Penpie Compensation Plan - Draft

[Mazanoth]

I am not convinced by the fact of denominating everyone’s losses in usd

Those who lost ether should get ether back

Whether to accept a discount or not is another subject, the purpose of denominating losses in the lost currency is to avoid “double punishment”

I propose that instead of the SRT they are minted to each victim according to their loss a synthetic token corresponding to the lost token, in the case of a lost ether the victim would receive a SRT.eth with a value of 1 eth whatever the value of the ether

For victims who lost USDe and USDC the SRT.usd token worth 1 usd can be minted

This ensures the fairest possible compensation for everyone

[dos35]

this seems like a fair plan.

[DefiWhale]

Thanks for your proposal Desmen,

Unfortunately, I see some flaws and risks that need to be addressed:

• The incentive to acquire SAFU is handicapped by the $27M that are already lost. Users would likely need to wait years for their tokens to yield rewards, and that’s assuming no further incidents occur.
• What if projects fake a hack or exploit to take advantage of the insurance coverage?
• How can SAFU Holders securely assess which protocols are trustworthy enough to join the insurance program and conduct ongoing due diligence?
• The proposal suggests launching a potential ‘MEME’ token based on an exploit, which creates a negative perception and could harm MGP’s reputation. I don’t think it would be a good move for MGP to proceed with this.

I think the best approach right now would be to put SAFUPIE on hold and consider introducing it later. Our primary focus should be on the repayment plan, while also growing the business and supporting existing SubDAOs.

I still believe that my latest proposal is the most suitable approach, but there are some interesting points in your proposal, which I’ve tried to incorporate.

Here’s the revised proposal:

English

Chinese

Penpie Recovery Token

MGP Team will issue Penpie Recovery Tokens (PRT) equivalent to the total value of the lost funds in USDT and distribute these to affected users.

Revenue Streams used for Compensation:

• MGP Team’s Allocation: Additionally, the MGP team will allocate up to 50 million (5%) MGP tokens at $0.10, allowing users to convert PRT to vlMGP.
• Revenue Streams: 20% of vePendle and 40% of vlMGP rewards will be directed toward the ongoing revenue stream that users can claim by staking PRT. For every Dollar worth of refunds claimed, one staked PRT is burned.

Affected users will have the following options:

1. Stake PRT to claim refunds from revenue streams
2. Convert a part of their PRT into vlMGP
3. Sell PRT in OTC deals for early exit from debt

Initial Relief Mechanism:

• Each user has the option to convert 18.5% of their PRT, into vlMGP at a 1:10 ratio.
• If some users do not use their full allocation for the conversion, other users will share the unused allocation.
• Converted PRT will be burned, unused PRT will be returned.

Handling of potential recovered Funds:

If any funds are recovered, they will be distributed to users in either ETH or USDT, depending on the form of the recovered assets:

• ETH Recoveries: If the recovered funds are in ETH, they will be distributed at the same ETH price that was used to calculate the PRT supply and the debt in USD.
• Non-ETH Recoveries: If funds are recovered in any asset other than ETH, they will be converted and distributed as USDT, to maintain consistent value for users.

For every dollar’s worth of refunds claimed by a user, they will be required to burn an equivalent amount of PRT. This ensures that the total supply of PRT decreases as users are compensated.

Proposed Changes to MGP Team’s Plan:

1. Penpie Recovery Token: Instead of creating SAFU Recovery Tokens through SAFUPIE, PRT will be issued. These can be staked to receive claimable refunds.
2. Increased Revenue Allocation to Compensate PRT Holders: The vlMGP will share 40% of the rewards. I believe 20% from vlMGP is too small, and the repayment period would be far too long, potentially stretching over 10-20 years, which is not ideal. Ideally, with a bull market and increasing ETH/MGP prices, we should adopt a more aggressive approach to complete repayments within a more realistic timeframe.
3. Increased Initial Relief: The initial relief allocation will be increased to 50 million MGP tokens, I believe this should be doable. If it’s absolutely not possible, then we have to accept 4%. But I think given the size of damages, it makes sense to do 5%.

[Shrimpie]

Dear Penpie team, dear users,

Thank you for the draft compensation plan. I appreciate that the Penpie team has taken the community’s suggestions into account when drafting this plan. My feedback below has many similarities to Defiwhale’s plan, with some additional considerations.

My feedback on this draft is based on three principles:

1. Victims should be given the opportunity to sell their ‘rights’ to compensation.

This is an aspect that the draft compensation plan addresses well. Victims will be able to sell their SRT either through the PancakeSwap pool or OTC with other entities, which provides flexibility.

2. The settlement period should be manageable.
   Based on estimates from Magpie’s first governance position and Defiwhale’s plan:

• Diversion of 40% of vlMGP APR yield will amount to USD 92,640 per month (38.6 ETH @ USD 2400).
• Diversion of 20% of the vePENDLE base and voter rewards will amount to USD 83,476.

