What is ROOK?

What is ROOK?

What is ROOK?

…and how do you make money on it?

Dapps & Protocols

·

11 min

What is ROOK?

…and how do you make money on it?

Dapps & Protocols

·

11 min

What is ROOK?

…and how do you make money on it?

Dapps & Protocols

·

11 min

What is ROOK?

…and how do you make money on it?

Dapps & Protocols

·

11 min

What is ROOK?

Did you know that every time you make a DeFi transaction, you could be overpaying? This is because of a phenomenon called Miner Extractable Value (MEV), which allows miners to extract additional value from transactions on the Ethereum blockchain. In 2022 alone, MEV bots netted over $200M in profit, and the phenomenon grows as more users join DeFi.

Rook Finance is a DeFi protocol that aims to solve this problem and provide users with a more efficient and cost-effective way to access decentralized financial services. Rook Finance figured that they could create a market for MEV where users and validators profit together.

The story of Rook Finance starts in 2020 when only a handful of sophisticated miners scoured Ethereum’s transaction backlog, called the mempool, for profitable trading opportunities. For a while, the phenomenon of MEV was too small to catch the attention of the public. As DeFi caught wings, it became clear that MEV would impact users negatively – without them even knowing.


Rook Labs recognized the issue of Miner Extractable Value (MEV) and how it was affecting DeFi users by causing them to overpay for transactions. To solve this problem, they developed a unique mechanism called "fair ordering," which aims to reduce the potential for MEV extraction by ensuring that transactions are processed in a fair and transparent manner.

Since its launch, Rook Finance has quickly gained popularity within the DeFi community, attracting a growing number of users who appreciate its focus on fairness and efficiency. At its height, Rook had $500+ million in TVL. As of 2023, the TVL Rook dropped to $5M, however, its utility is as strong as ever.

The platform has also introduced a range of new features and services, such as staking, lending, and borrowing, all of which can be done with the platform's native governance token, ROOK. 

ROOK holders determine the direction of the DAO and its activities, through Rook DAO governance. Governance oversees and determines many factors such as whether to certify Rook's MEV bots, called Keepers, to utilize the protocol, and how to invest the Rook DAO Treasury. Anyone can use Rook and participate in governance without KYC.


While it sounds good in theory, Rook DAO had its share of controversy in 2023. Historically, ROOK holders had a say over Rook DAO since mid-2021. However, Rook Labs has largely taken over management of Rook’s day-to-day operations, creating friction with token holders who felt shunned.

As a solution, Rook Labs coordinated a vote to divorce ROOK the token from Rook the project. The new organization, IncubatorDAO, got 60% of Rook’s treasury to do with as it pleased. In return, ROOK holders lost all their theoretical rights to Rook’s intellectual property and future profits.

ROOK holders who redeem their tokens through the smart contract get USDC, plus a pROOK token. At the end of 90 days, the remaining USDC was be split among pROOK token holders. Although Rook protocol was never hacked, its internal power struggle proved to be a lesson in decentralization and governance.

How does ROOK work?

Rook is an open settlement protocol that fairly distributes MEV to the users, protocols, and smart contracts that generate it. In practical terms, users can are incentivized to do swaps on Rook and get a share of the MEV rewards instead of having their transaction sniped.

To explain Rook, it's important to outline how MEV works. MEV stands for Miner Extractable Value and refers to the amount of additional profit that Ethereum miners can make by exploiting certain opportunities that arise during the transaction validation process.

For example, let's say a user wants to trade one crypto asset for another on a DEX. The user submits the trade order to the DEX, and the order is then relayed to the Ethereum network for validation. During this process, miners have the opportunity to inspect the trade order and can front-run the order by submitting a competing transaction that is prioritized ahead of the user's transaction. By doing so, the miner can potentially earn a profit by buying or selling the cryptocurrencies before the original trade order is completed, taking advantage of the price change that occurred due to the original order.

In this scenario, the miner is extracting MEV by manipulating the order of transactions to their advantage. This results in the user paying more in transaction fees, as the miner can select transactions with higher fees to prioritize and earn more profit.


Rook aims to fight fire with fire. The protocol uses its own finely tuned MEV bots, called Keepers, to capture MEV and fulfill user transactions within the protocol. The difference between an anon MEV bot and Keepers is the motivation behind their actions.

Average MEV bots are typically designed to maximize profits for the bot operator, often at the expense of other users. These bots scan the Ethereum network for profitable transactions, then attempt to manipulate the transaction order to extract the maximum MEV for themselves. This can result in users paying higher transaction fees or having their transactions front-run, leading to unfair advantages and increased costs.

On the other hand, Rook Finance's Keepers are designed to operate in a fair and transparent manner, with the goal of maximizing value for all users of the platform. Keepers are responsible for processing transactions and monitoring the network for potential MEV opportunities, but they do so in a way that prioritizes fairness and efficiency.

Keepers use a unique fair ordering mechanism that ensures transactions are processed in a transparent and fair manner, minimizing the potential for MEV extraction. They also prioritize transactions that benefit the Rook Finance ecosystem, such as those related to governance, staking, or liquidity provision.

