Growth is crucial to investment returns. However, in web3, there are very few projects that can successfully expand new businesses, and new businesses of old projects are often unable to compete with new projects that compete with the same businesses.
SubDAO + execution may be the answer to this question. From Pendle's Penpie to Radiant's Radpie, Magpie is rapidly expanding in the subDAO model. This Thread will use this as an example to analyze the best practices of subDAO for you.
A. What is a subDAO?
There are also some unsuccessful examples of subDAO today, such as MakerDAO's Spark, but such projects without independent tokens are still in the incubation stage and have no reference value. A qualified subDAO should have the following characteristics:
SubDAO has independent tokens and independent expansion capabilities
ParentDAO holds more interests in subDAO
Mutual benefits between ParentDAO and subDAO
Take Magpie’s subDAO, Radiant’s yield booster Radpie, for example. Radpie will issue $RDP, of which the Magpie Treasury holds 20%, and 30% of the IDO share will also be given to MGP, which means
MGP holders can share IDO revenue
MGP holders will be able to enjoy $RDP "dividends" in the future
Magpie has great control over Radpie, and thus has the right to govern Radiant
Radpie will leverage Magpie's team resources for a quick launch
B. What are the advantages of the subDAO model?
Reputation, subDAO inherits the reputation accumulated by ParentDAO in the past, which is convenient for startup
Growth, independent tokens allow for a sufficient budget to incentivize growth
Narrative, subDAO tokens keep up with the new narrative, allowing ParentDAO to keep up with the new narrative
Circulation, subDAOs are linked and share resources within the ParentDAO ecosystem to improve efficiency
Leverage, ParentDAO in the governance track can achieve leverage governance through subDAO
Reputation
The biggest fear of new projects in the cryptocurrency world is rug pulls, and LPs often give new projects a high risk discount. However, subDAO can inherit the reputation of ParentDAO, which greatly dispels this concern, and cooperation with KOLs and other project parties will become much smoother.
Moreover, reputation is an intangible asset that can be accumulated continuously. The success of existing projects will snowball and pave the way for new subDAOs.
Growth & Narrative
Wang Huiwen, co-founder of Meituan, once commented that web3 has a more radical customer acquisition and financing model, and Token is a tool to achieve this model. Old projects often face a dilemma when launching new businesses. If a large number of tokens are issued to incentivize new projects, prices will fall. If this is not done, it will be difficult to win in the competition.
What’s even more frustrating is that the tokens of old projects are too big to speculate on, and their positioning is unclear. When the market is chasing new narratives, it will not include these tokens in the core discussion of the narrative. For example, StakeDAO has developed Convex-like governance rights business in the past year, integrating 10 projects but the effect is very limited. It integrated Pendle but did not share much of Pendle’s popularity.
The subDAO model is different. For example, Penpie/$PNP, as an independent project, not only did not issue any $MGP, but also was firmly tied to the Pendle narrative. Although the $MGP price did not change on the surface, MGP is a Wombat-started project. A similar project, WMX, has recently fallen by 70%. If there is no Penpie, it is not difficult to imagine what MGP would be like.
cycle
For example, the mPendle/Pendle trading pool was recently listed on Wombat, and is seeking to use Bribe through MGP, so that the incentive expenditure of PNP will go to the hands of MGP holders.
Next, can mWOM/mDLP and the LP tokens on both sides also be listed on Pendle, and then use $MGP and $RDP to participate in Penpie’s bribery market? Although there is no clear information at present, it is reasonable to infer that there should be a high possibility.
Newly emitted tokens remain in the Magpie system through bribe, which is the so-called internal circulation. The meat is rotten in the pot, reducing external net expenditure. If there is an internal circulation, there will naturally be an external circulation. By sharing resources among multiple projects, costs can be reduced and efficiency can be increased. For example, Ankr obtained Wom incentives through Magpie Bribe, and Penpie was also successfully pulled in.
The ultimate goal of Magpie should be that all incentive tokens are not issued directly, but bribes are used to improve efficiency and mutual benefit within the ecosystem, and a more competitive bribery market is established through BD resource sharing.
In addition, Magpie focuses on the governance track, which is a perfect match for the subDAO model. This track is different from Perp, which requires continuous in-depth cultivation. After the project is built, there is relatively little post-work and the homogeneity is also high. Basically, a large amount of previous work can be reused when doing new projects.
For example, Penpie quickly launched the bribery market, which is very similar to the market that Magpie previously created for Wom. This is also part of resource recycling.
lever
Take Magpie as an example. Magpie nominally controls 20% of Penpie's governance rights, and Penpie controls 25% of Pendle's governance rights. On the one hand, Magpie enjoys 20% x 25% = 5% of Pendle's various benefits, but on the other hand, for protocol governance, yes or no issues, 20% of Magpie's votes will largely determine Penpie's votes, which means that Magpie actually has nearly 25% of Pendle's governance rights.
This is what is called leverage. Although subDAO dilutes the general equity portion, there is almost no dilution in terms of protocol governance. In a sense, the entire Penpie is a concerted action group, which means 1/20% = 5 times leverage.
C. Execution
The idea of subDAO is good, but it still depends on execution to be implemented. MakerDAO’s Spark has been released for half a year but has not seen any improvement. After all, it just forked AAVE and there has been no major updates since then. There is no sign of token economics. It cannot be called a subDAO at all, so it still depends on the team’s execution.
Summarize
SubDAO + execution has paved the way for growth for web3 projects. Rapid expansion through subDAO can obtain sufficient growth budget for new projects, keep up with new narratives, achieve ecological linkage and resource sharing. Of course, all of this is based on the team's excellent execution.
In the past, DeFi was mostly just a module and could not compete with the huge system of large CEX. However, if DeFi can expand horizontally quickly and become a system, perhaps the singularity is about to appear.