RFC: Implement RPL Buyback Using DAO-owned Enzyme Vault

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Hi all, this is Moss writing from Enzyme.

We invite the Rocket Pool community to provide feedback on this initial proposal. Your insights and suggestions are valuable to ensure that this initial idea meets your collective goals and expectations. Please share your thoughts and comments to help refine and improve this proposal.

Context
Here are the governance proposals on the RP forum by @Valdorff that inspired the creation of this RFC.

RPIP-45: RPIP-45: RPL Burn
RPIP-50: RPIP-50: RPL Buy & LP

TL;DR

  1. Non-custodial Trustless Execution: Ensures that buyback and liquidity/burn operations are executed without manual intervention or trust/custodial requirements.

  2. Automation: Reduces the operational burden on Rocket Pool’s development team by leveraging Enzyme’s automation capabilities.

  3. Regulatory Compliance: Minimises regulatory risks through systematic, automated processes.

  4. Decentralisation: Aligns with Rocket Pool’s ethos by utilising a decentralised, transparent approach to managing protocol revenues.

  5. Security: Built on a secure, time-tested protocol, minimising risk and ensuring robustness.

  6. Community Transparency: White-labelled vault provides visibility and accountability to the Rocket Pool community.

Proposal Summary
The use of a dedicated Enzyme vault supports the “RPL Buy & LP” and/or the “RPL Burn” concepts as outlined in recent governance discussions. Here’s a detailed breakdown of the proposal:

Vault Setup

  • Ownership: Establish a new vault owned and controlled by Rocket Pool DAO.
  • Access: The vault is accessible only to a single whitelisted address, ensuring security and controlled access. It will not be a public vault.

Program Operations

  • Revenue Flow: Protocol revenues will be directed into the Enzyme vault in accordance with Rocket Pool’s tokenomics design.
  • Allocation: Funds in the vault will be allocated based on the chosen strategy (buyback and liquidity provision, or buyback and burn).

Automation

  • Deposit Handling: Upon receiving deposits, the vault will trigger custom automation scripts:
  • RPL Purchase: Acquire RPL on the open market via DEX/DEX aggregators like 1inch, Paraswap, Uniswap, etc.
  • Liquidity Provision: Allocate a % of RPL to provide liquidity on platforms like Curve, Balancer, Uni v3, etc.
  • RPL Burn: Send a specified percentage of RPL to a burn address to reduce supply.

Security and Verification

Security is a top priority for Enzyme. Here are some key considerations:

  • Time-Testing: The protocol has been live on mainnet for about 6 years, demonstrating stability and reliability.

  • Audits: Every adapter/integration is audited by Chain Security, one of the top security firms in the space.

  • Bug Bounty: Enzyme has a large bug bounty program on Immunefi, incentivizing the discovery and resolution of potential vulnerabilities.

  • Protocol Upgrades: Enzyme does not force users to upgrade to a new version. Vault owners can review upgrade features and decide not to opt-in to new protocol versions, ensuring control over their operations.

  • Automations: Use the OpenZeppelin stack for secure and verifiable automation, ensuring no additional trust assumptions are necessary.

Regulatory Risk Mitigation

  • Systematic Automation: By implementing a systematic and automated buyback, Rocket Pool can reduce regulatory risks that may be associated with a discretionary manual process. This ensures that buyback operations are consistent, transparent, and compliant with evolving regulatory standards.

Alignment with Tokenomics Rework

  • Outsourcing RPL Management: This approach is in line with the overall philosophy of the tokenomics rework, which aims to keep the core functions within the Rocket Pool protocol (such as the bonding curve) while outsourcing the management and infrastructure of the RPL token. This strategy creates operational efficiency and allows the Rocket Pool dev team to focus on core protocol development.

White Labelling

  • Customization: The vault can be white-labelled and accessible via a custom URL, e.g. https: //rocketpool . net / buyback

  • Visibility: This enhances transparency and allows the community to track buyback operations.

Cost

  • Open Terms: a unique fee structure can be discussed to ensure a mutually beneficial arrangement for both Rocket Pool and Enzyme.

Conclusion

Implementing the RPL Buyback program using an Enzyme vault can be a strategic move that offers automation, security, and transparency. It supports Rocket Pool’s decentralised governance model, mitigates regulatory risks, and requires minimal effort from the Rocket Pool team, allowing you to focus on core development activities. We believe this proposal aligns with the long-term vision of Rocket Pool and enhances its operational efficiency.

We are excited to hear your feedback and remain available for questions.

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