A New Model for Web3 Project Expansion: The Advantages and Challenges of subDAO

In the Web3 space, the continuous growth of projects is crucial for investment returns. However, there are very few projects that successfully expand into new businesses, and traditional projects often struggle to compete with emerging projects that focus on these areas. In the face of this dilemma, the subDAO model combined with efficient execution may become a solution. This article will take Magpie's rapid expansion as an example to explore the best practices of subDAO.

Definition and Characteristics of subDAO

A mature subDAO should possess the following characteristics:

1. Have independent tokens and autonomous expansion capabilities
2. The parent DAO holds a considerable proportion of subDAO equity.
3. A mutually beneficial symbiotic relationship is formed between the parent DAO and the subDAO.

Taking Radiant's yield booster Radpie as an example, it will issue the $RDP token, of which the Magpie treasury will hold 20%, and another 30% of the IDO share will be allocated to MGP. This arrangement means:

1. MGP holders can enjoy IDO profits.
2. MGP holders will be able to receive "$RDP" dividends in the future.
3. Magpie gains significant control over Radpie, thereby influencing the governance of Radiant.
4. Radpie can leverage the team resources of Magpie for a quick launch.

Advantages of the subDAO Model

1. Credibility Inheritance: subDAO inherits the credibility accumulated by the parent DAO, facilitating project initiation.
2. Growth Potential: Independent tokens provide ample incentive budgets.
3. Narrative Update: subDAO tokens are closely following new trends, enabling the parent DAO to keep up with market hotspots.
4. Resource Circulation: Achieving synergy and resource sharing within the parent DAO ecosystem to enhance overall efficiency.
5. Governance Leverage: The parent DAO that focuses on governance rights can achieve the leverage effect of governance rights through subDAOs.

The legacy of credibility allows subDAO to reduce investors' concerns about potential risks from the very beginning, while also facilitating collaboration with KOLs and other project parties. In addition, the accumulation of successful cases will pave the way for future subDAOs.

The independent token model solves the dilemma faced by old projects when launching new businesses. If traditional projects massively increase token issuance to incentivize new businesses, it may lead to a price decline; however, not doing so makes it difficult to win in competition. The subDAO model neither dilutes the parent project's tokens nor fails to keep up with market trends.

In terms of resource circulation, internal transactions and incentive loops can be realized between subDAOs, reducing dependence on external resources. For example, projects within the Magpie ecosystem can support each other through bribing the market, forming a virtuous cycle.

For projects focused on governance rights, the subDAO model is a perfect match. After the initial setup of such projects, the subsequent work is relatively minimal and highly homogeneous, allowing for the extensive reuse of existing resources, thereby improving efficiency.

The governance leverage effect allows the parent DAO to influence a larger range of decisions with a smaller equity proportion. For example, Magpie indirectly influenced nearly 25% of Pendle's governance rights by controlling 20% of Penpie's equity.

The Importance of Execution

However, the success of the subDAO model is inseparable from excellent execution. The Spark project of MakerDAO is a counterexample; despite its attractive concept, it has failed to take off due to a lack of follow-up updates and clear token economics.

Conclusion

The subDAO model combines efficient execution with new growth paths for Web3 projects. It not only provides ample growth budgets and the ability to keep up with market trends but also achieves ecological linkage and resource sharing. As DeFi projects achieve rapid horizontal expansion through this model, they may be able to build a complete ecosystem capable of competing with large centralized exchanges, promoting the industry towards a more decentralized direction.