KIP-Draft Using ROOK as pseudo-collateral

KIP-4: Using ROOK as pseudo-collateral

Proposal

The ability to use ROOK as pseudo-collateral in JITU. The objective is to increase ROOK utility as well as protecting users from getting liquidated.

Background

ROOK needs more utility. Currently, there is no incentive to hold ROOK so we need to rectify that by making ROOK a productive asset. Since we can’t farm with ROOK, I propose that we add value to a user by allowing ROOK to be used as pseudo-collateral when a position is placed in JITU.

This mechanic would not only bring utility to ROOK but also attract more users into the Hiding Vault.

Specification

These are some implementations ideas that I’ve had but not attached to any of them. I just want the implementation to maximize the utility of ROOK while also offering greater liquidation protection for the user.

Example 1.) The USD value of the ROOK staked at the moment in time the position was placed into JITU is added to the Supply. If the position passes the 1.0 health factor, then the Keeper can take the staked ROOK until the position health factor is below 1.0. If taking 100% of the staked ROOK isn’t enough to bring the position health factor under 1.0, then the Keeper can liquidate the position.

Example 2.) The staked ROOK can have a multiplier effect to protect the Supply assets. If your staked ROOK is 25% of your debt position then 33.3% of your Supply is protected. If your staked ROOK is 50% of your debt position then 66.6% of your Supply is protected. If your staked ROOK is 75% of your debt position then 100% of your Supply is protected.

Example 3.) Similar to 1inch’s gas refund staking mechanic. ROOK can have a tiered system in which 1000 ROOK gets you an extra 1% buffer above the health factor of 1.0, 10000 ROOK gets you an extra 10% buffer above the health factor of 1.0, and etc.

7 Likes

Interesting concept, I like it :slight_smile: Happy to see ideas of making ROOK useful.

2 Likes

This is a terrific idea, which I have been thinking about (in similar, although not exact form) for a while.

Enabling this would require a reliable ROOK price oracle, which is work that is underway and we hope will be finished very soon (waiting on external parties).

One thing I have considered is how this liquidity could also provide alternative liquidity sourcing instead of our current Liquidity Pools (consequently removing/lowering a need for LPs) or also support JITU (which currently requires a large amount of stables, accessed via our LPs).

This is a very important and interesting topic - thank you for starting the conversation here. Can’t wait to explore it more.

4 Likes

Good idea, we need a way to stake rook or put it to good use as some sort of collateral.

4 Likes

very good idea!

more usecase for the token is always good for price

3 Likes

I just wanted to give an update on this @kiettykat - the dev team is discussing these ideas (as well as the feasibility of development/tokenomics with each of the different examples). We’ll be communicative about ideas/plans related to this as quickly as we can be. That does mean this will take some time with some other things in the dev pipeline, but we’re aligned on the thesis of bringing utility for ROOK x HV along these lines. Excited for it to manifest.

A natural place to go from here would be identifying which HV ROOK utilities are most intriguing (since the examples are a little dissonant) and trying to narrow things into implementation details. Im happy to help with that - as I said, it’ll takes some time, but could be looking at some really sick features on the other end.

These are my thoughts that I mentioned on the cc

  1. Rook could be used as a reputation mechanism where the rook you stake onto KD can give you protocol benefits such as higher collateral ratios on your loans. These ratios could even exceed 100% based on the bonded amount and if a bad actor refuses to pay back his loan the bonded rook gets slashed and redistributed to other stakers. The would allow KD to achieve the holy grail of defi, undercollateralized loans through this reputation mechanism.

  2. This concept could also be applied to kassets staked in the LP, where users who LP on KD can opt to modify their collateral ratios based on the LP position and open themselves to slashing in the event of loan default. This would make all assets within the KD ecosystem productive in their own right.

  3. To go even further beyond, we could also allow staking of lp positions on DEXs composed of Rook to unlock these improved collaterals ratios, at the risk of slashing. This would allow for participants of the KD ecosystem to both govern and have protocol benefits increasing the utility of rook and kassets through all of DeFi

Something noteworthy about this is that keepers who also own rook will have a competitive advantage over keepers who don’t because of the ability to improve their collateral ratio, this essentially forces keepers to own a non-trivial % of Rook to remain competitive within the CG due to the keepers who bond rook to their bots have to ability to undertake larger loans concerning their principal asset.