[DRAFT] [GF: Phase 1] Rook Protocol

Project Name: Rook Protocol

Author Name: @DaddyMatty

Number of OP tokens requested: 500,000 $OP

L2 Recipient Address: TBD Multi-sig

Relevant Usage Metrics:

The best place to view the full Rook analytics is on our Dune dashboard, but some highlights can be found below:

30 day volume: $38,002,972

Total volume: $291,249,673 (2 months)

Optimism alignment (up to 200 word explanation):

At least $1.3 billion in MEV has been extracted from users and applications as a result of misaligned incentives that have turned blockchains, the “ultimate coordination technology,” into hostile “dark forests”.

Intervention from groups such as Flashbots have prevented this massive outflow of MEV from destabilizing blockchain security. But there has been no equivalent effort to give users, builders, and applications the ability to harness or retain the MEV they create, the value that is rightfully theirs.

At Rook, we believe that for blockchains to thrive, this must change. Everyone – not just the most sophisticated actors – should have access to this capability. Blockchains let us own our assets, own our data. Why shouldn’t they let us own our order flow?

So we created the world’s first decentralized payment for order flow protocol.

It lets users, builders, and applications unlock, for the first time, the MEV that belongs to them. It’s a quantum leap for DeFi and for traditional PFOF as well.

It’s free to use, accessible to anyone, trustless and decentralized, and maximizes the value returned to users and clients. This is PFOF as a public good, and we want to share it with users and builders on Optimism.

Proposal for token distribution (under 1000 words):

How will the OP tokens be distributed?

  • 425,000 $OP for Optimism integrations via Rook’s Coordination Layer. Rook will coordinate with integration partners and use the OP tokens to incentivize the usage of the products and protocols integrated with the Coordination Layer…

  • 75,000 $OP in reserves for future Optimism integration of Rook’s retail trading app and earmarked for opportunities that contribute to the growth of the Optimism ecosystem.

How will this distribution incentivize usage and liquidity on Optimism?

The unique capability of Rook to capture and redistribute MEV allows builders to solve challenging engineering problems and offer unique products and features to users. Examples may include decreased slippage on trades, reduction or elimination of fees, enhanced returns for liquidity providers in AMM pools, the general prevention of MEV exploitation such as frontrunning, and many others.

By integrating Rook with more Optimism protocols, institutions, market makers, and “whales” who regularly look to execute large volume trades will be able to transact more frequently and bring their liquidity to the ecosystem.

Why will the incentivized users and liquidity remain after incentives dry up?

Incentivizing integration simply removes the technical barriers to entry from the need to dedicate engineering/dev resources. The real returns from revenue start once the integration is complete. Above and beyond protection from predatory MEV exploitation, Rook-enabled protocols on Optimism will be able to offer users the unique incentive of the MEV generated from their own orders! Transacting outside of Rooks’ Coordination Layer exposes users to MEV searchers that will extract capital at the user’s expense. Optimism users interacting with protocols integrated with Rook will have their transactions privately broadcasted to our allowlisted keepers. These keepers will search for the MEV of your transaction and rebate 80% of the extractable value back to users. This returned MEV can be used in many ways and we expect protocols to get inventive Users will be incentivized to remain on Optimism because:

  1. The features, functionality and revenue earned cannot be found elsewhere outside of Rook integration with Optimism

  2. Rook returns capital to protocols, applications and users that would otherwise be siphoned away, creating new revenue streams at no added cost or risk to users. Owning your order flow (and being paid for it) from non-inflationary token rebates is unheard of today - and once users get paid for transacting - it becomes the “new-normal”; as evidenced by our high user retention rate.

Empirical evidence from transaction data shows large volume traders (whales and institutions) who transact smaller (a few million) sample trades to test Rook’s execution against competing protocols quickly realize Rook’s competitive advantage and start transacting exclusively on Rook. Demonstrated in this example of a $110M trade.

Over what period of time will the tokens be distributed?

Integration times will vary given each integration is unique to the application. While we would prefer to under-promise and over-deliver, we feel it’s prudent to avoid setting a hard deadline for the claim period of Optimism tokens to ensure the highest priority remains steadfast on the quality of integration over the speed of integration.

That said, we will assess the distribution of funds and integration progress after the first 90 days.

How much will your project match in co-incentives?

Rook believes in coordination, and we always look for ways to incentivize strategic partnerships - and not just partnerships for profit - but projects and partners aligned to improving the public goods of the Ethereum blockchain. We are unable to commit to a uniform co-investment schedule,but we will routinely evaluate partnerships and assess the viability of co-investment of our treasury funds.

For guidance: historic co-incentives have been 100% funded by Rook, equal funding (50%), and partial funding.

The most recent example of a co-investment strategy passed through Rook DAO governance is through our mStable proposal. Rook is always looking for places to deploy treasury funds for mutually beneficial partnerships, and encourage projects to reach out.

5 Likes

I’ve been getting to know the Rook team for the last several weeks and have been really impressed by their strategic thinking and general protocol operations. I support this proposal!

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