RFC-000-035: Use CEF Funds to Participate in Citadel Knighting Round

Name: Use CEF Funds to Participate in Citadel Knighting Round
Author: Cl0kwork
Contributors: gdalf and Mitch from the Citadel Team did complete a peer review for accuracy
Category: Community Ecosystem Fund (CEF) allocation
Status: Draft
Scope: This RFC proposes to use some of the RenBTC in the Community Ecosystem Fund (CEF) to further participate in the CitadelDAO Knighting round. It is seeking feedback from the community on if this is a good idea, and if so, specifically which percentage of our CEF would be appropriate to contribute.

1. Synopsis

Hey Community,

To be clear, this post is pretty much a copy pasta from Spadaboom’s post in the Frax community. I’ve simply tailored it to the Ren Community (or RenDAO). I’ve been a Darknode Operator since the early days and would generally consider myself a “Bitcoin in DeFi Maxi” hence the alignment with Ren, Badger, and Citadel. OK let’s get into it.

This post is pretty long, so I’ll summarize the main points for those who want a simple read:

  • CitadelDAO is a treasury DAO aiming to be the largest community owned yield-generating Bitcoin position in the world (yes, Luna Foundation is not the only one aiming to create a multi-billion-dollar community-owned BTC position :blush:)
  • Imagine Olympus DAO’s bonding mechanics crossed with Curve’s tokenomics with the aim of creating sustainable yield-generating BTC positions across DeFi
  • They intend to integrate RenJS, as well as leverage RenBTC for natice BTC funding/withdrawals
  • The launch event is coming up and Ren (both our users and Community Ecosystem Fund-CEF) is 1 of 8 protocols whitelisted to participate. There are no VCs or early investors
  • RenDAO will already receive a portion of the 5% vlCTDL allocated for partners (based on the number of voting participants) but I am proposing we use some of our CEF Funds to further participate in the funding round
  • The funding rounds will be accepting BTC-equivalents in round 1 and yield-influencing assets in round 2
  • I propose we use some of our RenBTC CEF funds worth $500k to further participate in Round 1. I am proposing 15%, 20%, or 25% (or ~$75k, ~100k, $125k respectively) as the initial options, but appreciate feedback in the comments.
  • In exchange, the RenDAO receives vlCTDL, which will yields 1) Boosted CTDL emissions 2) a share of funding revenue paid in BTC 3) a share of treasury yield paid in BTC and 4) Citadel governance rights
  • By holding vlCTDL, RenDAO will have governance rights to propose RenBTC yield-generating strategies in the future

I believe there are 4 primary reasons we should do this:

  1. Financially: I simply think this is a good investment and will garner significant returns to our treasury, along with a 2nd stream of income paid in both CTDL and cold, hard BTC
  2. Volume: Citadel will be integrating RenJS (likely through the Badger Bridge) and our participation will encourage the Citadel DAO to integrate further Ren-products in the future (e.g. burn-and-mint direct fundings once we’re live)
  3. RenBTC Utility: These guys are at the forefront of BTC utility in Defi. Considering our primary product is RenBTC, this will only increase awareness and utility for RenBTC across the entire spectrum. Additionally, Ren DAO will have governance rights to propose RenBTC based treasury strategies in the future
  4. Partnerships: Not only does it strengthen our partnership with Badger and Citadel, it puts us in cahoots with the other 6 partners listed below :blush:

Here are the details:

1. Introduction

Citadel is a treasury DAO aiming to be the largest community owned Bitcoin position in the world. The treasury and protocol will be governed by the CTDL token, with a predominant Bitcoin treasury actively earning yield that will be shared with long term CTDL holders. Citadel DAO is a sub DAO to Badger.

Citadel will leverage unique funding mechanics to accelerate the continuous growth of its treasury while using the power of BadgerDAO’s tried and tested vault strategies, in addition to strategies powered by Citadel’s other partner protocols, to optimize its yield.

To ensure sustainable yield on treasury-held Bitcoin positions, Citadel will hold not only Bitcoin (+ BTC LP’s), but also yield influence assets across DeFi (eg. CVX, FXS and BADGER). This enables Citadel to wield large influence across multiple ecosystems and fight for Bitcoin to get the yield it deserves.

