KIP Draft: Strategic Ren Acquisition

Proposal

Buy 4 million REN using KeeperDAO Treasury funds and subsequently run 40 Dark Nodes with said REN. The yield earned at the end of each epoch will be used to buy more REN to create additional Dark Nodes.


Motivation

We propose this acquisition in the interest of building a revenue stream that will bolster our ability to continue funding development during MEV barren periods of the ETH network. Furthermore, for broader strategic implications discussed below, we seek to reinforce this revenue stream with a continual increase of Dark Node market share through yield reinvestment.

Background

Our current Keeper Bot uses funds locked in the LP to extract MEV. In the interest of maintaining its efficacy, we believe that it is best practice to use only the funds outside the LP for strategic acquisitions, barring any proposal whose specification may require otherwise.

Currently, we have ~33 million dollars of these assets in the KeeperDAO Treasury as follows:

Asset Quantity Value
ETH 3,825.96 ~$15,789,183
WETH 1313.86 ~$5,421,298
USDC 8,869,686.11 ~$8,869,686
DAI 3,285,917.69 ~$3,285,917
Total ~$33,366,085

Why Ren?

The Ren project is well-positioned as a “universal” liquidity source to provide wrap-less interaction between blockchains. Bridging crypto assets from one blockchain to another represents a tap into a large volume of ecosystem protocol usage and exposes KeeperDAO indirectly to a wide variety of decentralized exchanges. Here, interoperability represents stability and efficiency.

Looking to the near future, with the maturity of the RenVM the project will develop into an L1 where new applications can make use of programmable cryptography and live on multiple chains simultaneously, and have a compounding effect on dark node demand.

Specification

  1. The core team manually claims yield at the end of each epoch

  2. The choice of Dark Node VPS Provider is at the core team’s discretion

  3. Ren acquisition method is at the core team’s discretion

  4. If Dark Node APY is below 8% for a period longer than 3 months, a KIP will be drafted suggesting liquidating our REN position.

Limitations

The difference in market share for WBTC over renBTC could continue to expand, decreasing dark node yield. This is rectified by the existence of other ren-based assets to offset this difference in market share and offer attractive dark node yields. In the event of a crypto bear market, network activity of all blockchains has historically dropped significantly, this would make dark node yields negligible compared to this purchase. Standard smart contract risks

Authors: Curmudgeon, trepe, YungPeso, Barry

  • 1 million REN (10 DN)
  • 2 Million REN (20 DN)
  • 4 Million REN (40 DN)
  • 5 Million REN (50 DN)

0 voters

6 Likes

Personally, I would go with at least 3 or 4m$. Ren gonna be a core component of the next crypto era.
No matter on what amount we decide to go with, please lets make it happen fast. REN host 2 host bridge gonna be launched soon and I expect 1$ ren days to be gone.

2 Likes

I agree with flexibility on the amount purchased, the 2 million figure can be considered a placeholder

The thing is that, even if we buy a larger amount, I expect that with what REN has in roadmap by the end of year to make some money just by holding REN tokens so we could always sell back half on a 2x price if we want less exposure and secure some profits.

2 Likes

That can always be done, I think the current KIP is good on its own and a new KIP could be drafted if/when what you are proposing happens. This would allow us to be adaptable to what the community wants in the event of a REN 10x or 2x in price

Isnt the Dark Node APY already below 10%?
I get to roughly 8% (18.8 BTC per epoch (= roughly 1 month) / 1.820 nodes of 100.000 REN each at $1 per REN)

I’ve been a big supporter of REN for the last few years… have held several dark nodes, built their discord server, etc… but I’m not sure I see the value here.

In my opinion, dark node rewards currently do not offer enough APY that they alone are worth risking/locking up a significant portion of our liquid capital, especially after such a large amount was designated to the acquisition of CVX. The introduction of parking fees (IMO almost necessary for REN to decentralize) and other improvements could increase these APY’s down the road, but this timeline is unknown.

Therefore, this feels like we are essentially betting on the token price to go up, which may turn out to be a good bet! However, I don’t think we should be using the treasury to make these types of bets at this stage of the project. Instead, I believe we should be looking to strategically invest in projects that KeeperDAO could benefit from integrating with or provide an outside utility to ROOK.

3 Likes

Personally I would sell at least 50% of the ren we buy when the price double, get back the initial investment and from there anything else is profit. This is why I support buying at least 4m$ of ren so we can sell 2m.

2 Likes

Darknode deregistration takes 2 months, Shutdown a Darknode - Darknodes, so if we are running the darknodes and collecting fees, we are not able to quickly liquidate the REN in the case of price appreciation.

We would be better off forgoing fees and just holding the REN while looking for an exit, but at that point, we are just making token bets with the treasury.

2 Likes

I appreciate the thinking that went into this, but I would vote against it.

imho, we first need to secure funds for the team (including any significant team expansion) to a) survive a prolonged bear market (3-5 years), b) strategic acquisitions and c) for investments with a better r/r profile (e.g. seed investments in new protocols that want to do something MEV or execution related).

Until that’s been secured imho it’s premature to start talking about any more yield grabs, especially with (but not just limited to) the relative outperformance of Eth compared to DeFi coins.

I’d also question whether this’d be of strategic value either since we already have a very solid relationship with Ren, and running some Dark Nodes won’t change that.

We propose this acquisition in the interest of building a revenue stream that will bolster our ability to continue funding development during MEV barren periods of the ETH network.

a) I would say that investing in talent will have a much better ROI than relying on yield.
b) we have enough money right now to not worry about MEV barren periods for years, unless that all gets locked up into yield-bearing investments ; )

I’d personally encourage everybody to start thinking more about how to grow the protocol and the DAO into a top-10 project, and less like using our treasury as a hedge fund.

I know that we as a team haven’t been the best at communicating our plans for the future, so we haven’t been able to give you much in this regard, but we’re working hard on this internally and very soon we’ll be able to start having this discussion with the entire DAO. It’ll then also become a lot more clear for every DAO member how they can help contribute to execute these ambitious goals.

5 Likes

I think there are plenty of money in treasury for everything, also there was a kip already to fund hiring some talents. If you consider we need more funds allocated towards that please come up with a kip and I am gonna fully support it.

But I sill consider that buying ren even for a short term trade is a good idea.

1 Like

We shouldnt be short-term trading with our treasury using this current decision-making structure imho.

Also if we as a DAO decide that we want to more actively start managing our treasury, I dont think it should be done through KIPs, because we will always be front run. Setting up a DAO-governed but more independent and dedicated unit inside the DAO to more actively/passively manage (part of) the treasury is something that could be considered however?

Also, what if we flip it for a profit, and we sell the REN tokens? Can’t that be perceived by the Ren team as sort of being equal to a vote of distrust in the future of their project? Would they be happy with us dumping millions on the open market?

2 Likes

That sounds great Tommy. Am looking forward to that discussion!

2 Likes

Love this idea. Another great way to diversify the treasury into a yield generating asset.

Full disclosure: I am a long time REN community participant and darknode operator

1 Like

Strongly agree with you

I strongly support this proposal, REN should be on our balance sheet

1 Like