KeeperDAO: A Cooperation Black Hole

What’s neat about DeFi is that the composability of dApps enables new investment strategies one may not have considered before. KeeperDAO, an on-chain liquidity underwriter, is an interesting project which basically allows you to get exposure to a proxy volatility fund with revenues from liquidations and arbs, including interest earned on your assets in the pool during in-between periods. As the project matures, increasing 3rd party integrations with Keepers widens the surface area for profitable transactions and the value prop strengthens with increasing intellectual and financial capital joining the liquidation and arbitrage machine. 

Key Takeaways: 

• As DeFi expands, the need for liquidators and arbitrage grows as the industry needs healthy markets and functionality for protocols to scale
• KeeperDAO is a sector bet as a proxy volatility fund as DeFI scales up and a long convexity play
• The pooled liquidity model is a natural fit for this business however the big test will be how the game theory of the grim trigger strategy plays out in the wild
• KeeperDAO ultimately offers a number of revenue streams to participants: yield from lending idle funds, arbitrage transactions, liquidation fee sharing, earn tokens as an LP or Keeper
• Directionally, the industry is likely to consolidate amongst larger more sophisticated players with deep capital, and KeeperDAO has a shot here to build a strong footing
• The upcoming KeeperDAO tokens launch will align incentives between LPs and Keepers. It makes sense for rewards to be skewed to LPs at first to bootstrap the liquidity pool with a shift to Keepers later on as they perform the work

 

Market Opportunity

Before jumping into th