PIP #24 - Establishing a Transitional Liquidity Support Mechanism: Borrowing Treasury sPendle to Execute mPendle Buybacks
Abstract
This proposal aims to borrow the rewards distributed by sPendle in the treasury to execute mPendle buybacks in the secondary market during Penpie’s strategic transition period.
The core objectives are to:
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Provide emergency exit liquidity for mPendle.
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Stabilize the market peg of mPendle.
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Ensure the stable operation of the protocol before the final plan is determined.
Motivation
During the deliberation of the protocol transition plan, market uncertainty has led to an mPendle liquidity crunch and panic selling.
To maintain ecosystem health, this proposal presents the following arguments:
Confidence and Liquidity
Active buybacks offer an exit path for holders with urgent capital needs, mitigating panic.
Maximizing Asset Efficiency
Prevent assets from sitting idle before the transition plan is finalized, converting them into momentum to support the ecosystem.
Compliant Lending Architecture
Given that the attribution of rewards distributed by sPendle is yet to be confirmed, this proposal adopts a “lending model” to ensure legal and governance rigor.
Independent Wallet Management
The bought-back mPendle will be stored and managed in a separate, new address.
Specification
Lending Terms
Borrow unallocated sPendle rewards from the treasury.
The borrowing will incur an interest rate of 5% APY. This interest will be distributed after the future attribution is confirmed.
Execution Threshold
Authorization is granted to execute buyback-related operations at opportune moments based on market depth and volatility when the mPendle/Pendle peg falls below 0.5.
Ensuring Transparency
Snapshots of all utilized sPendle quantities and generated transactions will be recorded for future reference.
The mPendle acquired through buybacks will be temporarily stored in an independent new treasury address, which belongs to the Penpie Treasury.
Example
Assume 10,000 Pendle from rewards are borrowed.
One year later, 100% of the sPendle rewards are confirmed to belong to mPendle holders.
After one year, we will distribute the 10,000 Pendle principal + 500 Pendle interest to mPendle holders.
The borrowed 10,000 Pendle is fully used to buy back mPendle at a 0.25 peg, resulting in a total buyback of 40,000 mPendle.
These will be stored independently in a new wallet.
All 40,000 mPendle will fully belong to the Penpie protocol.
