Penpie Proposes Compensation Plan and Insurance Protocol After $27M Exploit

Penpie, a yield protocol built on top of Pendle Finance, published a draft compensation plan after suffering a $27 million exploit last month.

On Oct. 7, Magpie, the development team behind Penpie, published a proposal outlining a compensation plan for users impacted by last month’s hack alongside plans to launch a new insurance mechanism dubbed Safupie.

Magpie plans to distribute roughly 27 million Safu Recovery Tokens (SRT) tokens to users impacted by its $27 million exploit last month. Magpie will allocate 4% of its MGP token's supply to repaying users, including 1% from its team allocation and 3% from its treasury — with up to 30% of holders’ SRT tokens exchangeable for vote-locked (vl) MGP tokens at a rate of 10 vlMGP per SRT.

In addition, 20% of Penpie’s vePENDLE revenue and 20% of Magpie’s overall monthly revenue would be allocated to buying SRT tokens from the open market. Any recovered stolen funds would also become claimable to SRT holders through a bidding mechanism.

“The Safupie treasury will focus on compensating Penpie’s affected users before beginning to accumulate assets,” Magpie said. “Until the compensation process is complete, all funds gathered by Safupie will be directed toward buying back and burning SRT tokens from the market.”

Safupie tokenomics and Penpie compensation plan

Penpie also plans to expand operations to cover external protocols in the future.

Participating protocols can contribute assets to Safupie to create a central treasury. Safupie treasury assets will be invested into BTC, ETH, and USDT “to maintain value” and generate yield.

Users affected by hacks will be compensated with SRT tokens that represent $1 worth of compensation each. SRT can be burned for Safupie (SAFU) tokens at a rate of three-to-one, allowing holders to lock their assets to earn treasury yield, bid for recovered assets, participate in governance, or sell their SAFU on the open market.

Protocols holding SAFU could also burn the tokens to mint five times as many SRT tokens for distribution to impacted users as compensation claims. Protocols contributing to the Safupie treasury would be able to mint up to 100 times as many SRT tokens as the dollar value of contributions from the previous month.

“SRT tokens allow affected users to be compensated either through liquidity markets or by converting them into SAFU for longer-term rewards and governance,” the proposal said. “This dynamic helps maintain a balance between immediate compensation needs and long-term protocol sustainability.”

SAFU holders would also receive priority access to initial offers for Magpie subDAO tokens. SAFU’s supply would be capped at 10 million tokens.

The proposal calls for establishing an SRT/USDT pair on PancakeSwap seeded with 500,000 USDT, with 500,000 SAFU allocated to incentivizing liquidity providers. Magpie will also allocate 5 million MGP tokens from its treasury to incentivize the liquidity pool.

Governance

Safupie would be subject to community governance from SAFU holders.

Governance would determine which protocols can participate in Safupie, the implementation of compensation plans, and how treasury assets are managed. The proposal also calls for distributing a portion of the yield generated from treasury assets to SAFU holders.

Magpie plans to present the “final version” of the compensation plan on Oct. 14 after receiving community feedback over seven days.

However, forumgoers have expressed reservations regarding the complexity of Safupie and the proposed compensation plan, the quantification of losses based on fiat value rather than digital asset balances, and the proposed incentives for third-party protocols contributing to Safupie.

Penpie’s total value locked is $44.9 million, down 65% from $127.3 million in the five weeks following its exploit, according to DeFi Llama. The protocol also resumed operations on Oct. 7.

The price of MGP is down 1.5% over the past 24 hours, according to CoinGecko.