Buy back and burn initiative

KIPs Draft
#1

Hello everyone and good day to you,

First of all happy to be part of such a great community. Some of you know me, 99.9% don’t but that is not important :slight_smile: I have been a long time hodler and currently being in top token holders - I mention this so people know I only wish the best for the project and its community and I am not here for a quick profit.

I created this draft in order to do some brainstorming together regarding a possible future important aspect of our ROOK token use cases: the buy back and burn initiative.

As you know KeeperDAO treasury holds roughly 93m$ at the moment I am writing this, which is astonishing huge. As we all agree this treasury should be put to good use so we all benefit long term.

I have heard from right and left suggestions to create a marketing and spread awareness fund (great idea too), support talents (which already happens) etc. and I do believe there is room for another use case:

We could regularly buy back tokens from the open market every week with a % of the profit generated by the protocol: lets say most of the profit still goes to the treasury but the rest is used for the buy back.

The bought tokens should be burn in order to reduce the overall supply and create scarcity long term. Increasing demand → higher value of ROOK token → happy community.

For people say: “increasing the price of rook token is not important” I invite them send me their tokens, if they are here just for fun, why holding tokens? We all expect an increase of value of our holdings, otherwise why buy and hodl rook tokens? ROOK token is one of the backbones of the project and we, as holders, have the expectation this token will increase in value.

Even ETH implemented a burn mechanism, this will benefit everyone long term.

I think this buy back and burnt program could be very well used in marketing campaigns and to create positive vibes in the community. You know the say, happy //community, happy //project.

We have to determine if this is desired by the community and if yes, what % is used for the buy back.
Also, with the buy back tokens, we could burn them mostly but also leave some to fund other initiatives or award community members etc.

Thank you for your time and apologizes for my English.
Cheers and long life to keeperdao.

6 Likes
#2

Hi AlCappuccino,

I support this proposal. But I think that it can be improved, it is better to use the funds in the treasury to generate yield and use the income to buy and burn ROOKs. In the long term, it’s more profitable for all holders.

1 Like
#3

Why not do both?
But overall I like your idea. What I would like to see is that the yield is not some 4%. We should use high yield farms which are both audited and known. For example:

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OR
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Also, we should never put a lot of funds into the same pool/protocol since there is always a risk.
We could allocate a % of the treasury and spread it into 2-3-4 pools.

#4

Higher returns higher risk. Not a big fan of that. Better to use more reliable options. This kind of high return usually does not last for a long time, so it’s quite inconvenient to always move funds here and there.

1 Like
#5

Since we need to make a KIP for everything

#6

Some of these are not that high risk. They have been audited and I bet we can find a middle ground some with decent rewards. Because if we go with a 5% yield for farming with stable from treasury I don’t think it worth the risk anyway. Feel free to drop some suggestions here :slight_smile:

#7

A buyback may be beneficial in the later stages of a project. But as it currently stands, I believe utilizing the treasury of the protocol to temporarily raise price levels of ROOK would be a waste of precious resources. Instead, it may be wiser to force usage of ROOK when using the protocol before resorting to buybacks.

A buyback is typically incurred when no other project investments will create a positive net present value and thus, a return of capital is warranted. This is why late-stage companies typically undergo buybacks while startups invest in expansion. Given how early this protocol is, I believe a wide swath of positive NPV projects exists. Some examples of such projects may include hiring new developers to help advance the protocol’s future by generating new revenue streams, utilizing the treasury in yield-farming to generate additional revenue, and creating new incentives to capture new users.

Additionally, I think ignoring cryptocurrencies regulatory risks is a dangerous decision. As it currently stands, the United States Securities and Exchange Commission is in the beginning stages of waging war against DeFi. This includes investigating and potentially suing Uniswap, cracking down on Coinbase’s attempt at lending, an ongoing lawsuit against XRP and a resulting liquidation of Grayscale’s institutional fund, Chairman Gensler’s strong negative stance towards stable coins, and the destruction of China’s massive OTC business. These issues present immense systemic risks to cryptocurrencies as a whole and thus high risks to buying back ROOK at current price levels.

Due to said risks, it may be wiser to wait until the protocol is more developed, more revenue streams have been generated, and more clarification regarding regulations has developed. Undergoing a buyback is far riskier to the future success of the protocol. Resources will be wasted on short-term profit-seeking during high regulatory uncertainty and thus high systemic risk. Instead, I believe investing in the expansion of the protocol’s capabilities would result in a greater chance of the project’s long-term success and reduce the risk of wasting precious assets on short-term profit incentives.

5 Likes
#8

I’d like to see some numbers. What’s the profit we generate in the current act? What profit do we expect to generate in the next act given the 30% reduction in ROOK rewards? What’s the expected rise in ROOK’s value as a function of the % profit used for the buyback?