With these parameters, the compensation process would take about 10 years to complete (22,000,000 / (176,116*12)). As a victim, this timeframe is already too long and a further reduction of these percentages, as proposed in the draft, would be unacceptable.

3. The compensation scheme should be simple.

In its current form, the draft requires victims to a) decide on whether to exchange their SRT for shares in a new IDO (SAFU), b) exchange their SRT for vlMGP, and c) if they want to bid for potentially recovered funds.

These choices involve significant risk and complexity. The uncertain value of these options makes it difficult for victims to make informed decisions, potentially leaving them worse off. While the Penpie team may expect these options to benefit victims and the Protocol, complexity often leads to a reduction in perceived value. A simpler compensation mechanism would increase trust and encourage wider participation by victims.

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Proposal: Simple three-stage compensation mechanism

• Step 1: Airdrop MGP and SRT tokens based on losses.

Victims should be airdropped MGP tokens (set at USD 0.1) and SRT tokens based on their proportional losses. Assuming 5% of the MGP FDV is released, this would equate to USD 5 million in MGP and USD 22 million in SRT. In addition, some of the Penpie treasury should be used to further reduce SRT issuance.

• Step 2: Create a simple contract for the deposit of SRT.

The Magpie team should create a contract for users to deposit their SRT tokens. A snapshot would be taken at regular intervals and compensation would be based on each user’s share of the total SRT deposited. The deposited SRT would be burned 1:1 (one SRT for one dollar of compensation), simplifying the payout process. Potentially recovered funds could be treated similarly to other compensation funds and used to exchange and burn deposited SRT. Compensation would cease when there is no SRT left in the Deposit Contacts for a specified period of time.
An alternative would be to create a system where there is no token exchange. In this scenario, compensation could be streamed over time, stopping only when the full amount has been paid out.

• Step 3: Create a marketplace for SRT.

To ensure fair and transparent trading, the Magpie team should create a marketplace where victims can place limit sell orders for SRT and users can bid on those orders. Although using PancakeSwap is a good option, it would require significant incentives to create sufficient liquidity for larger transactions. A dedicated marketplace could provide a more controlled environment for victims to sell their SRT tokens at fair market prices without excessive slippage.

[playboy]

The current proposal has one core idea: using SAFU IDO to make the presure of upcoming compesation much less, that is, with each SRT burned into SAFU, the money need to compensate become less. If everybody expect safepie to be successful, then the most part of SRT is burned, and the compensation can be finished very soon.

The key to make SAFU valuable is to ensure there is no further safety issue for participated protocols, at least in a short period. If another accidient happens, everything is over, no matter you are the holder of SAFU or the remaing SRT. This thing, and people’s confidence about this thing, is the most important part to make the whole idea successful.

However, to make us confident of SAFU and safupie, the team need to buy more SRT from victims, if they only will to pay 1M$ by selling each veMGP at $0.1, I bet nobody will be confident about safepie at all, it’s that simple.

So if the team insists the IDO idea, they must buy more SRT initially from the victims. Othereise, please cancel the IDO plan and concentrate on how to compensate SRT using your money, protocols income, treasure, VC fund, and any other forms you could image.

Thanks.

[svenlul]

While I think DefiWhale’s plan is really good, I think losses should be denominated in ETH for eth-pools, and in usdt for usd-pools.

[Painpie]

Hello all,

First, I will address the SAFUPIE point. While this mechanism may be useful, I find it hard to see the interest for other protocols to participate as long as the Penpie hack is not reimbursed; their participation would be a lost cause, and they therefore have no incentive to subscribe. At best, this should be discussed separately from the Penpie compensation plan.

Second point, and from my perspective very important, compensation should be made in the initial exploited token (agETH, rswETH, stETH, sUSDE, gUSDC) or at least the underlying asset (ETH, USDE, USDC). Why arbitrarily convert the values?

Third point, compensation in vlMGP tokens. The rate of $0.1 per MGP seems inappropriate to me; moreover, vlMGP tokens are locked and will require additional time to be unlocked. Given the liquidity of the MGP token, the impact will be detrimental to MGP holders as well as to the hack victims, who risk seeing the price collapse even further. It’s a lose-lose situation.

Fourth point, using the revenues from vePENDLE and Magpie is a good idea; 20% seems to be the lower limit if we want to avoid prolonging the burden of the hack on the project for too long.

My view on compensation: we need to keep it simple and avoid pitting victims against each other in a race to recover their funds, as could happen with the plan, particularly regarding vlMGP or the recovery of stolen funds.

