Parrot Protocol

## What is Parrot Protocol? Parrot Protocol is a decentralised finance (DeFi) network built on Solana. Its primary goal is to unlock liquidity trapped in DeFi assets, particularly LP tokens and interest-bearing tokens, by enabling borrowing, stablecoin minting, and leveraged trading.

The core products of Parrot Protocol include:

• PAI stablecoin – a decentralised stablecoin backed by LP tokens
• Parrot Lending Market – a non-custodial borrowing and lending platform
• Virtual Automated Market Maker (vAMM) – a margin trading system using PAI as the unit of account

By allowing LP tokens to be used as collateral, Parrot Protocol provides additional liquidity and financial flexibility to DeFi users.

## What is PRT? PRT (Parrot Token) is the governance and utility token of the Parrot Protocol. It plays a central role in protocol governance, staking mechanisms, and incentive structures.

The total supply of PRT is 21 billion tokens, distributed as follows:

• Protocol incentives – 35% (distributed to encourage participation)
• Team & early contributors – 20% (locked and vested over three years)
• Initial DEX Offering (IDO) – 10% (auctioned during launch)
• Ecosystem & partnerships – 10% (allocated to integrations and collaborations)
• Seed investors – 20% (vested over three years)
• Protocol Controlled Reserve (PCR) – 5% (used for liquidity provisioning)

## What is PRT used for? PRT serves as both a governance and utility token, allowing holders to influence protocol decisions while also enabling liquidity-related services.

1. *Governance* - PRT holders can participate in the governance of Parrot Protocol, voting on:

- Stability fees and lending parameters - Collateral asset types for borrowing and minting PAI - System upgrades and protocol changes

Holders who lock their PRT receive gPRT (governance PRT), which grants voting power and enhanced incentives. The longer PRT is locked, the greater the governance influence.

2. *Staking & yPRT (Parrot Yield Token)* - PRT holders can stake their tokens to receive yPRT, which accrues rewards over time.

- yPRT earns protocol incentives and represents a claim on the protocol’s revenue. - Vesting yPRT gradually converts it back into PRT over seven days, with 50% unlocking after 2.1 days.

3. *Liquidity & Exchange Pools* - PRT is used to support liquidity pools that improve synthetic asset redemption and conversion:

- *PRT Liquidity Pool* – enables direct redemption of synthetic assets issued by the protocol (e.g., PAI, pSOL). Without this, users must trade synthetics on secondary markets. - *PRT Exchange Pool* – facilitates zero-slippage swaps between different synthetic assets. For example, exchanging 100 PAI for pSOL would be processed via the pool, ensuring efficient price execution. - *PRT Liquidation Pool* – provides a trustless, permissionless pool of capital that any bot operator can use to liquidate vaults. Liquidation fees are distributed to pool participants on a pro-rata basis.

4. *Protocol Fee Redistribution* - PRT plays a central role in the Parrot Protocol’s revenue model, which generates fees from:

- Stability fees on PAI stablecoin minting - Liquidation penalties from Parrot Lending - Borrowing fees from lending markets - Trading fees from vAMM margin trading - A percentage of earnings from +EARN yield products

A portion of these fees is used to buy back PRT, redistributing value to governance participants and stakers.

5. *PRT as a Backstop Mechanism* - PRT also functions as a reserve asset in case of system insolvency. If the protocol accumulates bad debt, PRT may be minted to cover shortfalls, ensuring solvency in extreme market conditions.

## Transition to a Tokenless Protocol In July 2023, Parrot Protocol introduced a proposal to transition to a tokenless model, allowing PRT holders to redeem their tokens for a share of the treasury. The proposed redemption price was $0.0045 per PRT, significantly lower than initial valuations, leading to reported -89% returns on investment (ROI) for early investors.

The proposal sparked strong opposition within the community, with concerns over:

• Lack of transparency – The reasoning behind the transition was not fully explained.
• Token ownership concentration – Reports indicated that approximately 81% of PRT tokens were controlled by the Parrot team and insiders, raising concerns over governance integrity.
• Unclaimed funds – The redemption period was set for eight weeks, with uncertainty about what would happen to unclaimed funds. Investors worried that insiders might benefit from these remaining assets.
• Premature unlocking of team and VC tokens – This decision further consolidated token control among insiders, raising doubts about fairness in the voting process.

Despite community backlash, the proposal was approved with 99.8% of votes, leading to the initiation of a token buyback program in late July 2023. Following the transition, Parrot Protocol ceased to operate with a native token, effectively removing PRT from circulation.

## Who created Parrot Protocol (PRT)? Parrot Protocol was developed by an anonymous team focused on Solana-based DeFi solutions.

The project launched its mainnet in mid-2021 and conducted an IDO in September 2021, distributing 10% of the total PRT supply through a dual-auction system.

Parrot Protocol is actively integrated with Solana’s DeFi ecosystem, partnering with Serum, Saber, and Mercurial to improve liquidity, lending, and stablecoin efficiency.