Auctions

Keepers are able to coordinate between themselves via the auction mechanism. This system uses a smart contract called "Coordinator." After a user initiates a transaction via Rook, the trade enters in a bidding period. The Coordinator verifies the Keeper's credentials and the amount of ROOK pledged.

The bidding period ends after a short moment and the Coordinator green lights a winner. The bidding period lasts milliseconds or seconds. 

Once a Keeper is greenlit to facilitate user trade, the Coordinator waits for a brief period of blocks for the Keeper to mine their transaction into the Ethereum blockchain. During this time, the auctionId for this auction remains locked and no other auctions can be started for this time window. Once this lock period ends, a new auction may begin again.Once this lock period ends, a new auction may begin again.


The Rook protocol also uses a reputation system algorithm that evaluates the Keeper's behavior. The higher a Keeper's reputation, the more likely they are to be greenlit for an auction. The higher a Keeper's reputation, the more likely they are to be greenlit for an auction. This ensures Keepers' actions align with the protocol.

Hiding Books

In this scenario, you may be wondering how to the Keepers maintain their edge over the average MEV bots. To protect its users from MEV outsiders, Rook has developed the Hiding Book, an off-chain orderbook that hosts virtualized orders only fillable by Rook Keepers. Tan off-chain orderbook that hosts virtualized orders only fillable by Rook Keepers. The Hiding Book provides users with single-connection access to the entire spectrum of on-chain and off-chain liquidity. 

Developers and companies alike are free to integrate Hiding Books into their products. This is a win-win because both users and Keepers are working together to maximize profit from a trade the user was going to do anyways. The profits generated are returned back to the user in ROOK tokens. 

ROOK Token

As previously mentioned, ROOK is the governance token of the protocol. The ROOK token also has utility within the Rook ecosystem. Keepers bid using ROOK for the exclusive right to settle incoming transactions as part of a bundle. The amount of ROOK bid is relative to the amount of profit the Keeper was able to find in the transaction.


Once a transaction has been executed, the ROOK bid by the winning Keeper is distributed according to the protocol, with the majority sent to the user who originated the transaction. This serves as a form of rebate and ensures that value or profit being created through transaction flow, is going back to the people who create it.

How to make money on ROOK?

Explaining Rook has been quite a feat. Now, let's get to the fun part: how you can profit from using ROOK. It is important to outline that swapping via Rook protocol is in itself advantageous over any other DeFi protocol. The reason is simple: you have the guarantee trades happen at their fair value – no more overpriced swaps. Furthermore, as a Rook user, you are rewarded in ROOK tokens for using the protocol! 


Here's how you execute a swap on ROOK:

1. Open the Rook app

2. Select the pair you would like to swap

3. Input the amount you would like to swap

4. Click "Swap" and approve the transaction

5. Done!

In addition to the fair swap rate, you will also be rewarded with ROOK tokens proportional to the size of your trade. 

ROOK Staking

With the earned ROOK you can either sell the tokens or stake them. The estimated APR is relatively modest, around 0.64%. However, if you feel like the price of ROOK is going to go up over time, staking is the perfect way to compound your ROOK tokens and sell them when it suits you.


Here's how you stake ROOK:

1. Open the Rook app

2. Click on the "Stake" tab

3. Input the amount of ROOK you would like to stake

4. Click Stake and approve the transaction

5. Profit

Upon staking you ROOK tokens you will receive an equivalent amount of xROOK.

xROOK lets you share in the protocol’s success by receiving a portion of the winning ROOK bid for each transaction executed through the Rook Protocol. The more transactions are settled on Rook, the higher the profit. 

Price Prediction for ROOK: Can it hit $1000?

Buying and hodling ROOK — the native token of ROOK protocol— is one way of potentially making money on ROOK.

By looking at its current price, it’s natural to think about the chance of ROOK hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.

Let’s examine the potential growth of the ROOK token by analyzing its tokenomics. ROOK’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} ROOK tokens being in circulation today, that means a price of {PRICE} per ROOK.

How did we come to that calculation? It’s quite easy, the price of an ROOK token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each ROOK coin. 

By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of ROOK at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for ROOK to hit that price.

At a price of $1000 per token, that means the current market cap of ROOK would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.

Now let’s shift our attention to the fully diluted market cap.

Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.

The fully diluted market cap represents the total value of a coin if all tokens were in circulation. ROOK’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} ROOK which means that no more coins above that number will ever be created.

These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.

How does this impact the price of ROOK? Taking into account the current price of an ROOK token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. ROOK coins that have been burned are not taken into consideration because they have been permanently removed from circulation.

Whether it seems gigantic or not, the number we came to above only takes into account the current price of an ROOK token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the ROOK protocol fully diluted market cap.

These are all crucial details to know when calculating if ROOK can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.

The future of ROOK depends solely on its growth as a network used by tens and hundreds of millions of users.

If you’re looking to add some ROOK to your portfolio, the most trusted places to get some are Binance and Coinbase.


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