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During Solana's peak, Parrot Finance successfully conducted a public token sale, raising over $80 million. However, after two years, the protocol's ambitious vision of revolutionizing the crypto lending markets has gradually lost momentum. Now, the team is resorting to a different approach by proposing a vote to buy out its investors.
The new proposal suggests discontinuing Parrot's governance token, also known as PRT, by implementing a redemption program. Under this program, $50 million from Parrot's treasury would be distributed among PRT owners, with each token valued at $0.0045.
A price at that level would completely wipe out the initial investors who believed in Parrot's ambitious plan of establishing a robust stablecoin and lending markets for the Solana blockchain. IDO investors would only be able to recover a mere tenth of their initial investment, despite the fact that Parrot's treasury still holds $73 million, representing only a 12% reduction from their initial contribution.
However, Parrot's team, despite their initial commitment to grant PRT owners control over the protocol, failed to deliver on their promise. Moreover, they have been accused of neglecting their responsibilities in guiding the protocol's development. This has left investors furious, as they fear the team could potentially exit with tens of millions of dollars.
The situation underscores the risks of financing crypto protocols through unregulated token offerings, especially during a period of increased scrutiny from the U.S. Securities and Exchange Commission.
Parrot's supporters were assured of a protocol that they could govern, but instead, they are being forced to depart with only a fraction of their investments.
PRT redemption tokenomics
Two years have passed since its launch, but unfortunately, Parrot's grand ambitions have not materialized as expected. The total value locked (TVL) in the platform remains relatively low compared to other established projects in the Solana DeFi ecosystem, and its token's value lingers well below its initial sale price. While other protocols are thriving due to innovative user incentive mechanisms and seamless integration of liquid staking tokens, Parrot's TVL seems to have stalled, showing limited signs of growth.
Two years have passed since its launch, but unfortunately, Parrot's grand ambitions have not materialized as expected. The total value locked (TVL) in the platform remains relatively low compared to other established projects in the Solana DeFi ecosystem, and its token's value lingers well below its initial sale price. While other protocols are thriving due to innovative user incentive mechanisms and seamless integration of liquid staking tokens, Parrot's TVL seems to have stalled, showing limited signs of growth.
Parrot.fi managed to raise an impressive $84.7 million during the peak of the 2021 Solana DeFi bull run by selling 10% of all PRT tokens to the public in September and October of that year. However, since then, the value of these tokens has plummeted by at least 88%, as reported by Cryptorank. Despite this significant loss in token value, the project's treasury still holds tens of millions in funds.
Parrot's proposed redemption plan holds the promise of restoring approximately $50 million to the hands of PRT token holders, out of the substantial $73 million treasury. However, it raises eyebrows among investors, as the remaining $21 million appears destined to remain in the possession of insiders. This allocation includes $6.3 million intended to sustain the project for the next seven years, alongside $8.3 million locked in illiquid LP tokens. Additionally, there are concerns surrounding up to $10 million of private investments made by the team, shrouded in dubious circumstances.
The reported numbers have displeased the investors who strongly advocated for a buyback. Furthermore, Parrot's redemption plan fails to impose any limitations on participation, which raises concerns that insiders may also access the redeemable funds from the company's treasury.
Investors believe that the odds were further tilted in favor of the Parrot team last November when they unilaterally unlocked a significant portion of unvested team and VC tokens, two years ahead of the originally scheduled vesting time. This strategic maneuver has granted the insiders substantial leverage over Parrot's redemption vote and, as per the investors' assertions, has resulted in a more advantageous effective redemption price.
The Parrot team members remained unresponsive when contacted for a comment.
The DAO that never was
With aspirations of ultimate community governance, Parrot was launched by its leader, PartyParrot, in June 2021, joining the ranks of numerous DeFi protocols that espouse the goal of democratizing finance.
A widely embraced approach to achieve this goal is by granting token holders the power to participate in the protocol's governance through a Decentralized Autonomous Organization (DAO). In late 2021, Parrot managed to raise over $80 million by selling its PRT "governance token" to the public. However, contrary to expectations, Parrot did not establish a functional DAO where PRT holders could exercise their voting rights on important matters. Instead, the team unilaterally made significant decisions, ranging from altering tokenomics to making "trust me bro" investments, without adhering to a formal voting process.
The ongoing vote signifies Parrot's inaugural venture into token-based governance, and if successful, it will signal the termination of the PRT token, thus negating the pledge 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.
As of the current moment, the buyback proposal has garnered overwhelming support, with 97% of the voters in favor. However, it's worth noting that the vote falls well below the quorum requirement. The voting process will remain open for the next week. Criticisms have arisen from certain voters on the ballot-casting website Realms, who strongly criticized the early insider unlock, alleging that it has given the team an unfair advantage as "majority token holders," thus rendering this vote meaningless and a complete farce.
The Parrot community on Discord seemed to be divided between long-term holders expressing open anger and newcomers reluctantly accepting the situation.
The pseudonymous investor, known as Crypto_Boi, became a member of Parrot's Discord community several months after the token sale. He entered the market when PRT was priced at $0.001 and described the token redemption as “nothing short of a robbery”. Despite this criticism, he remained supportive of the decision.
“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.”
