Improve the utility of the token ROOK
Iconium Blockchain Ventures is an early contributor to the Rook Project. We have kept and increased our stake since November 2020.
Following the approval of KIP-35 (reference n1), the function of ROOK has been reduced to that of a governance token, rendering it unattractive to both new and existing investors. The objective of this proposal is to initiate a discourse on enhancing the present token model, which would provide incentives for all parties invested in the project.
The KIP-35 proposition raises several noteworthy starting points, such as:
- The burning mechanism implemented earlier failed to exert a substantial influence on the token’s supply.
- The distribution of a portion of revenue to token holders did not generate a sustainable Annual Percentage Yield (APY) that could incentivize ROOK holders to stake.
- The simplification of bid distribution to allocate 90% to the user and 10% to the DAO Treasury is incentivizing all parties except for the token holder.
The substitution of ROOK with WETH in the bidding mechanism has two significant effects:
- PRO: It would lower the barriers to entry for new and existing keepers, thereby enhancing the adoption of the protocol.
- CONS: It would considerably diminish the utility of $ROOK as a governance token, as burning and staking would be phased out.
Following the identification of the broken token-model in the proposal, it is imperative to implement necessary measures to incentivize all stakeholders of ROOK.
Currently, the DAO Treasury is a robust piece of ROOK. However, many users have observed a significant disparity between the present valuation of the treasury and the fully diluted valuation of the ROOK token. The primary purpose of the DAO Treasury presently is to finance and support ROOK Labs and the core team and to generate additional yields that remain within the DAO Treasury.
While securing financing for the development of ROOK is essential to ensure its long-term success and active treasury management is necessary to decrease the burn rate, a mechanism should be implemented to support and maintain the token’s valuation, which is unrelated to the Treasury’s valuation.
Following the KIP-35 proposal, the Treasury can grow through two methods:
- The 10% revenue distribution from Keepers
- The yields generated from Treasury Management.
Our proposal involves utilizing a portion of these yields to create a consistent buy pressure for the ROOK Token. The following proposal will explore two primary methods:
- Token buy-back
- New staking model that distributes revenues in various tokens.
Let us delve into both proposed models:
- Buy-back of the token: The possibility of a ROOK buy-back has been discussed, with two main concerns raised by @DaddyMatty (reference n2):
- Transparency of our funds and orders on-chain. This concern can be addressed by employing a professional market maker and conducting the buy-back using a centralized exchange (CEX). Monthly reports can be provided to the community on the results of each operation. Alternatively, the buy-back can be executed over a longer time frame, as done by OpenLeverage (reference n3).
- Regulatory pressures from the SEC, which may classify ROOK as a security due to the expectation of profits. While not providing professional feedback as a non-lawyer, it is worth noting that several projects, including Binance with its automatic buy-back and burn of BNB, have implemented and used this approach.
- New staking model that redistributes revenues in different tokens: The real yield narrative is currently a hot topic, and GMX has demonstrated its success by redistributing ETH revenue to stakers. Adopting a similar solution that redistributes the 10% revenue generated by Keepers would be an organic KPI, connecting the two main actors of the ROOK ecosystem: the keepers and the token holders.
The objective of this proposal is to initiate an inclusive dialogue with the community to identify novel approaches to enhance the functionality of ROOK. Two potential solutions have been presented for consideration, and I welcome any feedback or suggestions in relation to them.
Disclosure: Iconium has a position in Rook. This draft proposal was written by Iconium, and the views expressed herein reflect its own opinions. Iconium is not receiving compensation from anyone for this proposal.