2. How Citadel DAO works

The way the Citadel protocol works is very innovative yet simple. Users can Swap, stake and/or lock.

With a very similar experience to making a trade on a decentralized exchange, with 1 click users can SWAP Bitcoin or yield influence assets for xCTDL (staked CTDL) at a discount to the current market price on a continuous basis.

We call this “funding” and it’s the main source of treasury growth.

xCTDL holders receive continuous emissions in the form of CTDL determined by the fixed elastic emissions model.

Holders of xCTDL will also have the option to LOCK their xCTDL for a fixed period of 21 weeks (7 epochs, where each epoch is 3 weeks). In return for locking xCTDL, lockers will receive the following additional rewards:

  • 2x boost on CTDL emissions (for example, if a user was receiving 1% of CTDL emissions when staking xCTDL, they would receive 2% with vlCTDL).
  • Share of Funding revenue generated — paid out in BTC
  • Share of treasury yield — paid out in BTC
  • Governance rights to vote on whitelisting protocols for Citadel treasury deployment and which assets to accept for continuous funding (ie. allow for swapping to discounted xCTDL).

To better understand how Citadel works, CTDL token mechanics and elastic emissions, review Citadel DAO’s tokenomic deep dive article here Citadel Tokenomics: A Deep Dive. A closer look at Citadel’s Tokenomics… | by Citadel DAO | Mar, 2022 | Medium 13

To dig into Citadel protocol open-source code: GitHub - Citadel-DAO/citadel-contracts: converting Citadel contracts to foundry 4

3. CTDL Launch Event

Citadel DAO’s goal is to have a completely fair and transparent launch while distributing ownership of CTDL to not only users that participate early but to a select group of DAO’s/dapps across our ecosystem, that align with the core values of Citadel. Their alignment and vested interest will accelerate Citadel’s ability to effectively deploy its treasury to benefit all participants in the ecosystem.

4. This is called the Citadel Knighting Round.

Over the course of multiple days users will be able to swap BTC and yield influence assets for xCTDL.

Only users who qualify for the whitelist can participate in the launch event. The whitelist selection criteria will be based on a combination of actions users have taken in the Badger ecosystem and in our partners dapps, like Ren (via the Badger Bridge, RenBridge, etc…). The group of partners/knights have been revealed over the last month and consists of;

  • Frax
  • Convex
  • Redacted
  • Ren
  • TRIBE
  • Alchemix
  • Tokemak
  • JonesDAO

All the Citadel Knights are also whitelisted to participate in the launch event themselves, leveraging their treasuries.

The current launch event details being discussed amongst Citadel DAO community members are as follows:

  • Round 1(Core Treasury Boostrap): Uncapped, whitelist participants only, open to bribes, fixed price of $21/CTDL
    • Accepted assets: WBTC, RenBTC, bibbtc/sbtc (ibbtc Badger vault token), ETH, FRAX, USDC
    • Assets will be rebalanced post launch to reflect the Citadel DAO policy team’s ideal treasury composition for optimizing yield and BTC exposure
  • Round 2 (Yield Influence): Capped (amount TBD), no whitelist, no bribes, fixed price of $25/CTDL
    • Accepted assets: Badger and CVX

5. Token distribution

This launch event is the ONLY distribution of CTDL tokens. There were no prior investment rounds, private or public.

To ensure a fair valuation of Citadel DAO at launch the following token distribution breakdown was developed by community contributors. Community sale includes round 1 & 2 as outlined above.

  • Partners and Badger (5% + 10% respectively) will receive vote locked CTDL which will remain locked for 21 weeks.
  • Operations (10%) allocation will be non-circulating and with the DAO to decide how to best utilize it in the future.
  • Early contributors (5%) will receive 33% of their allocation in xCTDL at launch with the remaining 67% vested over 21 weeks.
  • LP (10%) allocation is CTDL which will be paired with wbtc and 100% of it added to the Curve v2 pool to support liquidity for the CTDL token.
  • The community sale (60%) amount will be distributed as xCTDL at launch of the protocol after the completion of the 2 public rounds.