Instead of distributing 4% of MGP and impacting the price downward, putting a larger portion in collateral would prevent harming MGP holders. Then, create an rMGP that recovers 20% to 33% of the revenues from Magpie and vePendle, against which to borrow on the market from VCs or large holders the equivalent of the hack in stable coins. Swap the borrowed stable coins for the stolen assets that will be used to reimburse the victims.

So, we would have: A maximum loan of $27M in stable coins against 27M rMGP (1 rMGP = 1 USDT at creation) + collateralization of MGP. The rMGP would benefit from an interest rate of 7-10% per annum, for example, to compensate for the loan. The rMGP is repaid with interest from the revenues of the protocols seen above.

$27M in stable coins exchanged for 1249.31 agETH, 1370.99 rswETH, 1751.06 stETH (or their equivalent in ETH), 1,333,254.45 sUSDE, 330,469.75 gUSDC (or their equivalent in USDT).

If the entire $27M is not borrowed, but only 80%, for example, then the exchange is done pro rata based on the amount obtained, namely 999.45 agETH, 1096.79 rswETH, 1400.85 stETH, 1,066,603.56 sUSDE, and 264,375.80 USDC. The remainder would be filled by distributing the remaining rMGP to the victims.

In the event of recovery of funds in the future, the recovered funds will allow for the repayment of the debt.

Thank you for your time to read this. Have a nice day.

[hauruck]

I also think the compensation should be in kind, it would also make the overall SAFUPIE system more valuable if it could handle compensations in kind as in the underlying asset.

For the rest, I don’t know what to think about it, sounds like a fun experiment that might just work.

[JohnGalt]

Proposal for Compensation Plan: 30/20/50 Structure
Addressing the Hack, Restoring Trust, and Protecting the Ecosystem

As a holder of mPendle, PNP, MGP, and a victim of the recent incident, I would like to present a simplified and balanced compensation proposal. This plan seeks to provide fair restitution to victims while maintaining the integrity of the ecosystem, with a total compensation value of $27 million.

This “30/20/50” plan offers a strategic approach to ensure victims receive fair compensation without significantly impacting token prices or creating unsustainable pressures on the ecosystem. It also includes some risk-sharing for victims, which I believe is reasonable given the nature of the situation.

Key Points of the Plan:

1. 30% Compensation in vlMGP:

• Every victim will receive 30% of their lost funds in the form of locked MGP (vlMGP).
• Mechanism: Compensation will be locked in a 2-year vesting schedule (instead of the current 60-day period) with linear monthly or bi-monthly vesting over that time.
• Calculation: The vlMGP will be distributed based on the current MGP price, not a fixed $0.10 value, ensuring a more accurate reflection of market conditions.
• Rationale: This approach mitigates heavy sell pressure on MGP and ensures victims receive a steady portion of their compensation over time.

2. 20% Compensation in vlPNP:

• Every victim will receive 20% of their lost funds in the form of locked PNP (vlPNP).
• Mechanism: Similar to vlMGP, these tokens will be locked in a 2-year linear monthly or bi-monthly vesting.
• Rationale: Distributing vlPNP in this way helps avoid a sharp decline in PNP price, ensuring that victims can gradually receive their compensation without overwhelming the market.

3. 50% Compensation in SRT with a 4-Year Burn Mechanism:

• Victims will receive 50% of their lost funds in the form of SRT tokens, with a long-term plan to gradually convert them into stablecoins.
• Mechanism: Over a 4-year period, victims will be able to burn their SRT tokens in a stable-swap contract at a rate of $1 per SRT. This process will allow victims to redeem 1/48th of their SRT tokens every month.
• Funding: The burn contract will be funded by Magpie and Penpie revenues. No additional 500k pools will be seeded for SRT/SAFU. Instead, these funds will be used to support the burn contract for the first quarter of burns while the ecosystem accumulates further revenue to fund future redemptions.
• Rationale: This staggered burn approach allows for a gradual recovery of funds without flooding the market or causing instability. It also ties compensation to the continued success and revenue generation of the ecosystem.

Key Benefits of This Plan:

• Restores trust: By offering a structured and gradual compensation plan, we ensure that victims are compensated fairly while maintaining market stability.
• Reduces immediate impact on token prices: By using long-term vesting and burn mechanisms, we prevent the sudden sell-off of large quantities of MGP, PNP, or SRT.
• Shared risk: Victims will bear some risk if ETH or other assets rise in price over the vesting or burn periods, but this is a fair compromise given the realities of a hack situation.

Conclusion:

This proposal offers a balanced and fair path forward, compensating victims over a reasonable timeframe without destabilizing the ecosystem. While 100% recovery may not be feasible, this plan provides substantial compensation and a route to recovery while safeguarding the long-term health of the Magpie and Penpie ecosystems.

Time ranges, % values etc could be different as per team opinion, but here is the overall idea. Also this plan could be incorporated with other plan to achive perfection. Thank you for your time and consideration.