RFP-12: Remove OpEx % of Protocol Fees During New Chain Launches [Protocol Mechanics]

Abstract

The objective of RFP-12 is to improve incentives for Radiant users during new chain launches by eliminating the "OpEx" portion of protocol fees (currently set at 15% in RFP-7) and reallocating those fees to base lending interest and dLP lockers.

Motivation

Under v1 of the Radiant protocol, Radiant lockers receive 50% of protocol fees. In v2, dLP lockers will receive a higher percentage of protocol fees (60% vs. 50%), but the base lending interest, which was originally derived from 50% of borrowing interest, will be reduced to 25% as specified in RFP-7.

The OpEx Treasury, which was created via RFP-7, is used to pay salaries and operational expenses that cannot be paid in RDNT (such as ongoing audits, hosting, software licenses, and market-making vendors).

The purpose of this proposal is to temporarily redirect the OpEx Treasury percentage of protocol fees during the first two weeks of a new chain launch, in order to create an additional mechanism for incentivizing lenders, borrowers, and lockers, regardless of their eligibility for emissions.

The initial recommendation would be as follows:

• 15% of protocol fees generated by USDC and ETH would be redirected to the Base Lending Interest (25% → 40% of protocol fees received)

• 15% of protocol fees generated by all markets excluding USDC and ETH would be redirected to lockers of dLP (60% → 75% of protocol fees received)

The ideas behind this:

• Due to the reserved incentivized emissions for dLP lockers, USDC, which has been Radiant's largest market on Arbitrum, will need to remain competitive with other lending protocols on the base yield alone. This will encourage passive liquidity providers to use Radiant regardless of their dLP status.

• Allocating additional protocol fees to dLP lockers will provide extra incentives to account for the risks associated with LP tokens and locking liquidity into the protocol. Compared to v1, where lockers received 50% of protocol fees, this proposal allocates 50% more protocol fees to dLP lockers.

While this would be a temporary measure, this community suggestion was a function of the idea that the first few weeks are critical for success and de-risking the future for Radiant.

Key Terms

• OpEx Treasury: A treasury created in RFP-7 to be used to protocol operating expenses that need to be paid in currencies outside of RDNT
• dLP: Dynamic Liquidity

Specifications

• Adjust USDC parameter for base lending: 25% → 40%
• Adjust all other asset parameters for protocol fees: 60% → 75%
• Adjust OpEx treasury from 15% → 0% of protocol fees
• At two weeks after launch, the parameters will return to the base state, meaning that the OpEx Treasury will receive the standard 15% of protocol fees.

Steps to Implement

• Update the reserveRatio and protocolFee parameters to reflect the above recommendations.

Overall Cost/Impact

During launch periods, the OpEx Treasury sacrifices protocol fees in order to attract more new users.

Timeline

The proposed implementation will take effect upon the launch of v2 for Arbitrum and will continue for a period of two weeks post-deployment for Arbitrum and all future chains.

Voting

• In Favor: Supportive of RFP-12, removing OpEx % of protocol fees during new chain launches
• Against: Against implementation of the RFP-12 proposal
• Abstain: Undecided, but contributing to quorum