FAQ

Why use KuChain and Avalanche?

KuChain and Avalanche provide extensive growth possibilities and allow for low transaction fees for the end user. KuChain is a less utilized chain with its high growth potential. We see KuChain as a perfect way to enter the ever so developing DeFi Industry. We aim to become the most used Lending Protocol on KuChain as well as the most used DAO.

Why do we need Parrot DAO in the first place?

Dollar-pegged stablecoins have become an essential part of crypto due to their lack of volatility as compared to tokens such as Bitcoin and Ethereum. Users are comfortable with transacting using stablecoins knowing that they hold the same amount of purchasing power today vs. tomorrow. But this is a fallacy. The dollar is controlled by the US government and the Federal Reserve. This means a depreciation of dollar also means a depreciation of these stablecoins - reducing your purchasing power both in real life and in the metaverse.

Parrot DAO aims to solve this by creating a non-pegged stablecoin called PARR. By focusing on supply growth rather than price appreciation, Parrot DAO hopes that PARR can function as a currency that is able to hold its purchasing power regardless of market volatility - both in real life and in the metaverse. We also aim to provide game-changing lending protocols to DeFi startups and leverage traders on the AVAX and KCC Networks, Cross-Bridging Treasury assets to both chains.

Is PARR a stablecoin?

No, PARR is not a stablecoin. Rather, PARR aspires to become an algorithmic reserve currency backed by other decentralized assets - it utilises fractional treasury reserves to extract intrinsic value. Similar to the idea of the gold standard, PARR provides free-floating value its users can always fall back on.

What is Magic Internet Money (MIM)?

Magic Internet Money (MIM) is a stablecoin backed by interest bearing tokens issued by abracadabra.money!

MIM is native of the Ethereum Ecosystem and bridged to Avalanche! The place with the highest liquidity to buy MIM on Avalanche Network is on Trader Joe using the AVAX-MIM Pair!

The MIM address on Avalanche is 0x130966628846BFd36ff31a822705796e8cb8C18D

PARR is backed, not pegged.

Each PARR is backed by 1 MIM, not pegged to it. Because the treasury backs every PARR with at least 1 MIM, the protocol would buy back and burn PARR when it trades below 1 MIM. This has the effect of pushing PARR price back up to 1 MIM. PARR could always trade above 1 MIM because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1.

You might say that the PARR floor price or intrinsic value is 1 MIM. We believe that the actual price will always be 1 MIM + premium, but in the end that is up to the market to decide. It is Parrot DAO's intention to back PARR with metaverse and blockchain gaming projects, giving it intrinsic value for use in the metaverse.

How does it all work?

Parrot DAO sells bonds in the ‘Bond’ Page’ to investors at a discount to market prices. The profit from these bonds backs our token with real value and is used to mint new PARR tokens using real value, allowing us to offer high APYs which incentivises long-term staking.

Over time, the Protocol uses it's bonds to gain an increasing share of its own liquidity and expand it. This means that the Protocol can guarantee the backing of tokens.

What is the deal with (3,3) and (1,1)?

3,3 and 1,1 are some of the labels which give to certain actions with regards to Game Theory.

Game Theory is the study of mathematical models which can be used to determine the advantage or disadvantage of specific choices in a given scenario. In the case of Parrot DAO, we use it to describe the benefits and drawbacks of the various ways in which users can interact with the Protocol.

(3,3) is the idea that, if everyone cooperated in Parrot DAO, it would generate the greatest gain for everyone (from a game theory standpoint). Currently, there are three actions a user can take:

• Staking

• Bonding

• Selling

Staking and bonding are considered beneficial to the protocol, while selling is considered detrimental. Staking and selling will also cause a price move, while bonding does not (we consider buying PARR from the market as a prerequisite of staking, thus causing a price move). If both actions are beneficial, the actor who moves price also gets half of the benefit (+1). If both actions are contradictory, the bad actor who moves price gets half of the benefit (+1), while the good actor who moves price gets half of the downside (-1). If both actions are detrimental, which implies both actors are selling, they both get half of the downside (-1).

