The developers behind Parrot Finance, a Solana-based DeFi lending protocol, want to switch to a tokenless system and buy existing PRT tokens for USDC. But early investors in the project are angry at the prospect of a significant loss.
On the one hand, the Parrot team wants to release the value currently locked in PRT, which has fallen by more than 80% since the initial sale. On the other hand, angry investors have pointed out that they will bear the brunt of the losses. Meanwhile, insiders may receive a disproportionate share of any funds raised from detokenization.
Parrot Finance proposes PRT redemption scheme
On Friday, the Parrot development team initiated a vote on whether to switch to a tokenless protocol.
If approved, the proposal would see $50 million in funds from Parrot’s treasury split between PRT holders. Valuing the tokens at $0.0045 each, the scheme would see IDO participants recover just one-tenth of their initial investment.
Investors are reeling from the prospect of massive losses
Guess it wasn’t bad enough that Parrot’s early backers have already seen most of their investment disappear. In that case, the responses to the latest proposal suggest that many now feel cheated by the project’s developers.
One angry PRT owner called the proposal “pure financial crime”, arguing that the Parrot team would be able to collect any unclaimed funds after the 8-week redemption period. This could mean that they collect much more than the IDO investors who supplied the original liquidity for the protocol.
To make matters worse, Parrot’s developers will also retain control of assets not used to fund the PRT buyback.
In total, Parrot’s treasury consists of about 71 million dollars. This means that after $50 million has been redeemed in the detokenization process, $21 million will remain with insiders.
Parrot fails to deliver on the promise of decentralization
Like most DeFi projects, Parrot promised early investors that they would retain control over its governance. But this promise was never fulfilled.
Ironically, the latest proposal is actually the first time Parrot has deployed its decentralized decision-making framework.
Instead of asking its Decentralized Autonomous Organization (DAO) to vote on key design issues and protocol development, Parrot developers took matters into their own hands from time to time.
For example, the team unilaterally unlocked a large cache of tokens two years ahead of schedule in November, making them multiple token holders. As such, community members have condemned the voting procedure as a farce.
And these concerns appear to be valid. At the time of writing, over 90% of the votes are in favor of the PRT redemption plan. Given the vocal community’s outrage over the proposal, it certainly seems like Parrot insiders are swinging the vote.
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