Penpie Compensation Plan - Draft

Penpie 3. Community Ideas
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This thread aims to address compensation for affected users through a structured and transparent approach. It also introduces the SAFUPIE insurance mechanism, which will protect Penpie and potentially other participating protocols in the event of any unforeseen incidents. This compensation plan seeks to establish a sustainable framework for long-term protocol security.

This thread has two key components:

1 - SAFUPIE Explained: An explanation of the SAFUPIE insurance model

2 - Penpie Compensation Plan: A plan for compensating users affected by the recent exploit, utilizing Safu Recovery Tokens (SRT) and Safupie Tokens (SAFU)

1 - SAFUPIE Explained

SAFUPIE is designed to function as an insurance mechanism primarily for the Magpie ecosystem, with potential to expand externally to cover other protocols, much like an insurance company for DeFi protocols. Its primary purpose is to ensure long-term sustainability and security for protocols that join the program. The idea stems from the need to protect protocols, such as Penpie, from the financial fallout of unforeseen incidents like hacks, and to create a framework for compensating users for such events.

Here’s a breakdown of the SAFUPIE structure:

Insurance Model:

  • SAFUPIE operates like an insurance fund where participating protocols contribute a portion of their revenue or funds to a central treasury. In return, they gain access to insurance coverage in case of an exploit.

Compensation:

  • It will compensate users affected by exploits through its Safu Recovery Token (SRT) system. Protocols that have suffered an exploit will mint SRT tokens to compensate affected users, effectively transferring compensation responsibility to SAFUPIE.

Long-Term Stability:

  • SAFUPIE ensures that funds are always available for compensation by creating liquidity pools and revenue streams that grow the treasury over time. It allocates funds across stable assets like BTC, ETH, and USDT to maintain value and avoid depleting resources too quickly.

Governance and Yield Generation:

  • SAFUPIE is governed by the Safupie Token (SAFU), which gives governance rights to holders. They will decide which protocols can participate, how compensation plans are implemented, and how the treasury is managed.
  • Additionally, SAFUPIE generates yield from the treasury, and these rewards are shared with SAFU holders, providing long-term benefits beyond compensation.

SAFUPIE Liquidity Management: To support the seamless functioning of the SAFUPIE mechanism and ensure sufficient liquidity for compensation, the Magpie and Penpie teams will implement targeted strategies for liquidity provisioning. This includes establishing liquidity pools, allocating treasury resources, and maintaining a balanced treasury to ensure the longevity and stability of the compensation process.

  • Establish liquidity for the SRT/USDT pair on PancakeSwap, seeding the pool with $500K USDT.
  • Up to 5 million MGP will be allocated from the Magpie treasury to incentivize liquidity for the SAFU/USDT pool.
  • Up to 500K SAFU will be used to incentivize the liquidity of the SAFU/ETH pair.

The SAFUPIE treasury will focus on compensating Penpie’s affected users before beginning to accumulate assets. Until the compensation process is complete, all funds gathered by SAFUPIE will be directed toward buying back and burning SRT tokens from the market. Once this is accomplished, treasury accumulation (BTC, ETH, USDT) will begin, with quarterly rebalancing to ensure long-term stability and prevent resource depletion.

Relation Between SRT and SAFU:

The relationship between Safu Recovery Token (SRT) and Safupie Token (SAFU) is central to how SAFUPIE operates and compensates users.

SRT (Safu Recovery Token):

  • Purpose: SRT represents the compensation owed to users who have suffered losses due to an exploit, like the Penpie hack.
  • Issuance: Around 27 million SRT tokens will be issued to users ( the exact number to be determined by a snapshot at the time of the exploit), airdropped based on their proportion of losses. These tokens represent the commitment that SAFUPIE assumes on behalf of the affected protocol. Each SRT represents $1 worth of compensation.
  • Utility:
    • SRT tokens can be burned to mint SAFU tokens, providing users with governance rights and the ability to earn rewards from SAFUPIE’s yield.
    • SRT can be sold in the secondary market (e.g., SRT/USDT liquidity pool) if users wish to exit earlier.
    • As the SAFUPIE treasury grows or recovered stolen funds are claimed, SRT holders can bid for the recovered assets, further compensating their losses.