1400Ă—882 86.2 KB

After the launch event, vlCTDL will immediately be enabled along with the rest of Citadel’s protocol mechanics (swap, stake and lock) and the start of putting the treasury assets to work.

For a comprehensive overview of all the details of Citadel DAO please review our introduction article: Introducing the Citadel DAO. Citadel is a treasury DAO aiming to be… | by Citadel DAO | Medium 5

6. Proposal: Ren DAO participates in Round 1 of launch

To further align the two DAO’s and advocate for RenJS integration and RenBTC’s yield influence, I’m proposing Ren DAO participates in the initial launch event using RenBTC from our Community Ecosystem Fund (CEF). This is at the same fixed price as the whitelisted users from partner communities and the only distribution of pre-protocol launch CTDL.

To gain community wide sentiment, I’m proposing 3 different participation amounts for the purpose of deciding the adequate allocation collectively:

  • 15% of our CEF (~$75k in RenBTC) @$21 per CTDL = 2,381 CTDL
  • 20% of our CEF (~$100k in in RenBTC) @$21 per CTDL = 3,571 CTDL
  • 25% of our CEF (~$125k in RenBTC) @$21 per CTDL = 4,762 CTDL

(This is just my first take of amount – I welcome any feedback in the RFC comments)

7. What will Citadel DAO do with the BTC?

Treasury Strategies are the core infrastructure behind Citadel’s ambition to become the largest community-owned Bitcoin treasury in the world. In the weeks following our launch, Citadel will be working closely with our community and partners to develop innovative new treasury strategies across multiple protocols. Ren DAO has a unique opportunity to influence these strategies in favor of usage and adoption of RenBTC.

Citadel’s initial strategy is focused on the Curve & Convex ecosystem, which is currently the most reliable source of yield on liquidity pool deposits in DeFi. The strategy will increase Citadel’s holdings of Bitcoin, Badger, vlCVX, and CTDL/WBTC treasury-controlled liquidity while also providing BTC that can be distributed to lockers.

This initial strategy does not leverage RenBTC directly, but it does leverage bibBTC which has heavy exposure to RenBTC. By participating in the CTDL Launch, the Ren DAO will have a unique opportunity to influence RenBTC in future strategies.

For a comprehensive overview of all the details of the CitadelDAO Treasury Strategies, please review the detailed article: An Insight Into CitadelDAO Treasury Strategies

8. What does RenDAO get from this?

RenDAO will receive voted locked CTDL (vlCTDL) in exchange for their participation, which has a 21 week lock.

This will earn boosted CTDL emissions (2x and expected at 3 digit APY to start), BTC cash flow from treasury yield generated & funding revenue and the ability to participate in governance for whitelisting new protocols for treasury deployment and determining which assets the treasury can accept.

As described in the Tokenomics Deep Dive 13, Citadel will be distributing a portion of its treasury yield and funding revenue (revenue generated from users directly purchasing xCTDL from the treasury on an ongoing basis) to users who lock their xCTDL.

Citadel’s Treasury yield and funding revenue distribution will be divided as follows:

Funding Revenue

  • 10% to holders of vlCTDL
  • 10% to the DAO (Operations/LP)
  • 80% to the Treasury

Treasury Yield

  • 50% of yield to holders of vlCTDL
  • 50% of the yield will be used for auto-compounding treasury positions

Ren would directly benefit from the yield being generated on the Citadel DAO treasury. It will also receive a consistent flow of BTC into our own CEF that could be used for future investment.

Ren would also have influence over how the treasury is deployed and which assets the treasury takes in. This is important for ensuring Citadel DAOs long term alignment with Ren.

9. Citadel + REN become a force TOGETHER

Together, Citadel and Ren can support yield on bitcoin, grow utility of Bitcoin in DeFi, have another strategic partner in the Curve renaissance, and Ren can gain influence around one of the largest BTC treasuries in the world. On top of it all, Ren will have a protocol committed to being a long-term partner and participant of the REN ecosystem.

