Proposal
Acquire ROOK with WETH as a strategic investment.
References
[1] KIP-28: Rook DAO Treasury Charter
[2] Decentralizing Aave - Aavenomics
[3] YIP-57: Funding Yearn’s Future
[4] Ethereum Name Service - Token Unlocks
[5] Optimism - Your Unlock Schedule & Tokenomics Data
[6] Treasury Diversification #2 - Proposals - Lido Governance
[7] KIP-37: Discretionary Swapping of Like-Kind Assets
[8] ROOK Treasury - Dune dashboards
Background
Rook technology is good, the token is cheap, and the DAO doesn’t have enough.
On Nov 6th, the FTX collapse led to a massive mispricing of the crypto market due to numerous market inefficiencies. BTC and ETH have recovered to prices preceding the collapse but ROOK has not. After months of development and product awareness since this time, the asset is undervalued. As outlined by the Treasury Charter [1] the DAO can make “targeted and risk-controlled strategic investments” when it aligns with long term success of the Coordination Game under the ideal of credibly neutral governance.
Native protocol assets are an essential mechanism for funding contributors, providing grants, forming partnerships, and negotiating capital raises. If the Rook DAO will succeed in the long term, managing its native asset is crucial. Currently, the treasury doesn’t hold enough to ensure its long term success.
| DAO | % Allocation | Treasury token # | Market Value (3/17) | Total Supply | Initial % Allocation | Future Unlocks | |
|---|---|---|---|---|---|---|---|
| ENS | 71.27% | 71,271 M | $965.14 M | 100,000 M | 50.00% | yes | |
| UNI | 42.25% | 422,513 M | $2,500.38 M | 1,000,000 M | 43.00% | yes | |
| COMP | 23.14% | 2,314 M | $104.92 M | 10,000 M | 8.00% | yes | |
| LDO | 12.11% | 121,121 M | $288.33 M | 1,000,000 M | 25.00% | no | |
| AAVE | 8.36% | 1,338 M | $156.45 M | 16,000 M | 19.00% | yes | |
| OP | 3.39% | 145,504 M | $1,547.13 M | 4,294,967 M | 25.00% | yes | |
| ROOK | 12.84% | 162,799.50 | $3.04 M | 1,268,255.11 | 30.00% | no |
Unlocks.app, CoinGecko.com, DeepDAO.io
Optimizing native token oversight is difficult but there have been various industry strategies:
-
Restructuring of initial token contracts to account for future spending.[2] [3]
-
Vested unlock contracts from initial distribution.[4] [5]
-
Strategic fundraising by exchanging native assets at high value market value. [6]
Rook is not positioned for these now, nor in the future. Considering these factors, Rook Treasury should seek to acquire 25% of the ROOK token supply to align with other top performers and be positioned for long term success.
Investment Details
Investment Amounts:
Rook Treasury should seek to acquire 25% of the ROOK token supply in order to be in accordance with other top performing DAOS. This percentage is a common initial allocation while remaining lower that most outliers. The market balance of ROOK ($3M) is much lower than other DAOs granting us less flexibility than those with a smaller allocation.
| Allocation | Treasury Balance | Total Supply | Asset | |
|---|---|---|---|---|
| Current | 12.84% | 162,799.50 | 1,268,255.11 | ROOK |
| Purposed | 25.00% | 317,063.78 | 1,268,255.11 | ROOK |
| Acquisition Amount | Asset | |||
| 154,264.28 | ROOK |
The DAO should seek to acquire 154,265 ROOK.
Budget:
WETH should be used to conduct the acquisitions for the following reasons:
- Future protocol revenue will be earned in WETH in accordance with KIP-34 aligning any replacements to this proposal as a result of future revenue.
- KIP 37 establishes the treasuries discretion to swap like assets allowing them to utilize the 11,740 ETH balance. [7][8]
- Contributors have insured stability as there are no budget liabilities in ETH.
- Exchanges in ETH retain the 40/60 (Risk/Stable) construction of the treasury portfolio.
Since ROOK has been undervalued since Nov 6th, the price of 0.0190 ROOK/WETH (about $30) is fair and will be the basis going forward. Defining the target acquisition amount allows a proposed budget to be calculated.
| Amount | Asset | Max Rate | Asset | Proposed Budget | ||
|---|---|---|---|---|---|---|
| 154,264.28 | ROOK | X | 0.0190 | WETH | Yields | 2931.02 |
The proposed budget is 2931 WETH (about $5.1M).
Execution window:
A time window allows DAO participants to react to treasury execution and market price, with some certainty. The treasury can’t guarantee a definite timeline which is understandable for this difficult task. The DAO reports are quarterly which is when the community gains knowledge about protocol performance, which may be an important factor for reevaluating this proposal. All things considered, a fiscal quarter is the correct window.
Acquisition window begins April 1st 0:00:00 UTC and Ends June 23:59:59 UTC (Q2).
Orders:
Executing an acquisition of this size will be extremely difficult. DAO participants need some assurance that orders are conducted in a well-calculated way accounting for risk. Laying out clear parameters will allow token holders to know precisely what they are voting for.
Since this proposal cannot account for market volatility, the exchange rate of ROOK might fluctuate during the execution window. For this reason, it is more important to establish a maximum rate than a minimum. The treasury can acquire ROOK at any price below the maximum exchange rate at its discretion. Order amounts account for the edgecase where maximum exchange rate is met but a limit order can still be placed on the maximum. It also reduces price volatility during this acquisition.
Order parameters include:
-Any price =< 0.0190 ROOK/WETH
-A maximum order amount of 15 WETH (about $25k)
-Any number of orders
-Onchain purchases are only limited to Uniswap V2 ROOK/WETH, Sushiswap ROOK/WETH, and Bancor V2 ROOK/BNT asset pools
-Best executable price per order
The treasury should conduct purchases any time they decide while fulfilling the parameters but must find the best executable price accounting for slippage, fees, and MEV. (I’d recommend rook.fi for this process) Acquisitions must be completed onchain.
Any events not laid out by these parameters are up to treasury discretion.
Expected benefits for Rook DAO
Acquiring ROOK aligns with the core values of the DAO. It protects against future instability for DAO funding while clarifying the importance of ROOK for long term success. The clearly laid out parameters of execution prevent any foreseeable risk while empowering the treasury to use discretion in unforeseen circumstances. Using ETH as the purchasing asset maintains the DAO’s risk structure without jeopardizing contributors’ stability. Overall, everybody wins.
More benefits:
- ROOK intrinsic capital can be used for strategic capital raises in the future.
- Investment in a distressed asset at an undervalued price represents a high reward opportunity.
- More preparedness for liquidity provision proposals that could generate revenue.
- Better alignment for future revenue (WETH) with the native asset (ROOK).
- Increased capital for non-contributor funding such as grants and partnerships while aligning incentives.
Monitoring and Reporting
The treasury is required to report on the execution of this acquisition with a deadline of [June 30th] - 14 days allowing the DAO to evaluate performance and prepare follow up proposals.
This report must include a table with the amount of ROOK acquired and a detailed cost basis analysis (in WETH), for every order. After the June 30th deadline, any remaining budget will be returned to the treasury portfolio.
To Summarize
Target Acquisition: 154,265 ROOK
Budget: 2931 WETH
Maximum Exchange Rate: 0.0190 ROOK/WETH
Maximum Order Amount: 15 WETH
Order Domain: On-chain
Execution Window: April 1st 0:00:00 UTC - June 30th 23:59:59 UTC
Report Deadline: June 16th