kip: TBD title: 15,000 ROOK Liquidity Provision; APY roll into ROOK author: lapras <firstname.lastname@example.org> status: draft created: 2020-10-06
Provide 15,000 ROOK and equivalent wETH to provide liquidity on Uniswap V2, Uniswap V3, Bancor, and Sushi at a 30/40/15/15 split respectively. Send ROOK to the treasury. Use Eth yield to buy and send ROOK to the treasury.
It is no secret, that despite continued fundamental strengthening within the DAO (inclusive of the launch of governance), the ROOK token has faced inclement price action. There are various causes of such, but they are all underlined and exasperated by a lack of token liquidity.
The most natural solution to this illiquidity is to use treasury assets (ROOK and wETH) to provide this liquidity.
Olympus Pro offers a related resolution to this illiquidity worth discussing. That said, it is oriented for bootstrapping, whilst our protocol has matured past this phase and can be taking steps to diminish emissions.
Due to our war chest of ROOK and wETH, we do not have to offer discounted ROOK or bonded ROOK. We also immediately receive full APY, which I recommend we use to buy back ROOK and send to the treasury, or allocate for future stakeholder rewards.
In short, this proposal entails an Olympus Pro model, ran in house by our sizable treasury, and instead of offering discounts, we get full APY immediately and use it to buy back and use ROOK in the future.
LP Tokens refer to the set of liquidity providing tokens from Uniswap v2 (30%), Uniswap v3 (40%), Sushiswap (15%), and Bancor (15%). They will be comprised of ROOK and wETH.
Using DAO Treasury ROOK and wETH will provide us sustained treasury-kept liquidity.
Ultimately, owning income-earning liquidity with the treasury is a scalable, multi-beneficial adjustment.
Lastly, the yield from LPing can be used to support ROOK price action.
• Permanent liquidity floor supports investors and minimizes down side risk
• Token liquidity is an important factor that many Price Oracles require
• Significant APY
• ROOK-side of APY can be sent to the treasury
• Eth-side of APY can be used for periodic buy backs sent to the treasury
None identified (beyond normal SC risks)
The proposed allocation would be 15,000 ROOK. We have ~101k ROOK to date, which is ~$15m. We also have ~$50m of Eth and $35m of stables. We can use about ~700 ETH/wETH and 15,000 ROOK for this proposal.
Given the illiquidity of Uniswap v3 at the moment, which would largely be represented by the treasury, as well as anticipated increases in volume, I expect this to yield very substantial APY via fees/year. We can choose to burn the ROOK yield, or keep it (my preference). We can also choose to keep the Eth yield, or buy ROOK with that (my preference).
With current v2 and v3 liquidity and current volume at current price, we are looking at a floor of ~5% APY. There are also reasons to anticipate a substantial increase in volume; we are also taking a naive look at Uni v2/v3 distribution. This is to say, it is extremely likely this is a deep underestimation of the APY yield (eg ~20% is more probable).
Add 15,000 ROOK and an equivalent amount of wETH to LPs. This will yield us ROOK:wETH liquidity to support long term price stability and health, while also generating yield.
Use this yield to buy back ROOK.