Since the start of November, we have been constantly reminded of two things as we speak with our peers. This first is that the problems we are addressing are extremely widespread, with implications that reach nearly every DeFi user and protocol. The second is that when we speak with other protocols about the inefficiencies and MEV issues they face, the value of partnering with us is instantly realized. We are able to find customized solutions that excite their developers that no other protocol is capable of delivering.
As we continue our mission of turning MEV into a public good, the last 12+ weeks have been filled with focused development, organizational restructuring and expansion, collaboration with protocols, and changes to and experimentation with our revenue streams. We have seen a number of KIPs pass (and our first that did not), hosted several community events, and listened to your feedback on how we can continue to work to improve all aspects of KeeperDAO.
Our main focus for this Act has been completing development of and testing the Coordination Protocol, which has been an “all hands on deck” approach.
The Coordination Game has many moving parts, some of which exist on-chain and others off, but combine to form a complex, living system that can be layered into any web3 transaction-based protocol.
To track each individual part, we created a living Status Hub that provides a live look at Coordination Game development. In it, you can find much of the development progress made, including the building of the ROOK auction and green-light algorithm system, payment channels, the reputation system, xROOK and Keeper staking contracts, the Coordinator Keeper API, and integrating Ninja into 10+ liquidity sources through the Coordination Game. This has all been deployed to mainnet where it is undergoing rigorous testing.
The other side of Coordination Game is getting our initial group of participating Keepers and Market Makers integrated, tested, and ready to go live. This has been going very well, as we have three Keepers, along with Ninja, already integrated and testing their operations as we speak. Due to the nature of on-chain testing, we made the decision to turn off Hiding Game emissions so Keepers could begin filling trades and testing their infrastructure. We also have a number of Market Makers at various stages of integration, with some already submitting transactions.
The product team has been focused on preparing our products for scale in every way. We have rebuilt our whole product stack from the ground up to accommodate a sharp increase in users, orders, and engineers on the team. The result of this work is a brand new and much-improved web app, an expanded team of FTCs and contractors, and a unified data API and database. This infrastructure will vastly reduce friction in building new integrations with our partners and adding features to our own products. One such integration is with Tally, an up-and-coming, open-source, “Metamask killer” wallet browser extension, in which we are providing in-app limit order functionality.
These past few months have seen significant changes to the structure of the DAO, starting with KIP-12 (more on that below) and the creation of the offices of CEO (Hazard) and CTO (JZ). We have also continued to onboard new full-time and part-time contributors, Keepers, and Research Partners. We also initiated the transition from our old tokenomics to the new Coordinomics.
Our contributorship added our first new FTCs since the formation of the Labs team back in August when Avin was hired to the engineering team. Our new Lead Product Engineer, Pangolin, started on a grant contributing on a part-time basis, but it was clear that his ability, leadership, and vision were a great fit for our team. DaddyMatty, our new Treasury Specialist, impressed the community with detailed financial reporting that led to him spearheading a treasury working group. Before long, Matt was providing valuable insight and connections to the financial world and while using his experience in M&A to identify and forge new strategic partnerships for the DAO.
As we look ahead, the DAO will be asked to consider more changes to our operations and products. The future of our Liquidity Pool and Hiding Vaults will need to be determined as we consider our tokenomics, engineering lift, Treasury, and product market fit. The DAO will also be asked to fund new teams and approve new partnerships and implementations of our technology.
Act V saw five proposals move on to the Tokenholder Vote stage, with four KIPs becoming official and our first KIP being declined:
- KIP-10: Provide ROOK-ETH Uniswap v3 Liquidity with Visor Finance: KIP- 10 was our first rejected KIP. This proposal had Visor managing Treasury funds in a ROOK-ETH Uniswap v3 Liquidity position. Unfortunately, Visor suffered a hack and even though the Hypervisor wasn’t affected, the community decided that it should no longer be pursued.
- KIP-11: Co-invest ROOK in Bancor ROOK-BNT Pool: Through discussions with Bancor about our limit order integration, our teams were interested in increasing the size of the ROOK-BNT pool. After offering to match a Strategic Reserves investment of ROOK with BNT, we agreed on investing 6400 ROOK.
- KIP-12: Empower key contributors to expand and organize KeeperDAO: This proposal created the office of CEO and CTO and appointed Hazard and JZ respectively. These roles were granted operational authority to fund and hire contributors and seek and enter into strategic partnerships with other protocols. With oversight from the Sophons, Hazard and JZ will work with stakeholders to develop a unified organizational framework that will allow KeeperDAO to scale while maintaining community governance, participation, and ownership.
