The paradox of DeFi is we all want great projects that make us money, but no one wants to pay for them. Fair launch is great in spirit, but it’s not feasible in practice.
Prelude
We’ve tried to maintain as much fairness as possible for PenDao. Hopefully that has been clear through the Initial Discord Offering, having a small initial supply, being open with information, and all of our other efforts to keep everyone on a level playing field.
But nothing comes free. Building a solid protocol is hard work, and it requires capital. Audits, development, legal, all of these things need some amount of money to get done. Beyond that, it requires alignment so that contributors feel personally incentivized to give it their all (as we do).
So, we held a private funding round with Ventures, and a few individual investors to bootstrap development. We are very happy with this cohort. Our goal in the round was primarily to bring on funds and individuals we believe can be pivotal to the success of the protocol.
How it works
The private sale was not for PEN. We cannot pre-mine and sell the actual PEN token. If we did, we would need to take $1 per PEN sold in addition to the actual raise to make sure the tokens are backed. This would be really inefficient and capital intensive. So, how did we do it?
Through a sale of pPEN. pPEN is a precursor derivative of PEN; it gives the holder the option to mint PEN by burning pPEN and providing the intrinsic value of PEN. For example, an investor would provide 1 USDT and 1 pPEN to mint 1 PEN.
This makes it similar to an option. pPEN is worth the price of PEN minus intrinsic value, and it only makes sense to redeem it when PEN is above intrinsic value. This ensures that our incentives are aligned to keep the premium alive.
But it doesn’t stop there. pPEN is also vested based on supply. As PEN supply grows, more pPEN become available to redeem. So we don’t get an upfront payoff or an arbitrary date at which tokens have vested. We need supply to grow too.
We believe this creates the most optimal incentive alignment you could ask for. Tokens vest along with supply, and are only redeemed when we trade with a positive extrinsic value. We the team, investors and advisors, don’t only want supply to increase, or price to go up, we want both. And so do you.
The Specifics
Team, investor, and advisor pPEN cumulatively vest as 10% of PEN supply. This means that at 1m PEN supply, a maximum of 100k pPEN can be redeemed. At 10m PEN supply, it’s 1m pPEN. pPEN holders finish vesting anywhere from 2b to 5b supply, so this is a long term bet. There’s a lot of upside for holders, but it is dependent on actual growth of the protocol.
The breakdown is as follows:
- Team: 100m pPEN and 6% supply
- Investors: 50m pPEN and 3% supply
- Advisors: 30m pPEN and 1% supply
- DAO: 320m pPEN and no supply cap (community can decide that!)
The Plan
These funds will be used to support the project for as long as possible so we can allow the DAO to stockpile funds and start off with a strong footing. But we still dislike that not everyone got the opportunity.
So, though we can’t promise anything because we do not control the DAO, eventually we’d like to propose a DAO offering of pPEN. This would give everyone the same opportunity as well as increase the DAO’s capitalization.
That decision is reserved entirely to you, the token holder and community member. If you think this is already too much, we won’t do it. If you believe, like we do, that this creates exceptionally strong incentive alignment that far outweighs the cost, then perhaps we will.
But all that is for the future. This is what we have already done. If you find this disagreeable or you feel like you’ve been wronged, please, for the love of Zeus, do not participate. We do not want you to feel that way, and the best solution is to not buy the coin. If you do, you’ve signed off through your actions.
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Legal Disclaimers
The information provided in this Medium Post pertaining to PenDao,
Inc. (“PenDao” or the “Company”), its crypto-assets, business assets,
strategy, and operations, is for general informational purposes only and is not
a formal offer to sell or a solicitation of an offer to buy any securities,
options, futures, or other derivatives related to securities in any
jurisdiction and its content is not prescribed by securities laws. Information
contained in this Medium Post should not be relied upon as advice to buy or
sell or hold such securities or as an offer to sell such securities. This
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investment advice or opinion regarding the specific investment objectives or
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directors, officers, employees and shareholders make no representation or
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or errors or omissions thereof. PenDao reserves the right to amend or
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this Medium Post supersedes any prior Medium Post or conversation concerning
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Neither PenDao nor any of its representatives shall have any liability
whatsoever, under contract, tort, trust or otherwise, to you or any person
resulting from the use of the information in this Medium Post by you or any of
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Additionally, the Company undertakes no obligation to comment on the
expectations of, or statements made by, third parties in respect of the matters
discussed in this Medium Post.