SAFU (Safupie Token):

  • Purpose: SAFU is the governance and utility token of SAFUPIE. It allows holders to participate in decision-making (governance) and receive rewards from the treasury.
  • Issuance: Users can mint SAFU tokens by burning SRT tokens at a ratio of 3 SRT to 1 SAFU. The total supply of SAFU is capped at 10 million tokens.
  • Utility:
    • Governance: SAFU holders control the SAFUPIE Treasury and make decisions about how future projects join the Safupie insurance program and how compensation plans are structured.
    • Yield Rewards: The SAFUPIE Treasury generates yield from the assets it holds (BTC, ETH, USDT), and SAFU holders can lock their tokens to earn a share of these rewards.
    • IDO Allocations: SAFU and vlSAFU burners will get priority access to private rounds of IDOs for upcoming Magpie SubDAOs.
    • SRT Minting: Each participating protocol can utilize SAFU tokens to mint up to 5 times the amount in SRT tokens in the event of an exploit. For instance, if a protocol holds 500,000 SAFU tokens, it can use them to mint up to 2.5 million SRT tokens to compensate its affected users. Participating protocols may choose to acquire SAFU tokens to increase their insurance coverage.

Safupie Coverage for Future Exploits:

  • Participating protocols can mint up to 100 times the amount of SRT tokens based on their contributions from the previous month in the event of an exploit. For example, a protocol that contributed $10,000 the month before exploit would be eligible to mint up to 1 million SRT tokens to compensate affected users.
  • Apart from Magpie and Penpie, each existing Magpie SubDAO will hold a community vote to decide whether to participate in Safupie insurance program.

In essence, the SRT tokens allow affected users to be compensated either through liquidity markets or by converting them into SAFU for longer-term rewards and governance. This dynamic helps maintain a balance between immediate compensation needs and long-term protocol sustainability.

Summary

  • SRT serves as the recovery token, representing the compensation owed to users.
  • SAFU is the governance and yield token, which users can mint by burning SRT. It can also be used as a compensation token in the event of an exploit.
  • vlSAFU gives holders voting rights over SAFUPIE’s treasury and future decisions, access to the treasury’s yield, and priority access to private rounds of IDOs for upcoming Magpie SubDAOs.
  • Burning SRT to Mint SAFU: As users burn SRT to mint SAFU, the overall outstanding balance. (represented by SRT) decreases, while SAFU holders benefit from governance rights and rewards.
  • SRT Minting: Each participating protocol can use SAFU tokens to mint up to 5 times their value in SRT tokens during an exploit and can acquire more SAFU tokens to enhance insurance coverage.

2 - Penpie Hack Compensation Plan

This initial plan outlines compensation to address the losses incurred by Penpie users following the recent exploit. The plan leverages the SAFUPIE mechanism to ensure long-term compensation, governance opportunities, and financial stability for both Penpie and the broader Magpie ecosystem.

The objective of the proposal is to provide immediate relief through SRT tokens, gradual recovery through SAFU, and sustainable compensation over time via the SAFUPIE compensation fund.

Airdrop of SRT Tokens: Affected users will receive an airdrop of SRT tokens based on their proportional losses. Approximately 27 million SRT tokens will be issued, representing around $27 million in compensation from the Penpie incident. Users can:

  • Burn SRT tokens to mint SAFU at a 3:1
  • Sell SRT tokens on the market through the SRT/USDT pair allowing for early exit strategies
  • Claim Recovered Assets: SRT holders can bid for a share of any recovered assets

Compensation via SAFU Tokens: SRT holders can burn their SRT tokens to mint SAFU tokens, offering long-term benefits:

  • Yield Rewards: SAFU tokens are tied to the SAFUPIE treasury, which generates yield from BTC, ETH, and USDT. Vote-locked SAFU (vlSAFU) holders will earn a share of these rewards, providing ongoing compensation.
  • Priority Access to Private Round IDOs: Users can burn vlSAFU/SAFU to secure 10% of the private round allocation in future Magpie SubDAO IDOs with no impact to the usual vlMGP allocation. This option remains available until the SRT compensation process is completed.
  • Governance Rights: SAFU holders can influence how SAFUPIE operates and compensation management, giving affected users a role in the ecosystem’s governance.

