PARROT FINANCE: Unlocking Value in Liquidity Tokens

Victor NS
3 min readJul 3, 2021


Parrot Finance is a decentralized lending protocol built on Solana which uses liquidity provider tokens as collateral.

Source: Parrot Finance Medium


A DeFi Protocol for liquidity tokens(including Eth) on Solana.

Tokensale not held yet, you can earn a whitelist spot through community rewards program. More info below.

App already running on mainnet.

Value Proposition

The architecture of DeFi protocols today involves users approving protocols such as Uniswap, Aave and Compound to take control of their tokens and in turn, the protocols mint an equivalent amount of native tokens, generally referred to as liquidity provider tokens, to the users’ addresses. These liquidity provider tokens(LP tokens in short) represent the users’ collateral and can be redeemed in future on demand. The users’ collateral earns value through various means such as from protocol trading fees or interest when other users borrow from the asset pool their collateral comprises. This is how lenders earn value from their tokens when they supply them to Compound or Aave, or when users provide liquidity to AMMs like Uniswap. Using protocols today, you cannot fail to observe impermanent loss considering how volatile the crypto markets could be. Impermanent loss occurs when the value of tokens at time of deposit fluctuate negatively as time goes by, even when yield-adjusted, creating an opportunity for improvement in the protocol design to hedge against the market volatility. What if users could be able to unlock the value of the LP tokens they receive, allowing them to add more value and perhaps hedging against the seemingly inevitable downward skew? That’s where Parrot Finance comes in.

Parrot Finance

Parrot Finance uses LP tokens as collateral on the lending platform adding further value to previously dormant liquidity tokens. There are three main services users can get from Parrot Finance:

-Borrowing against their LP tokens deposit, receiving PAI which they can use to purchase more ETH or BTC.

-PAI stablecoin backed by LP tokens collateral and

-A virtual AMM for margin trading using PAI as unit of account.

Essentially, users can compound their capital by earning yield on a native protocol such as Compound and when they unlock the value of LP tokens on Parrot Finance they can activate the idle capital to use as they wish.

With most of the value in DeFi concentrated in Eth protocols today, the cross-chain approach enabled by Parrot Finance unlocks more opportunities, and possibilities for a cross-chain future.

Utility Token, PRT

In addition to PAI token, Parrot Finance’s main utility token is PRT. Fees will be collected on Parrot Finance services:

-Stability fees on PAI stablecoin

-Interest by PAI borrowers

-Liquidation damages

-Fees on lending market

-Trading fees on VAMM

An insurance fund of PRT tokens will be built into the system for the purposes of insurance the lending market during market crashes. Users will be incentivized to contribute towards this pool.

Governance Token, gPRT

To contribute to the long-term direction of the protocol, users will be able to vote using the gPRT token. The token can be earned by staking PRT tokens.

The longer a user locks up their PRT tokens, the higher the multiplier for the gPRT tokens they earn.

  • 1 year: 1x (gPRT1)
  • 2 years: 1.5x (gPRT2)
  • 3 years: 2x (gPRT3)
  • 4 years: 4x (gPRT4)

Token Distribution

Token: PRT

Total: 1, 000, 000, 000

Team & angel investors: 17.5% for 1–3 year lockup

Ecosystem and partnerships: 20%

Seed: 17.5% for 1–3 year lockup

Protocol controlled reserve 10%

Protocol incentives: 35%

Tokensale & community rewards

There is upcoming tokensale, of PRT token, but the date has not been established yet. To earn a whitelist spot, you can get more information on this blog post about community rewards.

App Available

Currently, users can be able to mint PAI on mainnet. Here is the app’s interface. Currently, you can mint PAI when you deposit USDC-spl at a collateral factor of 9.52 meaning you mint 9.52 PAI when you deposit 10 USDC-spl.

For more information on Parrot Finance visit: