PieDAO proposes token buyback after ending liquidity mining program

Quick Take

  • PieDAO’s buybacks will target market participants looking to sell tokens received as rewards for providing liquidity.
  • The move comes following PieDAO’s decision to stop renting liquidity from these market participants.
 
 

DeFi yield platform PieDAO has filed a proposal to its community for a phased buyback of its tokens, after ending the protocol’s liquidity mining program in October. The goal is to prevent a further price decline — although the token is already down 98%.

PieDAO’s liquidity mining program incentivized those providing liquidity on the platform with tokens. Some of these tokens were liquid while the majority were subject to a one-year vesting schedule.

Liquidity mining programs were popular in the initial iteration of the DeFi space because they provided a means for protocols to bootstrap liquidity — yet they can be damaging to the token's price.

Token emissions used to reward liquidity providers increase the number of the protocol’s tokens in circulation, hence why they often lead to a decline in price over time. In PieDAO’s case, the DOUGH price declined 98% during its liquidity mining program — from $2.14 at the start to $0.04 when it shut down the program.

Now that PieDAO has ended its liquidity renting program, the team says it's necessary to strike a deal with liquidity providers who want to sell their tokens. As such, the proposal is calling for the community to approve a plan for the protocol to use its treasury to buy back these tokens. These purchases will be done in the form of over-the-counter trades.

For the PieDAO team, the buyback is necessary to prevent any adverse impact on the DOUGH price from any forced selling by liquidity providers. The proposal also stated that a buyback could allow liquidity providers to unwind their positions without incurring heavy price slippage — a situation where the price at which a trade is executed is significantly lower than the expected price.

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