KIP Draft: Rook DAO Acquisition of ROOK


Acquire ROOK with WETH as a strategic investment.


[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


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,,

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.

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).


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 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

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This could make sense if some of the WETH revenue is used regularly for ROOK buyback without stating a budget or order parameters.

I think regularly using revenue for buybacks is a tokenomics issue that has a lot of regulatory uncertainty. As a community, we can present a buyback plan every quarter that could be changed to adjust for revenue.

this proposal accounts for this but there can be new ones

Shouldn’t we first see how much WETH does the protocol generate? I really don’t think it’s a good idea to swap 2931 WETH to rook without having a clear idea how long it would take for the protocol to earn this much WETH.

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ROOK is undervalued in the market. This proposal is a strategic investment from the DAO. We can account for revenue later but the opportunity is present now.

See the evaluation of some competitors and compare it to ROOK.

Yeah, I guess I’ll be the bad guy here. I would consider supporting a buyback if it was tied to the protocol revenue. Even then I’m not too enthusiastic about it. Other sophons might disagree with me though.

You say it is good if a DAO owns a large fraction of their native tokens. I am not so certain. DAOs that will survive the next couple of years have BTC, ETH, and stables in their treasuries, not native tokens.

You say regularly using revenue for buybacks is an issue but then you propose in the next sentence to do it every quarter. So is it an issue or not?

The phrase “strategic investment” is a pet peeve of mine. lol

First off, thank you for engaging with this post I really appreciate it!

An agreement to recurring buybacks is a Tokenomics change that might be misinterpreted by some regulatory agencies. This upset many members in the community, but is understandable. Positioning as a token acquisition is important and in better alignment with the long-term goals of the DAO. This proposal was constructed in a way that could be repeated if the community showed strong interest.

The 2931 WETH budget will likely not be spent due to liquidity conditions and the maximum exchange rate threshold. I’m also open to reducing the target acquisition to something like 20% of supply.

“Strategic investment” was the phrasing used in KIP-28 so I tried to align that but its probably not the best.

This is a risk but that’s the point. The reward/risk ratio is promising here and there are no budget liabilities to contributors in ETH. For just 1/4 of the Ether reserves (6.3% of the total non ROOK treasury) the DAO can acquire a sizable ROOK position. Which I argue is fundamentally undervalued. This is a small and controlled risk.

I do understand your points clearly and would love to chat at a governance workshop or DAO town hall!

What is the reward/risk ratio? Can you quantify it?

I agree with this, it makes sense that we need a higher percentage of more stable assets like BTC/ETH to be the backbone of the treasury especially until revenue is secured and we see how much reliable income can be generated. Buybacks at like 3 month intervals or another time interval as a percentage of protocol revenue could make sense eventually, but just using treasury to buy back tokens I just don’t think makes any sense for the long term future, especially at a more fragile stage where treasury may not be replenished quickly and price of those newly acquired tokens could drop quickly. If we, as a community give it time, I think we’ll all be rewarded much more in the future than doing something that feels more like a short term bandaid with much higher risk to the future of an extremely promising project. Just my opinion though.

Our ultimate goal is to restore the token to a central position within the protocol and therefore restructure the token model. That being said, given the lack of prioritization of this task by management, this proposal could be a good starting point to partially realign the interests of the DAO with those of management and also send a strong message to the market and token holders.

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