- KIP-13: Empower multisig to buy back up to $4M in ROOK: Prior to the launch of the CG, a maximum of $4,000,000 of DAO Treasury ETH and/or BTC may be used to acquire ROOK from the open market at the discretion of the treasury multisig signers, with the ability to delegate all or part of the execution to an individual from among the signers. Upon completion, the acquired ROOK will be deposited in the DAO Treasury and an update will be announced on Discord and Twitter with the full transaction details.
- KIP-14: Allocate $5,000,000 in stablecoins to act as a traveling liquidation backstop for B.Protocol B.AMMs: $5,000,000 of stablecoins from the KeeperDAO Treasury were earmarked for use as seed liquidity for new B.AMM deployments that support the Hiding Game. These funds stand ready to be deposited in successive target B.AMM contracts after a security review, audit, and deployment is complete, as long as other capital requirements have been met. Upon completion of the program, these funds, along with any yields accrued during its use, will be returned to the KeeperDAO Treasury.
There are many moving parts to our finances, and we must consider the individual strategies and investments that impact our Treasury and Strategic Reserves, as well as our runway for full-time and part-time contributor contributions.
The Act V emissions schedule passed in KIP-9 called for a total of 38,808 ROOK to be minted as emissions for the Hiding Game, Hiding Vaults, and Liquidity Pools. As referenced above, Hiding Game emissions were turned off before the end of the Act, and a total of ROOK 34,280.40 was emitted during the act.
- Total Hiding Game Emissions: 22,638 ROOK
- Total Hiding Vault Emissions: 3,880.8 ROOK
- Total LP Emissions: 7,761.6 ROOK
We are tracking each transaction and have provided a breakdown of what's been spent below:
The Labs grants program has been successful in crowd-sourcing meaningful contributions, including work on the integration with the open-source wallet Tally, our trade application, translations, graphic design, and financial reporting. We currently have five part-time contributors receiving weekly grants and plan to increase that number with the next Labs budget.
KIP-4's buyback and burn initiative kicked off with the start of Act V and ran throughout the entirety of the act. Each burn was conducted after using the Hiding Game to acquire the ROOK. In total, 13,321.1488 ROOK was bought back and burned.
KIP-5 started the acquisition of CVX from the passing of the vote through the end of the year. The Treasury spent a total of 2368.02 wETH to receive 366,116.71 CVX for an average cost of 0.006467948119 wETH.
The Treasury locked all 366k CVX, and participated in 5 voting rounds throughout Act V. The first lock of 271k CVX was on December 8th, and the second lock of 94k CVX was on December 22nd. These CVX tranches will unlock on March 30th and April 13th, respectively. The bribe voting revenue has been used to buy ROOK with the individual tokens acquired every two weeks. In total, CVX bribes have enabled us to buy a total of 7500.94 ROOK, as well as acquire 1208.25 CVX and 12040.73783 CRV. The locked CVX has also accrued 22,863.67 cvxCRV.
You can view the CVX position value by clicking here.
You can find the transactions and calculations for the CVX acquisitions by clicking here
You can find the CVX Bribe Revenue tracking document by clicking here.
KIP-6 enabled the Treasury to deposit 3,500,000 USDC in Maple Finance on 11/19/2021. Since depositing, the treasury has earned 5351.53955 MPL tokens worth $110,883.89 in rewards and continues to earn USDC at an average of 7.3% interest.
You can view the Maple Finance position by clicking here.
KIP-7 adopted the proposal to partner with Olympus Pro and participate in their Bond trial program. It was believed that implementing ROOK bonds would provide a sustained source of protocol-owned liquidity for the treasury ( via ROOK:wETH Uniswap v2 tokens). Per the KIP, we started the bond program with 5000 ROOK to be dispensed over 15 weeks.
As of 2/28, there is 988.57 ROOK left in the contract. In exchange for the 3710.67 ROOK we have given out via bonds, we have earned 160.485258639679509484 UNI-V2 wETH/ROOK tokens.
At todays price of $88, the original rook was worth $440,000. The current assets are worth $86,994.16 (ROOK value) + $341,412 (LP token value + fees), for a total value of $428406.16.
This makes the net on this KIP, as of writing this recap, negative $11,593.84.
Back in November of 2020, Strategic Reserves deposited 334.91 ETH and 4,728.24 ROOK to create the original UniV2 LP. Our original investment totaled $435,631 on the day of the transaction.
The current value of of the 1,186.94 UniV2 LP tokens is $2,189,744, including $937,102 in fees earned.
Despite poor macro conditions and increased volatility in all capital markets, the financial position at the end of Act V remains robust. With close to $30M (38%) of the treasury in stablecoins, KD has a sufficient amount of liquid, non-directional assets to sustain a prolonged bear market and take advantage of strategic opportunities that may come up. The fair market value for all assets is presented below.
Furthermore, KeeperDAO is well diversified as illustrated below.
