This topic aims to reflect on the recent PancakeSwap/Cakepie incident and to open a discussion about how Magpie can recover as a megaDAO
Context
PancakeSwap has recently decided to shut down their veToken model which put CakePie in a difficult position.Although the CakePie/PancakeSwap case is special due to $CAKE tokenomic focused on burn (instead of revenue sharing) & the heavy presence of Binance CEX as a large token holder, I do think some things can be adjusted in order to have better sustainability in the megaDAO.
As a vlMGP & vlCKP holder I took time to reflect on the situation and would like to share some suggestions with the Magpie team & community. Those suggestions mainly target subDAOs built on top of veTokenomic protocols.
Suggestions
1. Requesting a security fund from underlying protocols
When a protocol approaches Magpie to build a subDAO, it should be asked to make a security deposit before Magpie’s team starts building.
The purpose of this deposit will be to protect subDAOs investors in the event of a change to the underlying protocol that would be detrimental to them. This deposit fund should be public, controlled by the community and each decision regarding it should pass a vote before being executed
2. Allowing 1:1 redeem
One of the main concerns from head Chef & CAKE 3.0 supporters was the mCAKE peg.
This one is tricky because on one hand black holing strategy gives subDAOs a moat & strong competitive advantages over their related competitors. On the other hand as a subDAO keeps growing it becomes harder and harder to maintain the liquidity of its liquid wrapper.
Allowing users to initiate redeems could open doors to better arbitrage opportunities and encourage healthier pegs for Liquid Wrappers (mTokens).
As redeeming veTokens could be heavy of consequences for the protocol, this feature should be charging a fee to prevent any malicious actor from abusing it. The fee charged can be an additional source of revenue for the subDAO, it can be used later on to strengthen its related mToken peg.
3. Allocating some subDAO tokens to related underlying protocols treasury
At some point there was a strong conflict of interest between PancakeSwap & CakePie when the kitchen wanted to redirect $CAKE emission to ecosystem growth. That’s when CakePie’s downfall began.
On one hand PancakeSwap made a proposal that went against CakePie best interest & on the other hand CakePie community voted against a proposal that could have contributed massively to PancakeSwap v4 growth.
For the long-term success of subDAOs, it’s important to maintain a healthy relationship with the underlying protocols. The best way to improve relationships and reinforce a shared vision is to allocate tokens to partners.
A great example is how Pendle is the second biggest vlPNP holder
This way the subDAO success also strongly benefit the underlying protocol and we reduce the risk of conflict of interest
If there were better bounds between PancakeSwap & CakePie this could have prevented the kicthen from considering sunsetting veCAKE & hurting CakePie.
Another motivation for the kitchen to sunset veCAKE was the inefficiency of $CAKE emission.
Since too much $CAKE was going to small, pools with low volume it wasn’t optimal for the kitchen to keep that model. If they would have owned some vlCKP this could have helped Chefs to route $CAKE emission to pools of their choices by leveraging on CakePie massive veCAKE power.
In other words, allocating some tokens to underlying protocol partners would strengthen ties with the subDAO, allow the underlying protocol to retain some control over its governance, and avoid conflicts of interest between the sub-DAO and its partner.
Final Thoughts
Those 3 suggestions aim to make subDAOs healthier and more resilient as they will bring more safety for subDAO investors, users who deposit their tokens into lockers & underlying protocols who wants Magpie to build subDAOs.
Setbacks are part of the game and Magpie will come out stronger from that event.
If you have any other suggestions feel free to drop them in comment,
Thanks for coming to my TEDtalk,
BB