Community Call Treasury Tuesday - November 1, 2022

The treasury team discussed in-progress KIPs, the Q3 Report, and the streamlined tokenomics proposal.

Treasury Tuesday - November 1, 2022
đź’ˇ
Treasury Tuesday calls are open-invite meetings to drive the strategy, risk management, and overall discussion for all aspects relating to the Rook DAO Treasury.

To participate in the calls and ask any questions you may have, join our Discord!

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]