DeFi Project Parrot Holds Contentious Vote on Future of $70M Treasury

The redemption plan for the protocol appears to heavily favor employees and Parrot’s venture investors.

AccessTimeIconJul 21, 2023 at 6:15 p.m. UTC
Updated Sep 29, 2023 at 3:38 p.m. UTC
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Parrot Finance raised over $80 million in a public token sale during Solana's heyday. Two years later – its plans for shaking up crypto lending markets long since fizzled – the protocol is holding a vote to buy its investors out.

The new proposal calls for an end to Parrot's so-called governance token through a redemption program that divides $50 million of its treasury amongst PRT owners, would be worth $0.0045 apiece.

Such a price would obliterate the earliest investors in Parrot's vision of building a powerful stablecoin and lending markets for the Solana blockchain. IDO investors stand to recoup one tenth of their initial investment, despite Parrot's treasury retaining $73 million, only 12% less than what they put in.

But Parrot's team, which never followed through on its promise to give PRT owners power over the protocol, and which has faced accusations of being absent from the protocol's drivers' seat, could walk away with tens of millions of dollars, according to investors angered by the plan.

The situation highlights the downside of funding crypto protocols through unregulated token offerings at a time of heightened action by the U.S. Securities and Exchange Commission.

Parrot's promoters promised its community a protocol they would govern; instead, they're being asked to leave with pennies on the dollar.

PRT redemption tokenomics

Two years after its roll out, however, Parrot’s plans haven’t panned out. Its total value locked (TVL) places it in the lower tier of Solana DeFi and its token is well below sale price. Even as other protocols rally with user incentive mechanisms and liquid staking token integrations, Parrot’s TVL has gone sideways. raised $84.7 million when it sold 10% of all PRT tokens to the public in September and October 2021, at the height of that year’s bull run for Solana DeFi. Those tokens have since lost at least 88% of their value, according to Cryptorank. Meanwhile, the project’s treasury remains in the tens of millions.

Parrot's redemption plan would return about $50 million of Parrot's nearly $73 million treasury to holders of PRT, according to investor estimates. The remaining $21 million would stay with insiders: $6.3 million for seven years of project "runway," $8.3 million in illiquid LP tokens and up to $10 million in private investments the team made under dubious circumstances.

Those figures have irked the investors who rallied for a buyback. But Parrot's redemption plan also lacks restrictions on who can participate, meaning insiders might take from the redeemable treasury as well.

Investors say the deck stacked further in Parrot team's favor last November, when they unilaterally unlocked a major tranche of unvested team and VC tokens two years ahead of schedule. This move now gives the insiders strong influence over Parrot's redemption vote and, according to the investors, a better effective redemption price.

Parrot team members did not respond to a request for comment.

The DAO that never was

Like many DeFi protocols that fly under the banner of democratizing finance, Parrot launched with intentions to one day be ruled by its community, according to statements leader PartyParrot made in June 2021.

One popular way to accomplish this feat is by giving token holders a voting say in the protocol's operations through a DAO. Indeed, Parrot sold over $80 million of its PRT "governance token" to the public in late 2021. But Parrot never set up a DAO through which PRT owners could vote on anything. Instead, the team executed major decisions, from changing tokenomics to "trust me bro" investments, without holding a formal vote.

The current vote marks Parrot's first-ever foray into token-based governance. If it passes it will mark the end of the PRT token and nullify the promise of community control.

“The first proposal of DAO is to kill the Parrot 🤣 Hilarious,” the pseudonymous user Parachute, who has been in Parrot’s Discord server since October 2021, said in a public channel Friday.

At press time the vote was overwhelmingly in favor of conducting a buyback with 97% in favor. The vote is well below quorum; it is open for the next week. Some voters on ballot-casting website Realms blasted the early insider unlock for rendering the team “majority token holders, making this vote meaningless and a total farce.”

Parrot’s community in the Discord appeared split between open anger from long-term holders and begrudging acceptance from newcomers.

The pseudonymous Crypto_Boi, an investor who joined Parrot’s Discord months after its token sale and bought in when PRT was valued at $0.001, called the redemption “nothing short of a robbery” but was nonetheless in favor.

“It’s good that a redemption is happening, Because the team has done nothing of substance for the last year and a half and has been draining the treasury with their salaries,” Crypto_Boi said. “But they provide 0 results. So redemption is the only option.”

Edited by Aoyon Ashraf.


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Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

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