KIP-39: Deployment of Additional ETH for Yield Generation

KIPs Inactive
1 
kip: 39
title: deployment of additional ETH for yield generation
category: treasury investment
author: @DaddyMatty (matt@rook.fi)
status: Sophon review
created: 2022-11-14
replaced-by: none
replaces: none
dependency: KIP-24

References

  1. KIP-24
  2. Rook Treasury Holdings
  3. ROOK Staked ETH Positions

Proposal

This document proposes that Rook DAO increase the maximum units of ETH allowable to be deployed across three liquid staking protocols for yield generation as outlined in KIP-24 [1] by an additional 1,465 units of ETH (“Additional Units”).

Background

As of November 8, 2022, the Rook DAO Treasury holds a total of 11,750 ETH and ETH equivalents [2]. These holdings can be broken down as follows:

Asset Units % of Total
ETH 4,361 37%
sETH2 2,524 21%
rETH 2,128 18%
stETH 1,645 14%
WETH 1,093 9%
Total 11,750 100%

Once adopted, KIP-24 [1] authorized the deployment of a total of 7,934 ETH across three liquid staking providers. Additional real-time details on these positions can be found on our ETH staking dashboard [3]. The following schedule presents the maximum amount of ETH approved to be deployed across the liquid staking providers against what has been deployed thus far:

Protocol/Product Max Amount Approved (Units) Amount Deployed To Date (Units) Remaining to be Deployed (Units)
Stakewise 3,137 2,524 613
Rocket Pool 2,768 2,128 640
Lido Finance 2,030 1,645 386
Total 7,934 6,296 1,639

This document proposes deploying an additional 1,465 ETH or WETH on top of what is remaining to be deployed as outlined above. The following schedule presents the total amount of ETH to be deployed upon adoption of this proposal:

Protocol/Product Remaining to be Deployed (Units) Additional Units Total ETH to be Deployed (Units)
Stakewise 613 579 1,193
Rocket Pool 640 511 1,151
Lido Finance 386 375 760
Total 1,639 1,465 3,104

This would raise our total deployment maximum to 9,400 units which equates to approximately 80% of our total ETH and ETH equivalents in our Treasury as of November 8, 2022.

Official Team

The following contributors would represent the Official Team:

This proposal establishes that the Official Team is responsible for the execution and monitoring of the staking investments articulated in this proposal, subject to oversight by and reporting to the Rook DAO as established below.

Investment Analysis

The analysis supporting this proposal relies on the research and analysis as performed in KIP-24 [1]. No changes or updates have occurred that are material enough to warrant a reevaluation of any of the protocols and products as presented in that KIP.

For detailed information on the net position and performance of our current staked positions, please view our dashboard [3].

Execution and Management

Implementation

Actual execution to deploy these funds will be performed by the Treasury Multisig (0x9a67f1940164d0318612b497e8e6038f902a00a4) and the trading execution wallet (0xa41164009fa1021ac3cff34813e461ca445d0712). The treasury will make its best effort to begin deploying these funds within 120 days of adoption of this proposal, consistent with its ongoing commitment to minimizing the risk of market speculation and front-running Upon completion, an update will be announced on Discord and Twitter with the full transaction details.

Position Maintenance and Unwinding

All actions around position maintenance and unwinding of these positions will adhere to the requirements and standards as outlined in KIP-24 [1].

Specification

  • Stake an additional 1,456 ETH or WETH into Stakewise, Rocket Pool and Lido in amounts described above

  • Treasury Multisig (0x9a67f1940164d0318612b497e8e6038f902a00a4) to the trading execution wallet (0xa41164009fa1021ac3cff34813e461ca445d0712) to deploy assets to and make best effort to do so within 120 days of adoption

  • Official team to report monthly to community along with real-time dashboard updates

2

What is the rationale behind 1465? is it to reach 80% allocation?
I would like to see 1 year of opex eth not staked, and the rest deployed personally, but I’m not gonna fight about it if there’s an iota of pushback.

3

Yes, the additional 1,465 in additional units was selected as it raised our % of ETH deployed to 80%. This is a relatively minor increase from the previous % approved under KIP-24 of 75%.

Regarding opex, we currently do not pay any expenses or contributors in ETH, but instead USDC and ROOK. Regarding this, we have more than sufficient runway; more information on this can be found in our recent Q3 report: Notion – The all-in-one workspace for your notes, tasks, wikis, and databases.

1 Like
4

I was thinking gas costs for treasury activity etc. Should be a pretty trivial amount compared to the total holdings, and would mean 98%+ deployed most likely. I may be too aggressive for a treasury strategy though.

At the end of the day I’m in favor, and would advocate even higher deployment. I would stop short of 100% but allow for almost any amount up to 99.

5

Before thinking to continue to increase revenue or yield on a treasury owned by DAO members, have you thought to start redistributing AT LEAST some of the yield generated?
Because to be honest, doesn’t seem that things are going well for ROOK token holders…the utility of the token is becoming approximately limited and the fact that the Treasury is way bigger than the entire market cap of ROOK is no sense. So, before continuing to think about how to generate more yield, I would rather think about how to increase the utility of these tokens and how to use the treasury funds to sustain the market itself.

6

Thanks for the feedback on this. First off, I think that capturing yield on our assets and increasing tokenholder utility are not mutually exclusive; both can happen. Anyone can write a KIP to perform buybacks or reward shareholders in different ways.

Because these additional funds would be in the form of an ETH derivative, the funds are expected to be highly liquid and should closely approximate the value of the underlying asset. Therefore, if we as a DAO determine that rewarding tokenholders is our priority, this move would not prohibit such action; in fact, it would allow there to be a greater pool of capital to draw from.

I would be happy to have a discussion with you about your thoughts on increasing tokeholder utility, but in the end, I see these as two different discussions