Penpie Compensation Structure

Penpie’s $27 million outstanding balance will be transferred to SAFUPIE, making it the first protocol to participate in the insurance program. It will be handled as follows:

  • Approximately 27 million SRT tokens will be issued, representing the full scope of liabilities, and airdropped to affected users and the SAFUPIE operations fund.
  • 1% of the MGP tokens (10M)from the Team’s allocation and 3% (30M)from the Magpie Treasury will provide initial compensation for affected users at a rate of $0.1 per MGP token. This compensation period will last for 3 months, during which affected users can exchange 1 SRT for 10 vlMGP. The exchanged SRT will be distributed proportionally to the team and the Magpie Treasury. Each affected user can exchange up to 30% of their original SRT holdings in the airdrop. After the compensation period ends, any remaining MGP tokens will be returned to the Team and Treasury allocations.
  • 20% of Penpie’s vePendle revenue will be allocated to buying back SRT tokens from the market and burning them to mint SAFU, reducing the outstanding balance over time.
  • 20% of Magpie’s monthly rewards will be allocated to buying back SRT and burning them to mint SAFU, ensuring long-term compensation and stability for affected users.
  • The SAFU tokens minted through this process will be held and periodically locked by the Magpie and Penpie treasuries to participate in SAFUPIE governance, future yield generation and enhance their insurance coverage within the program.
  • Recovered stolen funds will be claimable by SRT holders through a bidding mechanism. The amount claimable per SRT token will depend on the total number of SRT tokens submitted for bidding. For example, if $8 million in stolen funds are recovered and 10 million SRT tokens are bid, each SRT token would be eligible to claim $0.8 of the recovered funds.

Path Forward and Community Input

The Penpie Hack Compensation Plan and the SAFUPIE insurance mechanism provide a clear, structured path for addressing user losses and ensuring long-term protocol security.

We encourage the community to engage with this proposal by providing feedback and commenting on this thread over the next 7 days. Your input is crucial in refining and improving the plan to ensure it best serves the needs of Penpie users and the broader ecosystem. After gathering community input, the Team will present a final version of the compensation plan for voting.

Thank you for your ongoing support and participation in shaping the future of the Magpie ecosystem.

Exploring SAFU as a MEME Token Idea

In light of recent trends in the DeFi space, the team is considering the possibility of launching SAFU as a MEME token to capture the growing MEME narratives and increase engagement within the community.

The SAFU token draws inspiration from Binance’s Secure Asset Fund for Users, which was established in 2018 to protect user funds during emergencies. CZ’s phrase “Funds are SAFU” has since become a symbol of security within the crypto space. Launching SAFU as a MEME token aligns with this narrative, where the meme culture merges with a serious utility. By tying into the ethos of safeguarding users while embracing meme culture, SAFU combines the viral appeal of MEME tokens with the real-world utility of decentralized insurance, much like Binance’s Secure Asset Fund for Users.

Capturing MEME Narratives: With MEME tokens gaining popularity, SAFU could leverage this momentum while maintaining its underlying value and purpose.

Potential BNB Chain Support: BNB Chain has been actively promoting MEME projects, and SAFU could potentially benefit from their support and visibility.

Reflecting the Magpie Team’s Vision: The Magpie team believes that a MEME token should not only be fun and engaging but also serve a meaningful and sustainable purpose. SAFU embodies this philosophy, offering both community-driven engagement and real utility within the SAFUPIE insurance framework.

We encourage the community to also share their thoughts on this idea. Do you think SAFU would benefit from being launched as a MEME token? Your feedback is essential in shaping the future of SAFUPIE and the broader Magpie ecosystem.

7 Likes
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20% of vependle revenue take away is too high.
10% ratio is acceptable

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If I understand the proposal with an example

  1. User lost 1 ETH on YEAR.MM.DD with a value of 2600$

  2. Compensation will be 2600 SRT

Three months later ETH has a value of 3000$ but the SRT amount will still be 2600 with a loss of 400$.
The contrary can be valid with ETH at a loss.

Do you not believe the native assets should be reimbursed?
Ex. lost 1 ETH, get back 1 ETH

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So I was a new user 1 month prior to the event and I keep hearing about replacing ETH that was lost, but have not seen any mention as to impact to the mPendle Stability Vault or even the Dolomite dUSDC pools which neither have ETH. Since I am a new user I am struggling to understand what impacts there would be if I had no ETH and just the 2 mentioned pools.