Therefore, an ideal scenario would be for all users to Stake - this allows the Protocol to build reserves and offer more attractive APYs whilst also allowing users to increase their stake and reduce their cost basis.

• If we both stake (3, 3), it is the best thing for both of us and the protocol (3 + 3 = 6).

• If one of us stakes and the other one bonds, it is also great because staking takes PARR off the market and put it into the protocol, while bonding provides liquidity and MIM for the treasury (3 + 1 = 4).

• When one of us sells, it diminishes effort of the other one who stakes or bonds (1 - 1 = 0).

• When we both sell, it creates the worst outcome for both of us and the protocol (-3 - 3 = -6).

Why is PCV important?

As the protocol controls the funds in its treasury, PARR can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 PARR with 1 MIM. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy PARR below 1 MIM with the treasury assets until no one is left to sell. You can't trust the FED but you can trust the code.

As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer term because more funds are available in the treasury.

What is a rebase?

Rebase is how the mechanism by which the Protocol rewards stakers. When new PARR are minted by the protocol using bond profits, a large portion of it goes to the stakers. Because stakers only see staked PARR balance instead of PARR the protocol utilizes the rebase mechanism to increase the staked PARR balance so that 1 staked PARR (sPARR) is always redeemable for 1 PARR.

What is reward yield?

Reward yield is the percentage by which your staked PARR balance increases on the next epoch. It is also known as rebase rate. You can find this number on the PARR DAO staking page.

What is APY?

APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of PARR DAO, your staked PARR represents your principal, and the compound interest is added periodically on every epoch (8 hours) thanks to the rebase mechanism.

One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 PARR on day 1, after a year, your balance will grow to about 1377.

How is APY calculated?

The APY is calculated from the reward yield (a.k.a rebase rate) using the following equation:

APY = ( 1 + rewardYield )^{1095}

It raises to the power of 1095 because a rebase happens 3 times daily. Consider there are 365 days in a year, this would give a rebase frequency of 365 * 3 = 1095.

Reward yield is determined by the following equation:

rewardYield = PARR_{distributed} / PARR _{totalStaked}

The number of PARR distributed to the staking contract is calculated from PARR total supply using the following equation:

PARR_{distributed} = PARR_ {totalSupply} \times rewardRate

Note that the reward rate is subject to change by the protocol.

Are high APY sustainable?

APY relies on the sale of MIM bonds in order to mint new PARR tokens. If sufficient bonds are sold, then high APY rates are sustainable. If the protocol aims for 10,000% APY, and 10,000 PARR tokens are staked, 200 PARR tokens need to be minted daily in order to achieve the APY; (Roughly 2% growth a day). If there are at least enough PARR tokens brought into the protocol from bond sales, the APY is sustainable.

The APY can be high due to compounding interest.

Why does the price of PARR become irrelevant in the long term?

As illustrated above, your PARR balance will grow exponentially over time thanks to the power of compounding. Let's say you buy a PARR for $400 now and the market decides that in 1 year time, the intrinsic value of PARR will be $2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1377 PARR by the end of the year, which is worth around $2754. That is a cool $2354 profit! By now, you should understand that you are paying a premium for PARR now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your PARR balance to grow exponentially and make this a worthwhile investment.

What will PARR intrinsic value be in the future?

There is no clear answer for this, but the intrinsic value can be determined by the treasury performance. For example, if the treasury could guarantee to back every PARR with 100 MIM, the intrinsic value will be 100 MIM. It can also be decided by the future DAO. For example, if the DAO decides to raise the price floor of PARR, its intrinsic value will rise accordingly. PARR DAO started with the intention of becoming a reserve currency protocol that is backed by Metaverse and Blockchain gaming projects, so our treasury will hold appropriate projects decided by the DAO.

Is PARR DAO audited?

PARR DAO is currently unaudited! It is a fork of Olympus DAO (Olympus DAO has been audited twice) on the Avalanche Network, audits will occur at a later stage. Stay cautious!