KIP Draft: Strategic YFI Aquisition

Proposal

Buy 1% of the YFI supply at a price of ~$35k but not exceeding $40K. (~13 million at the time of writing)

Motivation

The yEarn ecosystem has built a robust channel in the DeFi space and it is in the best interest of KeeperDAO to gain exposure to and influence over it through the native YFI governance token.

  • Bring utility and visibility to the ROOK token.

    • The addition of a ROOK yearn vault
    • Onsen rewards for Sushi LP’s
    • Addition of ROOK as collateral on CREAM
    • Addition of a ROOK Jar on Pickle Finance
  • Whitelisting of flash loans on Iron Bank for keepers

    • Makes our current LP model redundant allowing for the liberation of all of our treasury assets currently locked there to be used by the community.
  • Increase our control of CRV votes.

    • YFI is the second-highest controller of CRV votes and acquiring a substantial stake in their ecosystem will further enable us to influence CRV yield.
  • Earn/claim yEarn pool rewards.

    • yearn.finance interest
    • COMP
    • CRV
    • curve.fi/y trading fees
    • ytrade.finance leverage fees and liquidation bonuses
    • yswap.exchange system fees
    • iliquidate.finance liquidation bonuses
    • system dust (unassigned interest or fees)

Background

The current use of our Liquidity pool is to cover loan positions in the HV in the event of a liquidation using JITU and to be used for flash loans to extract MEV on Ethereum. The latter locks up a significant amount of capital in our LP preventing it from being used in more novel ways by the DAO. If this acquisition enables the whitelisting of KeeperDAO keepers to take out collateral-free loans from Iron Bank and also leads to non-native staking for the rook token then the utility gained through this YFI buy is outweighed in my opinion compared to the financial cost of it.

Specification

  1. The YFI acquisition is at the discretion of the core team
  2. The acquisition is contingent on KeeperDAO whitelisting for flash loans on Iron Bank
  3. The acquisition is contingent on KeeperDAO the creation of a Rook yVault

Limitations

The limitation for this KIP is very simple if the yearn devs are not ok with granting conditions 2 and 3 from the specifications then the majority of the value from this KIP is lost and the pursuit of YFI would be fruitless for KeeperDAO.

Authors: Curmudgeon, Trepe, YungPeso, Barry

I’d vote against this for the same reasons as I outlined here: KIP Draft: Strategic Ren Acquisition - #10 by tommy

I really do like the thinking that went into this. It is a very interesting idea but tbh in chasing these yield grabs we’ll end up being at a much higher risk of running out of money during any potential prolonged bear market and/or being unable to scale and acquire the way we want to because we’ll have spent too much of our treasury on higher risk assets (defi tokens). All these tokens can go down 90% in price, as unbelievable as that might seem to all of us in the peak of the bull market. Not saying it’s going to happen - and I’m generally in the ‘choose wealth’ camp of Su Zhu - but the potential to cripple the project if it happens is definitely there.

If shit ever hits the fan (like back in 2018) we need cash (and btc, eth), and lots of it. That’s what our treasury is for: to ensure our survival and to enable us (the DAO) to scale and invest continuously. We shouldn’t treat our treasury as a hedge fund would treat its capital.

I am fairly confident in saying that a vast majority of the team, if not everybody, shares has a similar standpoint. I reckon some of them haven’t been engaging in the discussions a much as we could because we’re just busy working on the project.

As a side note, I also think we should stay away from CREAM, as it has a bad history of being involved in hacks.

6 Likes

From my perspective, this proposal isn’t centered around yield at all but instead based on liberating a large % of funds locked in the LP being used for flash loans and then allowing us to do novel and interesting things with those funds as well. Also, this was not mentioned by the whitelisting into Iron Bank, I don’t see how we would not be able to take out flash loans to cover HV positions with JITU as well. this, in turn, would make the LP completely redundant.

The second leg this proposal stands on, in my opinion, is in taking steps to build out a “moat” for went the CG comes out. One of the preventative measures that prevents someone from forking our code and launching a token would be this newfound composability for the Rook token that forks could not replicate. The more utility the Rook token has thought-out DeFi the harder it is to catch up to our network effect.

Let me know if this clarifies anything or changes your opinion

I personally agree with tommy here. Unless the APY and returns are super super good to worth the risk of getting into a coin, I would avoid buying assets when the bullmarket is in its final 100m in my opinion.

CVX was a great buy because of 2 reasons: It was super cheap back then while being super hyped (it was a no brainer even as a flip) and the returns are incredible high and worth the risk.

Probably such acquisitions would make a bit more sense if we would have a full time professional trading/management team that can handle the treasury funds much faster than us trough a DAO proposal.

Having Rook as collateral on Cream for example right now is super risky. We lack liquidity big time, in case of a market crash if some big rook positions get liquidated we can have rook to 0$ in a moment. If we still want to have the option to borrow against our rook I would highly prefer to have this option on our platform and not somewhere else (cream was hacked many times already).