How do you want to make sure that the buybacks aren’t exploited?

We had a couple of buybacks in the past and the rook value only temporarily rose and not by much as far as I know. So we should only do a regular buyback if we are certain it will have a desired effect.

#9

Excellent points. I’m not sure if I agree or disagree overall - because 1. price-protecting actions and 2. growth-sparking actions are not mutually exclusive - & the legal outlook is ambiguous to me (and I am not a lawyer). I have to think more on it - love your well-thought out points, great consideration

#10

In the past buy backs, they were primarily done over extended time quietly on a CEX (so not easily identifiable). This allowed more minimal price impact, which was desired. Maybe it’s best we really identify what our intentions are with something like a buy back.

A. Value (price) improvement?
B. Gathering more ROOK for future use while it’s cheap? (If it wasn’t burnt)
C. Generate treasury appreciation (in which case, yield farming is interesting)?
D. Others?
E. All of of the above?

To answer your questions specifically

What profit do we expect to generate in the next act given the 30% reduction in ROOK rewards?

The Hiding Game will have a different mechanism once CG is live, so the reduction may actually be steeper. I’m anticipating more volume as a result of the CG.

What’s the expected rise in ROOK’s value as a function of the % profit used for the buyback?
and
How do you want to make sure that the buybacks aren’t exploited?

Are both unclear, but important to answer collectively.

#12

I agree, atm rook holders are just used as liquidity for farmers to dump on. There is no direct value from project succes flowing into Rook itself.

There is no better marketing than strong price performance and tokenomics. Incentivizing people to invest in rook will result in more exposure.

I suggest at least using 40-50% for buyback and burn which still leaves a more than decent number for development and other purposes.

Most people i know lost faith in Rook, let’s hope we can restore it.

1 Like
#13

In my opinion - if it’s marketing that we are after, it should come when utility is live so it is stickier.

#14

Thank you for your input, I would like to present my point of view regarding these:

  1. Legally speaking buy back and burn won’t change anything, there are plenty of projects with huge kick ass legal teams everywhere in the world that do this because it is ok, one example is WOO Network which you all gonna hear a lot more about it in the future, which is using 50% of revenue to buy back tokens from the market and burn them. They are backed by 3AC and Kronos Research quantitative traders who are trading around 10bn$ worth of crypto assets every day.

In conclusion I really doubt this buy back should be of any concern for keeperdao future. If we always think about what if in the future the X government decides X lets all give up crypto and bitcoin because China banned it 100 times in 13 years. Satoshi Nakamoto would have never invented Bitcoin if he would be concerned about the legal aspects all the time.

What I am saying is that I know they are important but lets not stumble over it much. If it is ok now, if other people with much more influence and much more to lose and much larger legal teams are doing it even if they are centralized (not like us), why should it bother us this much?

Also comparing Ripple token launch problems with Rook token launch is like comparing an apple with a car.

  1. You said: “Waste of precious resources”. In my opinion a waste is having a treasury this big and not using this for what it matters to ALL of us, the rook price. Even if we like it or not, rook price goes up when buyers exceed sellers. Currently we give away tons of rook to stimulate people using the protocol (even if they should use it anyway since they get so much more than in other places) but we hesitate 100 times before using the money generated to benefit rook token holders a bit. I didn’t say that we should use the whole treasury to do this, I said that from the (future) revenue we could allocate a %, something like 30%-50% to the buy back program.

  2. Crypto space is moving fast, we can not wait 10 years until rook is fully developed and do nothing in regards of protecting the price of rook and thus all hodlers until then. I won’t be happy knowing we continue giving rook rewards and do not having a single protecting mechanism for the value of rook. Every single holder cares of the price of ROOK, is a fact. Also another fact is that nobody wants to wait 5 years to get something in return. Nobody invest in crypto just for fun, we are here to make mainly.

  3. The buy back is proved to be effective by a lot of projects, here I mention again WOO Network and WOO project. Check out their token graph, what their community think about the buy back etc. It creates a fantastic vibe in the community every month. + the price of the token speaks for itself. While rook dropped in value a lot, woo increased a lot mainly because of this constant buy pressure from the buy back. People know that the buy back will go on no matter what and the total supply will decrease every month so they are not afraid on every drop.

  4. Having the buy back up and running now while the rook is only 140$ ish will benefit us more than having it up and running when rook is 1000$ (if that will ever happen without a buy back program from the colossal treasury that we paid for by diluting our own holdings because of the rook rewards). Keep in mind that since our treasury is in BTC eth stables etc, those won’t increase in value as much as rook price could increase in a much shorter period of time making the buy back less efficient. While the treasury could increase 30%, rook price could increase 300% when coordination game is live (which we all know that gonna be soon).

