form of ETH to whoever lost it. It is NOT to be converted in stables and have the correspondent amount of stables taking into consideration the price of ETH at the time of the exploit while the protocol that failed to protect investors’ funds keeps the excedent (which is the way I and others interpreted your proposal and please correct us if we are wrong and add more clarity to your proposal). It also doesn’t make any sense for the rewards to be pooled amongst all investors. People who lost USDC will be at obvious advantage because they didn’t lose 100% of their funds as many of us did. Therefore, if USDC are recovered, they should be sent back as USDC to whoever lost USDC, if ETH is recovered it should be sent back as ETH to whoever lost ETH.

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One feedback for the compensation plan is to use part of the revenue to (slowly) buy back and burn srt instead of paying it all back directly. Reason being, is that srt will trade at a (steep) discount and by buying it back slowly the debt can paid off much quicker.

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I would add
" * Ongoing Compensation: 20% of vlMGP revenue and 20% of vePendle revenue will be allocated toward compensating PRT stakers. These revenues will first be converted into stablecoins before being sent to the compensation contract for distribution."
=> why converting it in stablecoins ? Why this choice compared to an ETH conversion. If i’m right, vePENDLE rewards can be claimed in ETH so no reason to swap it except for USD hacked users.

Second thing, ca you give us real figures for vlMGP revenue and vePendle revenue of the protocole and confirm this dashboard is up to date https://dune.com/magpieanalytics/revenue-penpie-and-magpie with :

  • vePENDLE rewards claim : 211 ETH in August (for July), 113 ETH in September (for August) and 56 in October (for September)
  • vlMGP subDAO revenue 181.5k USD in August (for July), 167.9k USD in September (for August) and almost 0 USD (only 25USD ?) in October (for September)

Thank you.

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If people lost ETH, they should be compensated in ETH.
If people lost USD, they should be compensated in USD.

If ETH raises to 6000 USD, users will lose additional funds and I am afraid users are not going to use anymore the protocol.

An idea is to give back the native token proportionally to all users.
As example: 100 ETH in September

100 users with 10 ETH stolen each

1 ETH reimbursed to everyone

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  1. The compensation time horizon is insanely long and does not inspire confidence (pointed out by lee, xCryptoRASH)
  2. Given the compensation pool’s absolute amount is fixed, suggestions of preferential treatment such as faster repayment to certain pools (proposed by Alex89, gr1zz) will mean slower repayment to other pools. This is an unfair scheme and a selfish proposition. All pools should be compensated at equal proportionalized rate, with same projected end-of-repayment schedule at any given time. (i.e. if horizon is 3 years, then after Year 1: 90%-loss pools should have been repaid 30%, and 10%-loss pools should have been repaid 3.33%)
  3. The compensation distribution done at a rate of $0.10 per MGP is completely arbitrary. MGP has not been at $0.10 in almost 2 months. Team should use something more explanable, such as VWAP of past 2 months, counting backwards from a certain meaningful date (like the date this compensation plan is fully finalized).
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Does it mean that users can receive more 100% of lost funds?
E.g. I stake PRT and vePENDLE/vlMGP revenue covers 50% of PRT supply. Suddenly Penpie recovers 100% of stolen funds sending all recovered funds to compensation contract. In this case my PRT stake is worth $1.5 on 1 PRT staked.
This approach is not fair and will lead to insider trading. Part of recovered funds should be sent to Penpie treasury (after 100% of PRT supply will be burned)

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Thank you Desmen and the Magpie Team for your continued open communication with the community.

Your focus on openness and transparency is definitely to be admired in such an industry like crypto.

Thank you also for incorporating our feedback into this updated plan.

Safupie is an interesting concept and should be explored separately as you suggested.

If stolen funds are recovered, compensation that is based on the value of Eth at the time of the exploit is very helpful as well.

But this plan has one large issue that will prevent it from being accepted in a community vote.

We can all agree that the incident has created two types of liabilities, one denominated in stables and one in Eth.

This needs to be reflected in the plan.

People have already suffered life changing losses, including myself.

Without this change, there is little chance that we will be fairly compensated considering the expected timeline to repayment.

Desmen and the Magpie Team please let us know if you are open to returning Eth to those that lost Eth and stables to those that lost stables ?

Thank you as always,

Joey Copper

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Those of us who lost ETH’s amount owed should be denominated in ETH and repaid in ETH. USD has nothing to do with it.

Team and treasury allocations should be higher.
vlMGP revenue and vePendle revenue contribution should be higher.
Future Subdaos IDO Allocation should be higher.
Liquidity for PRT needs to be a lot higher.

I dont say this so that we can get more money, I say it so we can get what we will get in a more reasonable timeframe: within say, 5 years.

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