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

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

kip: 4
title: Buy back and burn 100% of Ninja's new revenue initiative
author: AlCappuccino
status: draft
created: 9 Oct 2021

Preface

Definitions

Buy back refers to the mechanism of using profits to purchase ROOK.

Burn coins means the permanent and intentional elimination of those specific coins from circulation to make them unusable forever.**

Ninja is the internal KeeperDAO Keeper. Address: 0x3D71d79C224998E608d03C5Ec9B405E7a38505F0

Summary

Increasing the value of the ROOK token and keeping the community motivated and united because of this was not a priority until now. Since we do have a lot of funds into the treasury (around $100m) to cover all sort of development and expansion related costs, we could and should use a decent part of the future Ninja profits to buy back ROOK tokens from the open market and burn them.

At current revenue level, this 100% will translate into approximately $1m being used for the buy back every month.

Benefits

  1. Create constant buying pressure on ROOK token that would result in an increase of ROOK market price
  2. Reduce the total ROOK token supply by burning
  3. Create a solid use-case and a reason for people to hold ROOK tokens
  4. Keep the community motivated and united by giving back to the token holders some of the profits generated
  5. By creating a positive vibe, the community will further drive the adoption of the protocol
  6. Legally speaking, the buy back and burn does not affect us long term, proved by many other projects
  7. The buy back and burn is super easy to market and drive awareness trough media channels since is a very well received and hyped concept and would be forever one of the main reasons people will like hold the token.
  8. The buy back will work together with the limit orders that are discussed here: Place a limit buy order on ROOK token - #9 by shadow Having the buy back in place will reduce the chances these limit orders fill.

Risk and downsides

  1. Temporarily, no more Ninja’s Profits are deposited into the treasury.

Background

Please see the original draft here: Buy back and burn initiative - #21 by Rookie

Proposal

Use 100% of Ninja profits to buy back and burn ROOK, once a week. This lasts until the Coordination Game and new related tokenomics are live.
This buy back should be done randomly, regularly, and at least once a week, reducing the risk of it being exploited and increase the efficiency.

11 Likes

Looks good to me. We could discuss whether it makes sense to use more than 50% of the profits for the buyback.

2 Likes

Agree, personally I would go with 50% until Coordination Game is out or until we have more details about it. I wouldn’t mind go with 70% or close to that since we already have enough money in treasury but I don’t mind to start low and we can increase in couple of months.

Based on @aszom comment I think we should indeed discuss what % would we like to be used for the buy back. We can of course change it later once the Coordination Game is out for example.

Personally, after a day of consideration, I would go with the 75% option because I don’t see any reason to increase the value of the treasury too much from now on since we already have enough funds and assets there that we could work with.

  • Use 50% of Ninja Profits for the buy back
  • Use 75% of Ninja Profits for the buy back

0 voters

1 Like

I have the finer details of the CG and think this proposal will have to be tweaked in the context of CG - but for now personally voted 75%. When a proposal is released to go live with particular tokenomics with the CG (proposal should be released with documentation), consideration of this proposal (assume it is live) will be part of it.

For now, I would be happy with either of these options, but I like the idea of the stronger price impact in the short term. I think this will draw more attention to the project in the short term, and also alleviate the need for limit orders (remains to be seen).

1 Like

Based on some further discussions, I think we should take into consideration another voting for 100% option too. We can of course change it later once the Coordination Game is out which should be later this year.

  • 75% of Ninja’s revenue used for the buyback and burn
  • 100% of Ninja’s revenue used for the buyback and burn

0 voters

3 Likes

I’m in favor of doing this as well. Maybe instead of picking a number such as 50-100%, we could consider what the big picture is we’re going for. For example, by buying & burning ROOK we’d be unwinding emissions/minting and re-targetting the supply. We could decide on some high-level target to hit, then mash the ~100% button until we get closer to that target. That would help limit the scope of this proposal. As mentioned, we could also cap the proposal with the Coordination Game launch. So this ends when either the CG launches or the target is reached.

3 Likes

In favor of having it cap with the coordination game launch or when we have the final details of how the cg will work so we can have another proposal in time for everything related to Ninja’s profits then.

1 Like

Thrilled you are in favor of this!

I think we should consider, if we had an explicit level/date, a lot of people would game it. The easiest way to avoid this and have the desired impact would be to do it periodically, where within that period the exact moment was non-deterministic (“smash the button” somewhat randomly).

I also think doing this in a semi-continuous fashion will improve price and volume sooner and consistently, which is valuable (for a bunch of reasons - for instance, price oracles), and not just at once.

3 Likes

I am in favor of this proposal.

1 Like

Not totally opposed to this but would like more opinions on buyback and burn vs buyback and use, something along the lines of Stop Burning Tokens – Buyback and Make Instead — Placeholder

more scarcity does not automatically mean more value

The treasury has 100k rook (see here) so the opinion of the sophons is that it’s safe to burn because we have plenty rooks to spend.

1 Like

It’s definitely safe, but is it optimal?
As a thought experiment, what if you buyback and lock the ROOK for 4 years. aren’t you in effect making ROOK more scarce (less liquidity) and propping up the treasury with long-term value.

1 Like

I have the same perspective that it is nonoptimal but I feel like the current community sentiment is that burns should be implemented. I would prefer to implement the burn system and then iterate on it in the future than to try and bog down consensus over the best way to implement buybacks

1 Like

I think we have a substantial amount of ROOK currently. The idea of keeping ROOK that we get from revenue is interesting as well, although this will have a larger impact in the immediate.

I would be happy to help with a KIP (cc @yungpeso @azazello), which you guys have suggested already, in which we establish yield from the treasury (I believe there is at least 1 KIP from Maven being drafted, so supplementary to that) and fold that revenue into buy backs but - unlike this KIP - the ROOK is set aside to be managed by the treasury.

The thing is that this problem could be rectified once the CG launches my point of view is that of an outsider.