10. Bribe to Earn More Influence

There is 5% of the entire CTDL supply allocated to partners of Citadel. By using the Hidden Hand platform from Redacted (currently supports Frax Hidden Hand 1 ) during the launch event, users can vote for 1 of the 8 partner DAO’s when participating in the sale. The more votes a partner DAO gets, the larger share of the 5% supply they will receive. We can use the proposed contribution to add additional allocation for Ren’s CEF.

11. Conclusion

I’m looking forward to discussing this proposal with the Ren community here on the forum and gaining sentiment on the use of Community Ecosystem Funds, and how much we would be willing to offer.

12. Resources

Discord - discord.gg/citadeldao 4

Twitter - https://twitter.com/TheCitadel_DAO 5

Github - GitHub - Citadel-DAO/citadel-contracts: converting Citadel contracts to foundry 4

Blog - https://thecitadeldao.medium.com/ 3

5 Likes

not a fan of this. if we are branching out from just holding the originally yielded asset (in this case btc), then id rather put it back into buying a darknode or gaining a voting/boosting position on an already acknowledged platform like veCRV.
The entire idea of unredeemable deposits is basically the opposite of rens protocol, but i am far from a btc maxi. i am a ren maxi, but for h2h

Thanks for the great write-up @Clockwork!

Personally I think these type of opportunities are a win-win for us when using the CEF. We support our key partners for Ren asset utility and in turn receive governance rights, yield influence and an income stream. At the same time we also need to remain largely liquid so I think the participation amounts that you chose make sense, and I would support a 20% allocation.

1 Like

Also thanks for the RFC, Clockwork :+1:

Having briefly looked at the CitadelDAO, it strikes me as being very ambitious project with its goals and intentions for the future - and if CitadelDAO does go on to become one of the largest community-operated Bitcoin treasuries, it could prove to be quite advantageous to Ren.

With the CEF yet to be used, the Ren community will inevitably have to make a decision on where to use it first, and participating in the Citadel Knighting Round strikes me as being a very strong contender for our first real application of the CEF.

The benefits for me are:

  • We’ll be dedicating CEF resources to a project which will specifically use and integrate our tech (RenBridge)
  • As well as potentialyl increasing RenBridge volume, the RenDAO will also have influence in the future of CitadelDAO.
  • The Badger brand has a working, cooperative history with Ren, and with proven volume.
  • As CitadelDAO grows and becomes more popular, RenBridge volume to the CitadelDAO could grow with it.
  • It will help to strengthen third-party integrator relations (with both BadgerDAO and CitadelDAO).
  • CEF allocations are reasonable for the more cautious community members here (15% isn’t enormously risky)
  • BTC cashflow to RenDAO is in line with Ren’s philosophy of participants being paid in native assets.

Happy to support 15% (possibly 20%) allocation of the CEF.

1 Like

I think this is exactly the type of thing we should be funding with the CEF. Great proposal, ambitious project, will potentially increase volume for renbridge, potentially help the REN community treasury itself grow more yield, having stake in projects that are pro BTC(renBTC). I think 20% is reasonable but would even potentially vote 25%. As we can gain this back in a few months. Thanks for putting this proposal together.

I support this. Our modest investment would not move the Citadel needle itself necessarily, but it still seems like a good investment in the future of BTC in defi spaces which aligns with our goals, good for the CEF/Treasury, beneficial for exposure or adoption of Ren tokens and applications, and could continue to build a tighter working relationship between Ren, Citadel, and Badger. 20 - 25% allocation seems like a good plan.

Thanks for your feedback on this. Unfortunately, we can’t purchase Darknodes with the CEF until that process becomes decentralized (otherwise, a single person would have control over the keys). Also - this proposal does in fact leverage veCRV and Badger for boosted yields. By participating, we get the benefits of the boosted yield that Citadel will be acquiring, without having to purchase the boosts directly.

I do understand your point about “unredeemable deposits.” This is fair and was actually one of the first thoughts I had as well. But to be honest, it does take RenBTC off the open market, thereby increasing the demand to mint new RenBTC which is a net positive for us. It will also [hopefully] demonstrate to the larger crypto community that there is indeed a market for wrapping BTC and putting it to work in DeFi.

I hope this helps address your concerns! I will be submitting an RIP shortly and wanted to be sure I addressed all concerns.