When I read the post-mortem it said that ETH was taken only but could someone help elaborate what impacts are to the other pools?
Based on what I see it’s 20% of vePendle revenue and 20% of Magpies monthly rewards will be used for paying back the bulk of the 27 million ETH lost. Is there an overall impact to everyone or just those holders of ETH. Anyone that is more knowledgeable and willing to share insight greatly appreciated. Cheers

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i still want to know what is going on with the vast majority of the PenPie TVL that has been frozen for more than 1 month, that conveniently is being ignored, that received 0 rewards in the meantime, with 0 communication for those affected by this.
And, let me be clear, a large portion of those persons you keep ignoring just wait for 1 thing to say goodbye to your entire ecosystem because of the lack of respect you treated them with (that thing being the unfreezing of our funds of course). I’ve used your ecosystem for almost 1 year, i understood and empathized with what was going on, but as i was left in the dark each time i tried to have answers in the past month, i am amongst those waiting to give up on you.
So do what you want to refund whoever you want as we haven’t been invited to the conversation, we just want our 150 millions (if your TVL displayed is to be believed) to be unfrozen.
Good continuation

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I have my doubts but I mostly agree with the idea of Safupie.

Here are some of the biggest problems for me:

1/ 30m MGP tokens from the 100m MGP Community Treasury, and only 10m MGP from the 175m team and advisors? Seriously? You f*cked up, you should pay a bigger amount than that.

2/ 40m MGP, 20% of Magpie’s rewards + 20% of vePendle revenue, but no contribution from PNP revenues? You could at least take 20% of vlPNP rewards to repay faster and/or add PNP to the repayment.

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Agreed. 50% of vePendle revenue is used to support the mPendle peg, currently by using it to increase Pendle/mPendle liquidity

So diverting a fixed 20% of this revenue toward the compensation plan will only further hurt the peg and drive away stakers

I suggest making the % variable instead of fixed based on mPendle peg performance, which could be adjusted periodically. Better the performance, higher the % goes toward comp with a cap of 20%. For example:

90% peg = 20% of revenue toward comp
80% peg = 15% of revenue toward comp
70% peg = 10% of revenue toward comp
60% peg = 5% of revenue toward comp
50% peg = 0% of revenue toward comp

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If this is only native yield w/o bribes, thats not much. May be point of voting of Penpie subDAO in future.

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An insurance organization is needed by the industry. It’s a pain to have to pay for it for us, but it’s a step in the right direction. I hope it will become an inspiration for other startups.

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the mPendle peg is sitting at 30% now, and been below 50% way before the recent penpie hack. According to this design, the vePendle can never pay to the recovery fund . The purpose of SAFUPIE is to recover exploited funds. If someone want to stake mPendle, they will find its better to buy cheap and stake.

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  1. where is the $500K USDT for SRT/USDT pool come from and where is the initial SRT in this pool come from? And if too little intitial SRTs are there, this becomes a first-in competition and that’s definitely not the expected behavior.
  2. It’s the team made a mistake and now they would only like to provide 10M MGP tokens from their allocaition, and it’s even not free, but sell at the pretty high 0.1$ with the form of vlMGP. Compared to Treasury’s 3% MGP plus an extra 5M for SAFE/USDT pool, the team takes too little responsibility compared to which they should take for there mistakes. Please provide more MGPs from your allocation and in this way the team can also get more SAFU, which is the main incentive to build safepie better.
  3. Some people think 20% from vependle’s yield is too much, but it’s penpie this protocol involved in this exploit, you can’t hope the income comes from other subdaos. And no yields from vlPNP or PNP token itself is used based on the current plan. I don’t think this is too much, but too little actually, considering how long it needed to compensate all amount(several years to be extremely optimistic)
  4. If SAFU can be a pretty successful and valuable MEME token, almost everything will become so easy, because the whole compensation plan is ensentially an IDO of this token using debts, but I really don’t easy path to make it happen.
  5. I don’t see how the SAFE is capped at 10M is implemented, they can be mint slowly in the future, how is the amount is controled?
  6. If other subdao doesn’t join safepie, does it mean if they happen an accident in the future, they will not be compensated and all potential restore from the stolen fund in that accident is used to compensate the previous accidents of protocols other than that subdao? I don’t think that is reasonable. But if it’s not the case, what’s their real incentives to join safepie? To make this issue resolved is the key part to make all subdaos willing to join safepie, else the whole idea just don’t really works.
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Thank you for the initial draft.
Main concern is the complexity and time needed to build this.
To simplify the process and turn it into blocks so that we can get compensation ASAP
Here are my suggestions :
0- Airdrop SRT to affected wallets.
1- burn SRT to MGP up to 30% for ONLY affected users ( not swap, not vlMGP) -
Team shouldn’t be competing with affected users in pools/recovered funds or yields acured
2- burn SRT to bSRT
bRST holders can claim compensation yields from vault (20% vePendle 30% Magpie revenue)
Yield vault has a minimum 3years lifetime that can be either voted to be stopped or continued after that.
3- airdrop recovered funds to SRT bSRT and lpSRT (SRT/USDT pool) holders pro rata
4- Proceed to build the SAFUpie product```