While the past few months have been busy with development, our team has held many conversations with other protocols as we look to coordinate all of DeFi. What has been most exciting is seeing our team create custom solutions to help protocols overcome inefficiencies and MEV slippage.
We announced a joint partnership with B.Protocol a Backstop DeFi primitive, that will see KeeperDAO’s Treasury dedicate $5,000,000 to the seeding of new B.AMMs with native support for the KeeperDAO Coordination Game, and an engineering collaboration to bring the Coordination Game to current and future B.AMMs, starting with Liquity’s LUSD.
By pairing the B.AMM, B.Protocol’s leading liquidity backstop technology, with the Coordination Game’s ability to harness the best automation on the blockchain, every lending protocol will be able to have a dedicated backstop to remove risk and rapidly rebalance small, medium, and large liquidations efficiently, in a wide variety of market conditions.
We also announced a coordination partnership with GMX, a leading decentralized spot and perpetual futures exchange on Arbitrum and Avalanche.
On GMX, dynamic pricing happens via Chainlink Oracles and TWAP pricing from DEXs with high asset volume. Because prices on GMX update per block, large changes in asset prices between blocks can create opportunities for arbitrage, a form of Oracle Extractable Value (OEV).
Currently, the GMX protocol does not benefit from the OEV created by its price updates. With KeeperDAO Coordination, it can. By relaying oracle updates through our network of keepers, GMX gains a new source of protocol revenue and eliminates negative externalities from the OEV.
The unique design of the Coordination protocol allows GMX (or anyone else) to verify at all times that the OEV is being discovered fairly and allocated correctly, with the vast, vast majority going to GMX and its LPs. This integration will be the first application of the KeeperDAO Coordination protocol on both an Ethereum L2 and a non-Ethereum blockchain.
We announced a collaboration between mStable and KeeperDAO to explore a direct integration of KeeperDAO’s Coordination protocol with a mStable AMM. The integration would create a way for arbitrage transactions to be relayed through the KeeperDAO Coordination protocol, with the vast majority (approximately 80%) of the profit generated from this arbitrage being distributed to the mStable protocol and its users or LPs.
Through the addition of a reduced or dynamic fee swap function only accessible to KeeperDAO Keepers, Keepers who wish to use mStable’s AMM for rebalancing and arbitrage of mAsset baskets could do so without competition from Keepers operating in the wild, who will reach arbitrage price later due to the need to pay the flat fee of the public swap function.
This small priority from the reduced fee can allow KeeperDAO Keepers to execute swaps through the far more efficient Coordination protocol, with greatly reduced settlement overhead versus the public mempool where profit is bid away to the benefit of miners.
In practice this would mean that pools with this special fee lane could be more balanced than they are today, because the more efficient rebalancing arbitrage can happen more frequently and for smaller imbalances than at present. This could make the pools more capital efficient overall.
We look forward to exploring other integration opportunities with mStable as well as ways we can aid the growth of their deposit base.
Lastly, we announced a coordination partnership with Gamma Strategies, a leading provider of active liquidity management and discretionary liquidity strategies, to build an advanced set of products powered by the KeeperDAO Coordination protocol.
Gamma's Hypervisor smart contracts allow LPs to maximize returns on concentrated liquidity AMMs, like Uniswap v3 and the upcoming Sushi Trident and CrocSwap, without the need to manage the position themselves.
By integrating KeeperDAO's Coordination protocol, Gamma’s Hypervisors will more fully capture the value created by their own rebalances and its LPs will share in the most advanced JIT liquidity strategies, powered by the liquidity already within the Hypervisors, and the very keepers who had been competing against them.
We are very excited to see the early returns on these partnerships when the Coordination Game goes live, as we know that the data gathered will only make our upcoming conversations about coordinating with new prospective partners more powerful.
We wouldn't be here today without our community and our supporters. Their feedback, suggestions and contributions are significant for KeeperDAO's future, and we want to continue to encourage all forms of participation in our DAO. Below is a link to each of the Community Calls from Act V:
KDCC Coordination Game with JZ
Mark Richardson- Bancor
Act V will be the last Act in KeeperDAO's brief history. We are deprecating Acts in favor of turning to standard quarters. This will help with forecasting as well as standardizing the recapping of all DAO activities.
As the Coordination Game finishes audits and is fully activated, we will be able to reprioritize new products and upgrades. Our business development activities will ramp up, coupled with engineering hires, enabling us to increase our ability to integrate with other protocols.
We will also deploy new Treasury and Budget strategies, project the runway needed for us to scale up our team, create regenerative revenue streams and build up our grants program.
With each day, our team grows more excited as new contributors get onboarded, PRs get merged, tests run successfully and partnerships are formed.
Coordination has started, how far can we take it?