KIP Draft: Dissolution of the DAO
Proceed with the dissolution of the DAO and distribution of the ROOK-governed treasury (https://debank.com/profile/0x9a67f1940164d0318612b497e8e6038f902a00a4) to ROOK governance token holders.
ROOK DAO currently suffers from a profound misalignment of interests between the management team and ROOK governance token holders.
This misalignment has been reinforced by the design and implementation of a vicious gatekeeping mechanism by the current management team, in a way that enables them to veto and control any community-led proposal that wouldn’t fit their objectives.
Despite an alarming lack of product growth (79% decline of product usage volume over the last 6 months) and product development, the team is currently burning ~$6.1M per year from the DAO treasury, with an average yearly compensation of $300,000 per contributor (with ROOK equity only representing 11% of this compensation).
This results in value destruction at an unreasonable scale for ROOK governance token holders, without any recourse for the ROOK token holders to stop this transfer of wealth from their treasury to the management team. As evidenced by the latest team’s proposal, they no longer desire to operate in a DAO structure, and therefore we need everyone to be able to leave equitably.
This proposal intends to suggest the dissolution of the DAO and distribution of the ROOK-governed treasury to ROOK governance token holders, in a pro-rata format, resulting in each ROOK token receiving ~$54.9 per token.
Analysis and Rationale
The ROOK DAO governance is a farce and has been hijacked by the management team who designed and implemented a gatekeeping mechanism to ensure the team can profit freely from the ROOK-governed community treasury without needing to deal with governance from ROOK holders.
Currently, each proposal needs to be approved by sophons, including proposals that would remove them and elect new sophons. The current sophon committee is composed of 5 members, from which a majority of 3 are team members. This pernicious governance mechanism excluded ROOK token holders from the governance process, and secured the inability of external reviewers to challenge the current management team.
The leadership team is failing to grow the protocol and isn’t suited to lead the DAO anymore. In Q3 2022, volume was $41.6M, in Q4 2022, volume was $23.1M, to this date, in Q1 2023, volume is $9.1M, a decline of ~78% in 6 months.
The current burn rate of the 22 DAO contributors is $6.1M per year, with an average annual compensation of $300,000 per contributor. This could be justified by a large proportion of these salaries being paid in vested ROOK tokens, but you will be surprised to hear that only 10% of this compensation is paid in ROOK tokens.
Their justification? Price was going down. So after making sure they received enough ROOK tokens to secure each governance vote, they decided to maximize their individual return by increasing the proportion of compensation received in stablecoins.
In regard to product development, there has been no publicly available and widely distributed information published about ROOK management team roadmap, and no objectives identified. This lack of basic business acumen demonstrates how far the management team is from product and market realities, while piling up cash from salaries and trying to cut ROOK token holders from the governance process.
This is a terrible use of the DAO treasury and should be immediately interrupted before the whole treasury is siphoned.
There is a profound misalignment between DAO contributors, sophons and ROOK governance token holders. While ROOK governance controls a DAO-owned treasury of ~$44M, the project is currently valuing the project below $10M, a 75% discount to the governance token-controlled cash reserves of the DAO.
The reason for this huge discount is the fact that the team remains unaccountable to this day, and is comfortable prioritizing their returns over the central role that the ROOK token was designed to have in the protocol governance. Additionally, this reflects the poor expectations the market has for this team to be able to convert a community-owned treasury of $44M into a protocol that will have a higher valuation.
A smart contract will be created to allow ROOK holders to swap their governance tokens for a pro-rata share of the DAO treasury.
On ratification of this proposal, the DAO treasury will transfer the totality of the funds to the smart contract.
Prior to ratification of this proposal:
- Development of a smart contract that allows ROOK token holders to swap and burn their governance tokens in exchange for a pro-rata share of the DAO treasury.
On ratification of this proposal:
- Transfer the totality of the funds from the current DAO treasury to the newly developed smart contract.