Because the number of contributors to KeeperDAO has been growing rapidly, and with the introduction of decentralised governance, it's become increasingly important to codify the DAO's mission, vision, and the core principles that will drive its collective decision-making going forward.
By outlining the 'why' behind KeeperDAO, we also hope to provide our community and the wider blockchain industry with a clear sense of its long-term goals, why we believe they're important, and how we view its role as the steward of the Keeper economy in an exponentially growing multi-blockchain DeFi universe.
Keepers are bots that work on blockchain networks like Ethereum. They are an emergent and increasingly important network participant. They respond when there is a need to buy and sell a sequence of assets, or execute particular smart contracts in a timely manner.
DeFi relies on Keepers to function. Their constant arbitrage keeps prices in sync across decentralised exchanges like Uniswap and Sushiswap; their readiness to re-pay unhealthy loans keeps lending protocols like Compound and Aave solvent; their ability to do both at once keeps algorithmic stablecoins like DAI soft-pegged to the dollar.
From the Keeper's perspective, a blockchain is a giant chessboard. Some moves are profitable, and others are not. Like a Grandmaster, they look for sequences of moves with high "maximal extractable value", or MEV, and then try to be the first to execute them. To be the first, they must pay block producers (miners and validators) above and beyond the normal fee in order to ensure their transaction is "first in line". This is where the problems start.
Unlike block producers, Keepers were not accounted for in Ethereum's protocol design. They haven't been given a game to play, and instead are forced to play the "Competition Game," engaging in bidding wars for transaction priority in which up to 100% of the MEV that the Keeper discovers, ends up getting paid instead to the block producer, as fees.
This useless and wasteful "Competition Game" has been lucrative for block producers, but a disaster for everyone else. It robs Keepers, scrambles the incentives that secure the network, and has increased congestion, fees, slippage, and failed transactions for users. It has turned Ethereum's public mempool (the database where all unprocessed transactions are stored) into a Dark Forest.
KeeperDAO attempts to solve this problem by giving Keepers a new game to play: The Coordination Game.
A Vision of Coordination
The Coordination Game is a game-theory optimised Keeper protocol that provides a solution to the MEV incentive structure problem on Ethereum. By aligning Keeper's incentives with those of the other network participants, it gives them a new game to play, in which they can fully fulfill their potential as beneficial actors inside the Ethereum ecosystem.
And for them to fulfill their roles more effectively - without the aforementioned negative externalities - there needs to be a transparent, efficient and decentralised market for their services. That doesn't exist right now. It's not clear how many Keepers there are, how much liquidity they command, how protocols should optimally price risk, or how users and protocols should bid for Keeper attention when they require services.
Our protocol will fill this void by formalizing the work Keepers do in a way that benefits the network, ensuring more determinism and avoiding harmful side-effects like the exploitation of users and protocols through predatory MEV attacks.
Instead of playing a zero-sum MEV game, independent Keepers can now coordinate — free from Grim Triggers, Priority Gas Auctions, and other profit-destroying activities — so they can prosper to the benefit of themselves, the users, and the DeFi protocols they service.
KeeperDAO is a DAO dedicated to Keepers and the work they do. We are united around a shared mission: to bring about a decentralised economy in which Keepers create more efficient, secure, and egalitarian blockchain networks.
We research and build unique technology to coordinate access to certain shared resources - namely order and transaction pools bound for blockchain networks such as Ethereum - allowing Keepers to more efficiently capture on-chain profit - for example by executing an arbitrage or liquidation - and more fairly redistribute that profit to those that add value to the network - the users, protocols and Keepers - without it being destroyed through contention or the extraction of MEV.
In addition to this, KeeperDAO creates new primitives that users and protocols can use to protect themselves from predatory MEV, routed through our community of Keepers for handling and execution.
We call these two strategies the Coordination Game, and the Hiding Game, respectively. The first increases Keepers' expected profitability by eliminating costly competition, and the second gives participating Keepers more opportunities to profit, while protecting and even adding value to the originating users and protocols. Combined together, this creates the infrastructure for a more secure, fair and profitable financial ecosystem for both DeFi users and protocols.
These are the principles that started KeeperDAO. As we evolve, they may evolve with us, because the entire community shares in defining what they are. But as a starting point, these can help guide decisions and the project's direction, and help us represent the ideals we would like to strive for.
Reward those that add value
Without users, applications, and protocols, there is no network. Profit shouldn't come at their expense, and they should be entitled to a share of any surplus profit gained from their activity.
MEV doesn't belong to block producers
Keepers discover MEV and provide liquidity to capture it; protocols and users create MEV with their markets, products, and transactions. Block producers are incidental to the MEV economy and have no claim to the value within the blocks they validate or mine.
Search for "win-win" scenarios
Coordination and cooperation can be more competitive than going at it alone, especially in the open world of DeFi. We want to embody coordination not only in our protocol design, but in business practices and funding, to create a DAO that looks to work with others, shares its profits to gain even more, and welcomes any partnership or contribution where both parties stand to gain.
Solve hard problems
As co-founder Joey Zacherl said, "we're a home run first, singles and doubles later type of ball club." We want to be a DAO focused on providing lasting solutions to the complex problems of MEV and the Keeper economy. Solutions that generalise and can flourish in many directions.
We believe in the power of decentralisation to create stronger communities and modes of production. We are committed to creating and experimenting with all approaches that can allow us to become a stronger DAO.