Hi everyone,
We want to provide context and clarify our intentions behind actions taken following the Phase 0 airdrop.
Background
As a major project on Optimism, Perpetual Protocol applied for and received a Phase 0 OP Token grant of 9m OP tokens.
The proposal outlined 3 areas for spending: Liquidity Acquisition, Liquidity Mining and Builder Acquisition.
Two aspects of the execution of the proposal have drawn criticism from the Optimism community. To better understand how decisions are made at Perpetual Protocol, it is key to know how the project is structured. As with most projects in the space, the ultimate goal is to decentralize and Perpetual Protocol shares this ideal. We currently have 5 distinct entities which are:
- Perpetual DAO: the entity that holds and manages all remaining PERP tokens from the initial mint
- Foundation: the team that builds the core protocol, manages the current UI found at perp.com, and manages rewards etc. as mandated by the Perpetual DAO
- GrantsDAO: a sub DAO that funds projects and protocols to integrate and build on Perp
- Token listing DAO: a sub DAO that approves and lists markets on Perp
- Market Making Entity: a separate entity and team that handles market making
All of the entities currently have distinct teams, budgets and mandates, with the exception of the Perpetual DAO which does not yet have a team.
Issue 1: Retroactive airdrop to LPs
As part of the initial Phase 0 proposal, we specified that we wanted to allocate 8M of OP tokens towards liquidity mining incentives to grow the TVL and trading volume on Perp. As part of this, we had also intended to reward existing LPs through a retroactive airdrop. This was not put into the proposal as we did not want to attract airdrop farmers but rather incentivise real individuals and entities that would provide funds to Perp.
We did not provide sufficient details regarding our implementation plans and we should have communicated our plan better to the OP community.
Wallets belonging to the market making entity (MME) were not excluded from the retroactive airdrop to all wallets that facilitated trading volume as an LP between launch and June 1, of which MME wallets comprised a substantial majority.
The MME was formed as a distinct legal entity with its own team (detailed in this gov post: https://gov.perp.fi/t/proposal-market-making-entity/634/). ​The MME uses the wallets listed in Perp V2 Foundation vs External, some of which were migrated from the Foundation (source).
The MME mandate is two fold:
- Provide liquidity on Perp V2, and
- Work with other market makers to provide liquidity on Perp V2 via USDC lending or other means
After the retroactive airdrop was sent to historical LPs of Perp v2, because the OP token has not yet been added as a collateral type on Perp v2, the MME decided to convert a portion of the OP to USDC (one of three assets currently used as collateral) in order to provide more liquidity on Perp v2.
OP was not sold to profit team members, but to further the MME mandate of driving liquidity growth on Perpetual Protocol, and by extension, Optimism as a whole. We understand that to many people it may look like the foundation and MME are one organization, and as such, presume the foundation team gave tokens to itself, and later sold them. We would like to apologize for poorly communicating this matter to the OP community.
We have asked the MME to repurchase the OP tokens that were sold, and place these in the fund used for future liquidity mining rewards as described in the Phase 0 proposal.
Previously we planned to add OP as a collateral type once price discovery had matured and major distributions had been completed. We have decided to expedite this process, allowing the MME team to use OP as collateral in the near future, adding to the OP token’s use cases.
Issue 2: GrantsDAO Allocation
The sale of 500k OP tokens for USDC and subsequent bridging to Mainnet executed by the Perp GrantsDAO also caused concern and dismay among the Optimism community.
The GrantsDAO is the longest running Perp sub-DAO. The GrantsDAO Committee is independent and no current or former foundation team members sit on this committee. This DAO has funded numerous Perp related projects and aims to continue doing so for years to come.
According to the GrandDAO’s experience, a large majority of grants are priced in USD as most of the projects still have expenses that are required to be paid in USD. Given this, the DAO committee’s mandate demands effective treasury management, and the committee decided the best course of action was to sell the 500K OP for USDC. Afterwards the funds were bridged back to Ethereum and into the Gnosis safe where GrantsDAO funds are kept.
The committee has expressed its understanding that bridging liquidity out of Optimism goes against the mission of the GrantsDAO (to grow the Perp and Optimism ecosystems) and this was an oversight on their part. We have asked the committee to create a new Gnosis safe on Optimism at the earliest possible time and bridge funds back so they are ready to distribute to grantees on Optimism.
Restatement of Intentions
The Phase 0 airdrop proposal’s stated goal is to increase the use of Perpetual Protocol as well as Optimism. We firmly believe the actions of the foundation team and sub-DAOs are aligned with this goal, as our future is directly tied to the future of Optimism as a whole. However, we understand how the actions described above led to misunderstanding about our intentions.
Perpetual’s Future with Optimism
Despite recent misunderstandings, our commitment to Optimism, the community and ecosystem has never been stronger.
- We continue to have the highest transaction volume on Optimism (Dune) and work constantly to grow this number.
- We remain dedicated to being on Optimism only and have no plans to deploy on other chains. We are not multi-chain and the success of our protocol ties directly to the success of Optimism.
- Given we are not multi-chain, all PERP and OP used as rewards serve to grow and incentivise liquidity, users and builders on Optimism.
- We have a heavy focus on composability and have a solid track record of funding projects through grants. Working closely with the OP team we have convinced many projects to deploy on Optimism and continue to collectively grow the ecosystem.
- We are active in Optimism governance and are firmly committed to the future success of Optimism as well as a healthy, decentralized governance landscape.
We hope this gives some context into how the various teams thought about the actions they took and hope to illustrate that none of these had the intention to be malicious or self-serving. We have strongly backed Optimism as the chain to be on and will continue to do so. We strongly believe in the OP team and the potential of the ecosystem to thrive and create a composable DeFi world that benefits all.
