Community Call Treasury Tuesday - November 1, 2022

View the agenda for this event.

Governance Proposals [1:00]

• The Labs Budget Request has been ratified. This is a quarterly funds request that breaks out the allocation of funds per team.
• The Treasury Charter, which will act as a “North Star,” is working its way through the Sophon review process.
• New KIP: Replenish Discretionary Investment Limit Funds. This is a follow-up to KIP-23 that allows Labs to make discretionary moves of up to 5% of the treasury funds.
• The ALCX staking proposal is pending, and may be re-worked due to ongoing discussions with Alchemix on the necessity to maintain this position.
• An upcoming KIP will request to expand the treasury’s ETH deployment funding. The treasury has additional ETH that can be deployed into yield-bearing strategies such as Lido and RocketPool.
• Above Average Joe asked if the new staking system would require a migration or just be an immediate switch. Deetz explained that the assumption is that there would be a two-step process requiring deprecating the old system, launching the new system, and having users stake in the new contract.

Initiative Collaboration [7:00]

• The Rook Labs Q3 Report has been released!
• Financial Position
• Treasury Management Activities
• Liquid Staking Derivatives Performance
• Stablecoin Testing
• Comp. 3.1 Implementation and Vision
• Runway Impact
• The treasury holds around $50m in total assets. Due to the large quantity of stablecoin holdings, Rook is in a very fortunate position that is fairly unique within DeFi. [8:00]
• The treasury has been consolidated to reduce risk and primarily hold a core set of assets such as BTC, ETH, and stables.
• The treasury team is focused on 1) the core values of the investments, and 2) reducing the amount of counterparty and regulatory risk with the assets that are being held. [11:30]
• The risk-reward ratio between smart contract and regulatory risks compared to yield has become skewed, and this is being considered in the treasury’s allocation strategy.
• Volatile movements include liquidating the CVX position, and exiting Maple Finance and B.Protocol. [15:00]
• The Liquid Staking Derivatives positions have outperformed expectations due to favorable price divergences and positive slippage. [17:20]
• The stablecoin testing wallet has seen impressive results, with an effective APY of 2.44%. This strategy does not require custodying assets in third party contracts, making it a compelling yield strategy. [18:30]
• Rook has around a 4.2-year runway with current stablecoin holdings, extending to eight years of runway when factoring in ROOK. This estimate does not include revenue, raises, or other appreciation in holdings. [23:50]
• Rook is open to pursuing potential M&A (merger and acquisition) opportunities. [28:00]

Tokenomics Proposal Discussion [29:30]

• The Streamlined Tokenomics proposal is an effort to align Rook’s tokenomics with the preferences expressed by users and partners.
• While discussing integration efforts with partners, the Rook team discovered that there was an overwhelming preference for bids and rebates to be denominated in wETH rather than ROOK.
• In many cases this was a hard requirement, due to the partners’ need to remain neutral by eliminating a third-party token and inventory risk.
• Changing the reward to ETH makes the protocol more sustainable. It’s trivial for any project to offer native token incentives, but offering ETH increases credibility and highlights long term viability. [34:40]
• This change also allows the protocol to improve the execution of ROOK buys based on market conditions rather than blind purchases.

Questions Summary

• Potential acquisitions aren’t necessarily restricted to other MEV protocols. There are opportunities with protocols such as Index that need to regularly rebalance a basket of assets. This class of protocols experience a significant loss due to slippage and MEV. Rook could reduce this and transform a cost center into a revenue stream, with 100% of the reward being returned to Rook. This could  be a win-win for the protocols and users, and could create a defensible moat. [40:30]

Introductions

• HiroKennelly may be helping the treasury team produce written content for marketing and education to help spread the word about Rook. [45:20]