  • SAFU bribes on SRT/USDT pool ( up to 60% of tokens, form of TGE)
  • 40% of SAFU sold as standard TGE and sales go 50% to treasury and 50% airdropped to SRT holders.

This approach would incentivize the following behavior

People would
1- buy SRT to burn for bSRT to get yield and possibly airdropped recovered funds
2- buy SRT and LP to get incentives on the pool in form of SAFU while speculating on getting airdropped recovered funds (can be packaged as pendle market for more liquidity)
3- buy SRT to get airdropped 50% of SAFU TGE sale

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Exactly, wish SAFUPIE can expand to other ecosystem. Maybe someone with connection to lobby Pendle. This is a product much needed in this industry

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The team please get more SRT/SAFE shares by compensating victims, I don’t think the current plan is enough. Let’s analyze the holders of SRT and SAFE and why they would like to hold.

SRT:
Initially the holders are the victims, after that the holders of SRT are those who tend to believe no protocols involved will happen serious exploits, if exploits do happen, new SRTs are minted and each SRT is expected to receive less compesation.

SAFE:
Also initially the victims, then the one would like to mint or buy SAFE also hope no exploits happen, because only in this way safepie’s treasury is grown by time which makes SAFE toekn more and more valuable.

So, no matter you hold SAFE or SRT, you do hope the protocols go well and no accident are there anymore.

However, based on the current plan, the team only like to hold up to 1M SRT(or equally, up to 0.33M SAFE), and only get those quote by selling their vlMGP at $0.1…

How can we trust the team in this case that they will build the protocol with their best and also pay much more attention to the safety of protocols invovled in this system? If the protocol is not developing well or further exploit happen in the future, their loss is quite limited anyway, it’s the current victims who hold most SRT/SAFE become hurt again. Showing this attitude, you hope those victims of this time’s exploit holding all those SAFE/SRT for long time and expect their value is increased?

Please take your responsibility seriously and get more shares into the system if you believe that’s an important part of the whole magpie eco and have confidence to build it well. 1% of MGP selling at 0.1$ is simply too few for your responsibilities.

2 Likes
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lolz dont tell me u didnt know the Penpie is back online and u can withdraw your fund as u like

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Thank you Desmen and the Magpie Team for all your hard work getting Penpie running again.

All was done with safety in mind and to ensure the protection of our funds, we are all very grateful to you.

This incident has greatly affected me financially so i very much appreciate everything you have done and your tireless dedication.

Thank you also for letting us know what type of support will be given to the compensation plan.

Now with this information the community can propose something more realistic that you would accept.

So far we’ve had healthy discussions both in the previous open call for suggestions and here.

The compensation plans suggested by the community relied on raising funds, using large amounts of the treasury and/or using large amounts of revenue.

While maybe the team is feeling that the community asked for too much, this draft leaves a worrying impression.

The whole team has done a great job dealing with this incident so far.

But gamifying the debt buy back as well as trying to memeify the incident itself will not look good and will hurt the project’s chances of reestablishing itself.

The incident has created two types of liabilities, one denominated in stables and one in Ethereum.

If this is not reflected in the compensation plan it will affect everyone.

Not only will it show up in the price of SRT/SAFU but also in the credibility of the project.

Before voting on any plan the community needs to know will Magpie truly protect its users ?

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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So, in fact, we have a $27M meme token presale here? :smiley:

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I am afraid that shows a total lack of understanding of what meme coins are and why they are popular. The whole point of a meme coin is that it does NOT have any purpose or utility other than fun and speculation. Fun and speculation are the purpose and utility. Anything else and its not a meme coin and will not succeed in the meme coin ecosystem.

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In the case of the very large amount of funds lost from Amphor’s Boosted ETH vault. Will the recovery funds go to the individual vault depositors or to Amphor to distributed by them?

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about the srt/usdt pool, 500k USDT is too small, I suggest team calculate the average and median asset value for the exploit and then decide the pool size