RFP-7: Protocol Fee Distribution in v2 - Protocol Mechanics

Abstract

RFP-7 proposes to adjust the protocol fee distribution in Radiant v2 by splitting it into three distinct buckets. Furthermore, this proposal seeks to reapproach the protocol’s handling of RDNT token vesting fees.

Motivation

For this DAO proposal, the primary aim is to provide a stronger utility proposition for liquidity providers in Radiant v2 by increasing their share of the protocol fee stream, while concurrently reducing the dilutionary impact of vesting RDNT. This will be done while keeping base borrowing fees competitive with all major lending protocols.

In addition, this proposal seeks to leverage a portion of fee distribution in order to create a formalized incentive structure for DAO participants to maintain continued contribution toward the development of Radiant.

Key Terms

OpEx: Abbreviation for operational expenditure. Expenses a business incurs through its day-to-day operations. Operating expenses can include developmental costs, marketing, payroll, legal, step costs, and funds allocated for project reach and expansion.

Specifications

The following protocol mechanic changes are being proposed for Radiant v2:

Fee Distribution: Overall Split

v1 Design:

• 50% of protocol fees are streamed to RDNT lockers & vesters
• 50% are given as the base APY to lenders

v2 Design Proposal:

• 60% of protocol fees are streamed to Dynamic Liquidity (dLP) lockers
• 25% allocated as the base APY to lenders
• 15% streamed to a DAO OpEx wallet which will pay for salaries, exchange listings, community-sourced bounties and marketing partnerships

Fee Distribution: Vesting RDNT Treatment

v1 Design: Both vesting RDNT and locked RDNT earn protocol fees.

v2 Design Proposal: Vesting RDNT will not earn protocol fees. Locked dLP will earn protocol fees with an increased distribution share.

Rationale

Overall Split

The additional outlay and risk associated with locking up LP tokens for an extended period (as compared to single-sided locking in v1) justifies the increase in fee share for dLP lockers.

Adjustment to the base lending fees affords the protocol flexibility to incentivize dLP lockers while still maintaining competitive rates in line with all major lending platforms.

The OpEx allocation will mitigate pressure to use RDNT tokens to pay for operational initiatives. The initial team funded Radiant with no outside investment and over $1.5M spent. By earmarking an OpEx budget, the DAO can provide continued funding for future audits and exchange listings, pay the salaries of developers working on the project, and fund community-sourced work.

This aligns incentives through the DAO governance model, while ensuring that the project remains independent of external funding sources such as grants and VC investment.

Vesting RDNT Treatment

Vesting RDNT that continues to accrue protocol fees has the effect of significantly diluting the fee revenue pool at the expense of those who have committed via locking LP tokens.

This change will have the net effect of improving lock utility vs. Radiant v1 and reducing dilution in the pool, as it redistributes fees away from vesting addresses to those who provide real value through locked liquidity.

Steps to Implement

Fee Distribution

• Smart contract logic and UX/UI adjustments to be tested in a staging environment
• Upon completion of beta testing, code would go to Peckshield to review
• Upon completion of the audit, implementation would occur upon launch of Radiant v2

DAO OpEx Fund

If RFP-7 passes, a subsequent proposal will be brought forth to the DAO which will further outline the parameters of the OpEx fund.

This proposal will seek to define:

• Types of expenses that require submission and approval from the DAO
• Designated wallet address for OpEx fund

Overall Cost/Impact

Cost

Likely some maintenance dev cost, no additional structured costs beyond existing time/resources spent in development.

Impact

Anticipated shift towards “sticky” capital and protocol longevity.

Timeline

Implementation of fee redistribution and changes to vesting would go into effect upon launch of v2, and would deploy on all subsequent Radiant chains (current & future).

Voting

• In Favor: Supportive of the RFP-7 v2 design proposals
• Against: Against implementation of the RFP-7 v2 design proposals
• Abstain: Undecided, but contributing to quorum