A New Approach to Web3 Project Expansion: subDAO Model

The growth potential of Web3 projects is crucial for investment returns, but successful projects that can expand into new businesses are rare. Established projects often struggle to compete with new projects that focus on those areas. However, the subDAO model combined with efficient execution may be able to address this issue. Taking Magpie as an example, it is rapidly expanding through the subDAO model, demonstrating the best practices of subDAO.

Definition and Characteristics of subDAO

A mature subDAO should possess the following characteristics:

1. Have independent tokens and independent expansion capabilities.
2. ParentDAO holds a large amount of equity in subDAOs.
3. ParentDAO and subDAO have mutual benefits.

Taking Magpie's subDAO - Radiant's yield booster Radpie as an example. Radpie will issue $RDP tokens, of which the Magpie treasury will hold 20%, and another 30% of the IDO allocation will also be distributed to MGP. This means:

• MGP holders can share IDO profits
• MGP holders will enjoy $RDP's "dividends" in the future.
• Magpie has significant control over Radpie, and thus holds governance rights over Radiant.
• Radpie can quickly launch using the team resources of Magpie.

Advantages of subDAO Model

1. Credibility Advantage: subDAO inherits the credibility accumulated by ParentDAO, making it easier to launch quickly.
2. Growth Potential: Independent tokens provide ample incentive growth budgets.
3. Narrative Follow-up: subDAO tokens closely follow the new narrative, allowing ParentDAO to keep up with market trends.
4. Resource Circulation: Interlinking and sharing resources within the ParentDAO ecosystem to enhance overall efficiency.
5. Governance Leverage: The ParentDAO in the governance track can achieve leveraged governance through subDAOs.

Reputation Inheritance

New projects often face the risk of rug pulls, leading LPs to apply a higher risk discount. subDAO can inherit the reputation of the ParentDAO, greatly alleviating concerns in this regard and facilitating smoother cooperation with KOLs and other project parties. Reputation, as an intangible asset, can be continuously accumulated, and the success of existing projects will pave the way for subsequent new subDAOs.

Growth and Narrative

Independent tokens enable subDAOs to have sufficient incentive budgets, avoiding the dilemma faced by old projects when launching new businesses: a large increase in token issuance may lead to a price drop, while not doing so makes it difficult to win in competition. At the same time, the new tokens of subDAOs are more easily tied to market hot narratives, helping ParentDAOs indirectly share the popularity of new narratives.

Ecological Cycle

The subDAO model promotes resource circulation and sharing within the ecosystem. For example, in the Magpie ecosystem, newly issued tokens remain within the Magpie system through the bribe mechanism, reducing net external expenditure. Resource sharing among multiple projects also helps to reduce costs and increase efficiency, such as Ankr obtaining Wom incentives through Magpie Bribe.

Governance Leverage

Taking Magpie as an example, it indirectly influences 25% of Pendle's governance rights by controlling 20% of Penpie's governance rights. This leverage effect allows Magpie's influence in protocol governance to far exceed its actual stake.

The Importance of Execution

Although the concept of the subDAO model is appealing, it ultimately requires strong execution to be realized. Some projects have attempted the subDAO model, but due to a lack of subsequent updates and clear token economics, they have failed to achieve the expected results. Therefore, the execution capability of the team is a key factor for the success of the subDAO model.

Conclusion

The subDAO model, combined with efficient execution capabilities, has opened up new growth paths for Web3 projects. It not only provides ample new project growth budgets but also keeps pace with new market narratives, achieving ecological linkage and resource sharing. As DeFi projects rapidly expand horizontally through this model, they may be able to form a massive system that can compete with large centralized exchanges, driving the industry forward.