Here is my headcanon recap, based on two short storys that I used to explain it with added details.
The year is 2045, and the company known has Hasbio has made a product, a fluffy pony. The fluffy pony is a toy-like pony with the ability to walk, talk, breath, eat and more. Hasbio was in progress of making these products when supporters and members of PETA broke in and released the prototypes to the public. The prototypes aren’t what the company imagined. They were disgusting, tiny vermin that did nothing but talk in annoying voices and shit everywhere. This caused some major legal issues within the area, so what they did to amend it, was to delete all fluffies with a different product called The Gelatin Dog. The product is later released and kills over 90% of the wild fluffy pony population, and people are allowed to kill them whenever they wish. This makes fluffies ponies near extinction. Hasbio, of course, isn’t completely done with the idea of fluffies, so the company remakes the entire product and this time, without any annoying PETA members putting their production at halt, they can finally release their finished product. The new fluffies aren’t like the old ones. They aren’t as stupid, they don’t shit as much, they are easy to train, and there are many subspecies and products that promote the product in the best way possible. The Gelatin Dogs are scarce now, being required to be incinerated when found, and a patrol that stops all access of fluffies leaving the city. They eventually amend their mistake and are at the top of the toy market. Now with their mistake fixed, they now support the cities masses, and become a popular landmark.
This concludes the headcanon.