Proposal for Penpie’s Trust Restoration and Sustainable Revenue Structure Reform

Penpie 3. Community Ideas
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Proposal for Penpie’s Trust Restoration and Sustainable Revenue Structure Reform

1. Overview

Penpie’s revenue is generated entirely through mPendle holders, similar to depositing money in a bank and earning interest. However, the peg between mPendle and Pendle has collapsed to 0.3:1, and the recovery of hacked funds has not been completed.

Despite this, PNP community holders (PNP stakers and the development team), who bear responsibility for the protocol, are earning over 50% APY through Bribe Market voting rewards, further worsening Penpie’s long-term sustainability and credibility.

For Penpie to establish itself as a legitimate decentralized finance (DeFi) protocol and attract more capital, restoring trust and restructuring its incentive model is crucial.

2. Problems with the Current Structure

① Unfair Reward Distribution & Loss of Trust
  • The current reward distribution is as follows:Current Reward Structure:
    • 78% → Liquidity Providers (LPs)
    • 12% → mPendle Stakers
    • 5% → vlPNP Holders (Rewarded in mPendle)
    • 5% → Treasury
  • The actual revenue generated by mPendle is 22%, which should be returned to mPendle holders.
  • However, nearly 40% of this revenue is being distributed to the Penpie community (PNP holders).
② Lack of Incentives to Hold mPendle Compared to Similar Protocols
  • Lido only takes 10% of its revenue as a fee while allowing short-term withdrawals.
  • In contrast, mPendle is permanently locked and cannot be withdrawn.
  • Given these factors, Penpie’s revenue structure should, at minimum, follow a model similar to Lido while providing strong incentives to hold mPendle.
  • With the peg broken and no clear path to restoring it, there is no reason for users to hold mPendle.
③ PNP Holders Earning Rewards While Hack Victims Remain Uncompensated
  • Penpie suffered a $27 million hack, yet the affected users have not been compensated.
  • Despite this, PNP holders (or the development team) are receiving over 50% APY through Bribe Market voting.
  • This is equivalent to a financially struggling company paying dividends to shareholders instead of covering its debts.
  • This structure discourages new capital inflow and threatens Penpie’s long-term viability.

3. Proposed Solution

① New Reward Structure (90:10 Model Centered Around mPendle Holders)

Updated Reward Distribution:

  • 78% → Liquidity Providers (LPs) (No change)
  • 20% → mPendle Buyback & Burn (Peg Restoration & Trust Recovery)
  • 2% → Penpie Community (For Operations, Development, and Hack Compensation Fund)

Key Change: 90% of the fees generated by mPendle should be returned to mPendle holders, while 10% should be allocated to the Penpie community.
This ensures stronger incentives for holding mPendle while reducing excessive rewards for PNP holders, making Penpie’s incentive model sustainable.

② Bribe Market Revenue Redistribution
  • Currently, Bribe Market profits are being monopolized by PNP holders, which is unfair.
  • 90% of Bribe Market revenue should be used to buy back and burn mPendle to restore the peg.
  • The remaining 10% should be allocated to Treasury for operations, development, and hack compensation.
③ Optimizing Bribe Market Voting → Implementing an Automated Voting System
  • Automate Bribe Market voting to maximize capital efficiency.
  • Instead of manual voting, an optimized system should allocate bribes to each project based on the best value ratio.
  • This prevents inefficiencies caused by individual voting strategies while ensuring maximum revenue generation.
  • Most Bribe Market revenue should be directed towards mPendle buybacks and burns.

4. Long-Term Benefits (More Profitability for PNP Holders in the Future)

  1. Maintaining the current structure will prevent Penpie from growing further.
  • Without peg restoration, no new capital will enter, and TVL will continue to decrease, threatening Penpie’s survival.
  • If the current reward model persists, short-term profits may continue, but ultimately, the protocol will collapse.
  1. Implementing this reform will restore trust and attract more capital.
  • Once the peg is restored, mPendle liquidity will increase, and new capital will be more willing to invest.
  • If Penpie adopts a sustainable model like Lido, it can achieve significantly higher TVL and long-term revenue growth.
  1. Although PNP holders may see reduced rewards initially, they will benefit much more in the long run.
  • Continuing to pay dividends while the protocol is financially struggling only weakens long-term value.
  • If Penpie prioritizes trust recovery and organic growth, PNP holders will ultimately receive even greater rewards when the protocol expands.

5. Conclusion

Currently, Penpie’s revenue model and reward distribution system are creating serious trust issues, and if left unaddressed, the protocol’s long-term viability is at risk.

To fix this, 90% of mPendle revenue must be returned to mPendle holders to restore the peg, and Bribe Market rewards must be fairly redistributed. Additionally, PNP rewards should be halted until hack victims are fully compensated.

→ Without trust, Penpie cannot survive. This reform is necessary not only for the protocol’s sustainability but also for the long-term profitability of PNP holders.

→ By implementing these changes, more capital will flow into Penpie, ultimately leading to greater returns for the entire community.

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If the depegging issue is overlooked, Penpie will inevitably collapse in the long run, which goes against the interests of both the development team and participants. The integrity of mPendle is critical to the platform’s sustainability. The development team must take action to restore the peg and implement improvements that encourage more Pendle to be locked in mPendle. Addressing this issue will increase user confidence, enhance liquidity stability, and strengthen Penpie’s long-term viability. Ignoring it will only lead to further capital flight and reputational damage.