A New Approach to Expanding Web3 Projects: subDAO Model

In the Web3 space, successful projects that expand into new businesses are rare. Traditional projects often struggle to compete with new projects that focus on this area when exploring new business opportunities. However, the subDAO model may offer a solution to this problem. Taking Magpie as an example, it is rapidly expanding through the subDAO format, including projects like Pendle's Penpie and Radiant's Radpie. This article will delve into the best practices of subDAO.

Definition and Characteristics of subDAO

A mature subDAO should have the following characteristics:

1. Have independent tokens and expansion capabilities
2. The parent DAO holds a large proportion of subDAO equity.
3. The mother DAO and subDAO mutually benefit and coexist.

Taking Radiant's yield booster Radpie as an example, it will issue RDP tokens, with the Magpie treasury holding 20%, and another 30% of the IDO share allocated to MGP. This means:

• MGP holders can share IDO profits
• MGP holders will enjoy the "dividends" of RDP in the future.
• Magpie has gained significant control over Radpie, thereby influencing the governance of Radiant.
• Radpie can quickly launch using the team resources of Magpie.

Advantages of the subDAO Model

1. Reputation Inheritance: subDAO inherits the reputation of the parent DAO, which is beneficial for project initiation.
2. Growth Potential: Independent tokens provide ample budget for incentivizing growth.
3. Narrative Update: subDAO keeps up with new trends, allowing the parent DAO to also stay in tune with market hotspots.
4. Resource Circulation: subDAO interacts and shares resources within the parent DAO ecosystem to enhance efficiency.
5. Governance Leverage: The parent DAO in the governance domain can achieve leveraged governance through subDAOs.

credibility advantages

New projects often face a trust crisis, but subDAO can inherit the reputation of the parent DAO, significantly reducing risk perception and facilitating cooperation with KOLs and other project parties. This accumulation of credibility can pave the way for subsequent subDAOs.

growth and narrative advantages

Web3 projects face aggressive customer acquisition and financing models, with tokens being key to achieving this model. The subDAO model allows new businesses to have independent incentive budgets, avoiding the dilemma of massive issuance of parent project tokens. At the same time, subDAO tokens are more easily tied to emerging narratives, gaining market attention.

For example, although StakeDAO integrates multiple projects, its effectiveness is limited. On the other hand, Magpie's Penpie, as an independent project, not only did not issue additional MGP but also successfully tied the market narrative of Pendle, providing support for the parent project MGP.

ecological cycle

The subDAO model can achieve resource circulation within the ecosystem. For example, the mPendle/Pendle trading pool launches Wombat and participates in Bribe through MGP, directing the incentive expenditure of PNP towards MGP holders. This internal circulation reduces external net expenditure and enhances the efficiency of the entire ecosystem.

In addition, resource sharing among multiple projects can reduce costs and improve efficiency. For example, Ankr obtains Wom incentives through Magpie Bribe, and Penpie also benefits from this. The goal of Magpie is to establish an efficient bribery market to achieve mutual benefits within the ecosystem.

Governance Leverage Effect

In the field of governance rights, the subDAO model can generate significant leverage effects. Taking Magpie as an example, it controls 20% of the governance rights of Penpie, while Penpie controls 25% of the governance rights of Pendle. This not only allows Magpie to enjoy a corresponding proportion of vePendle earnings, but more importantly, Magpie's votes can greatly influence Penpie's decisions, thereby having a greater impact on Pendle's governance.

The Importance of Execution

Although the concept of the subDAO model is appealing, it ultimately requires strong execution to realize it. MakerDAO's Spark project is a counterexample, with slow progress over the past six months and no real subDAO formed yet. Therefore, the team's execution capability is crucial.

Conclusion

The subDAO model, combined with efficient execution, has opened up new growth paths for Web3 projects. It not only secures ample growth budgets and keeps pace with market trends but also achieves ecological linkage and resource sharing. This model may help DeFi projects build a more complete system to better compete with large centralized exchanges. With the development of this model, the DeFi sector may soon witness a significant breakthrough.