  5. Crypto market is usually in one of these 3 stages: bull season, bear season, neutral season. The price of rook will go up or down based on this pretty much naturally. In a bear market no matter how well the project is going (if you don’t trust me check out how much every single project lost during the last bear market, these is no exception) rook will lose value. There is no other way, none, that will help rook token having a stable value or positive one in a bear market than a regular buy back. Even if the developments go well, still, the bear market doesn’t care. If sellers exceed buyers, the price will go down. But having the buy back up, bulls will be helped tremendous, both by the buy back itself and by the positive feeling.

  6. The treasury is not in stable coins, while this is good when the markets go up, it is also bad when the markets go down. Right now I think, like most of people, we are in a neutral/bullish phase of the crypto markets. If in this phase we have almost 100m$, in a bearmarket we gonna have less or a LOT less, everything is possible in crypto. I don’t want to start the buy back program when there will be a smaller amount of money in the treasury, neither on the next bull run or when crypto in general is covered by a 10m thick bad sentiment.

Some will argue that ok, but in case of a bear market the rook token price will also be cheaper and thus the buy back will have the same effect even if we use less money. While this is partial true it is not fully true! If we are doing the buy back now we gonna get a positive vibe from the community, influencers etc. and everyone will help push the project and the price forward since the crypto vibes are good in general. If we do buy back later when a bear market comes, a similar one with 2018, the community won’t care, nobody cares anymore about anything, everyone is panic selling etc. No matter what fundamentals projects have. Now a buy back is a lot more effective. Is like planting seeds during the best season and not in winter when everything is frozen.

These are my points, sorry if they are long. Don’t take anything personal, my English is not perfect.

1 Like
#15

  1. Hard to anticipate the effect of the buy back, but for sure won’t be a negative one.
    Also, we can adjust the % for the buy back based on market action and treasury development. If the results are too good we can reduce the % or allocate the funds somewhere else. If the buy back does not have a visible effect, we can increase the % a bit. Test and repeat until we have the desired result which is having less price drops, less volatility and eventually having the emissions absorbed by the buy back completely if that will be possible.

  2. Do the buy back daily, regularly at random periods of time and in small tranches OR having a bot instructed to do the buy backs on price drops and when there is a floor formation on the price. This is not hard to be coded with such a great team we have AND will also be quite effective doing the buy back when the rook price is at some sort of floor or when it drops.

#16

This is the part I’m afraid of and the reason why I’m asking for numbers. :slight_smile: I know it’s difficult to anticipate the exact effect of the buy back but some estimates should be possible to make.

Let’s assume the most extreme case: we use the whole treasure to buy rook back in a very short period of time so there are no significant sells. Where would the price be? Would it go up to $300? $500? $700? Would we reach ATH? This is the best case scenario for rook price and the worst case for the treasury. A more realistic price estimate will be below the extreme and once we know the extreme and the buyback still seems reasonable, we can discuss how to make a more realistic estimate.

My background is in the natural sciences. I love order of magnitude estimates and back-of-the-envelope calculations.

#17

I would prefer any excess rook or treasury funds be used to fund the expediting of development. We need staking and CG more than a jolt to short-term price action

#18

I was not thinking to use a specific amount from the current treasury. I was thinking to use a % of the future revenue. In this case we still gonna have a large treasury as we do right now.

With the current treasury I would like to see a limit order buy wall placed at a specific price rather than start using the current treasury for the buy back.

#19

  1. Why do you consider buy back short term? When it is actually quite the opposite since it is a continue process done regularly.

  2. Give some specific ideas regarding “expending” because I don’t think the whole amount of 100m$ is needed for this only reason. 100m is a lot. We could use it for a lot of things, this might be one of them although I stated that I would like to see a % of the future revenue not the current treasury used for the buy back.

#20

I love looking at at a portion of future revenue to be designated to burn. I think that is a wonderful mechanic, and should be built into future utility.

For the current treasury, I would anticipate, or really fear, a very public strategy like this would get front ran immediately by smart money, they will burn through our buy back, and we will see zero benefit from it. I think the current treasury could definitely still be used for this, but maybe attach it to current usage, for example, if HG volume/profit exceeds a designated target, we burn ROOK from the treasury, or if price exceeds its 30 day average for a week, we burn some allocation.

1 Like
#21

It’s not temporarily as it will result in a constant buying pressure which is driven by protocol succes.
Higher price → more eyes → more potential developers and the emitting is more powerful.

you can just TWAP % of treasury over a certain date, also if we’re going to use future revenue the buybacks will be consistent so there is no way to effectively frontrun it

3 Likes
KIP-4: Buy back and burn 100% of Ninja's new revenue initiative