Rook Q3 Preview: Strategy
Hazard discusses the past and looks toward the future as the revamped Rook protocol emerges from the shadows of stealth mode.
- A detailed Q2 Report is now available.
- The DAO and Rook Labs have overarching goals, and the team would like to lay out the roadmap so the community fully understands the vision.
- This period of reform marks a moment where the team will begin to more clearly express goals and progress to the community.
- Rook’s intention is not to extract profit for its own gain, but rather to create a vehicle for users to capture value from their own order flow and become "Citadel as a public good."
- Now that the updated protocol is out of R&D mode and unleashed into the wild we can see data flow, which will give the team important insights.
- Rook depends on volume, but needs to go out and find a source of that volume. This is where business development comes into play in order to increase protocol usage and mindshare.
- Easy scaling refers to the "build it and they will come" class of products – Uniswap and Curve, for example.
- Jungle scaling refers to the class of products that need to actively push for adoption. A very successful example of this would be Chainlink.
"You can't just make something. Your market is kind of a jungle. It's overgrown, and you have to go in there and hack and slash your way through it and tame it somehow before you can unlock that ability to really scale and start reaching people." – hazard (10:47)
- Application layer MEV doesn’t have a one-size-fits-all solution, so you have to properly identify the business scaling side of the problem by bringing in the various actors across the system.
- One way of expanding the reach of a MEV-aware layer is by product-izing the solution, making it simple to integrate, and demonstrating its benefits with data.
- Blockchain-layer MEV is easier to scale compared to application-layer MEV since the problem space is smaller, but the Rook team believes that MEV belongs to the application layer.
"The application layer is the high ground that nobody wants to figure out and capture. But that's why we're here. We were in a unique position at the end of 2021. We had the technology to do it, and we had the capital necessary to fund the kind of team... in terms of quality of expertise and in terms of just pure headcount, they could actually execute a strategy to go out and capture this opportunity.
So that's what we've been doing." – hazard (16:40)
- Rook has processed $300m in volume in the past two months, with no token incentives. This growth is 3x faster than that of the previous Rook protocol.
- Rook can capture roughly 0.1% of volume as MEV.
- Rook Labs has 5-10 years of runway to accomplish their goals with the current headcount of ~30 contributors. This assumes zero revenue and takes into account distressed asset prices.
- Rook can be considered to have reached "critical mass" when third parties reach out to us for integration, rather than our current "jungle scaling" scenario.
- Long term, we hope that other protocols can easily self-service their integration with the Rook protocol.
"We think it would [be best] if all of the order flow processed on a blockchain were processed through Rook and its protocol, because that would mean the maximum benefit for users and applications." – hazard (29:05)
- The team has identified that lack of transparency is a problem, and is working on improving this going into Q3 through better communication and more real-time reporting.
- The Rook Product strategy can be distilled into three key verticals:
1. Orders (ERC-721): Signed orders, intentions, commitments. Projects that want to execute trades through the Rook HidingBook or our updated trading protocol.
2. Transactions/RPC: Projects that want to extract MEV from generic transactions or interactions with a remote procedure call.
3. Smart contract: Projects that want to extract MEV from interactions with smart contracts, such as AMMs or other products.
"But ultimately, all of that order flow goes to the same place. It goes to the coordination protocol. It's coordinated. MEV is captured and redistributed. So in the end, it all looks like volume for the protocol. What we're focused on is building intake mechanisms to capture these three types of order flow at the application layer." – hazard (57:15)