RFP-2: Emission Reductions - Core: Ecosystem Fund Allocation

ABSTRACT

This proposal seeks to address the long-term success of the Radiant protocol by means of adjusting the rate of Arbitrum RDNT emissions to more sustainable levels.

MOTIVATION

Whereas the front-loaded emissions structure was a tool used to promote utility for RDNT, Radiant Capital is currently “over-emitting” into the protocol, relative to the protocol fees being generated. Consequently, this emissions structure dilutes current RDNT in circulation at an unsustainable rate.

In order to achieve Radiant’s omnichain vision, we must earmark emissions for our forthcoming deployment on BNB Chain, as well as other networks that will be supported in succession. This change must be effected in order to attract new users while still maintaining competitive yields when compared to other DeFi money markets.

RATIONALE

RFP-2 aligns with the Radiant DAO’s core principles of Determination and Collective Benefit. Long-term sustainability is imperative to the success of the protocol and subsequently, its community. It is important for the Radiant DAO to make critical adjustments such as these in order to ensure the best possible product.

The objectives of reducing emissions are as follows:

• Reduce Arbitrum RDNT supply inflation to more sustainable levels.
• Further enable community-driven governance for emissions through the creation of the RDNT DAO Reserve, a multisig wallet which will be tasked with emission management for new chain deployments as well as any major emissions allocations changes, governed by RDNT tokenholders.
• Maintain competitiveness with the yields in our existing ecosystem, as well as for potential future deployments.
• Make RDNT more scarce.

KEY TERMS

• Emission Rate - The speed at which tokens are created and released into circulation. Emission rate determines–or limits–how quickly these coins will be released. Typically, when a cryptocurrency is relatively new, the emission rates are high. As time progresses, this rate gradually drops until the maximum supply is reached.
• Multisig - Shorthand for “multiple signature”. A specific type of digital signature or wallet that operates with multiple signatory addresses. A multisig wallet requires more than one private key to sign and authorize any given transaction.

SPECIFICATIONS

Given the immutability of the Radiant smart contracts, we can’t simply “dial down” emissions. Instead, we propose to direct RDNT emissions into a DAO-governed multisig wallet (the “RDNT DAO Reserve”).

The RDNT DAO Reserve will be governed by RDNT tokenholders and executed by a Council-directed 2-of-3 multisig. It will be responsible for major emissions allocation changes, as well as for the routing of extant emissions across current and subsequent chain deployments.

The Council proposes the following percentage reductions to the current token emission structure::

• Arbitrum Lending/Borrowing Emissions: -50%
• Global Ecosystem/Core Contributor Emissions: -50%
• Global Team Tokens: -50%

By doing a straight reduction of team emissions by 50% while keeping the total supply at 1B tokens, the original team allocation would effectively be reduced from 20% to 10% of the fully diluted supply.

Consequently, this proposal recommends that the original team allocation remain at a 20% share of the circulating token supply, such that if a future proposal were to recommend an allocation from the RDNT DAO reserve (e.g., for BNB emissions), the original team allocation of the circulating supply would remain equal to 20%.

This aligns with our initial vision and would prevent the Team from being issued too many or too few tokens relative to the total in circulation. Furthermore, it ensures that the Team’s total number of tokens will grow as the protocol expands, in accordance with the original emission schedule published at protocol genesis.

STEPS TO IMPLEMENT

• Snapshot vote on RFP-2: Emissions Reduction
• Establish RDNT DAO Reserve multisig
• Implement adjustments to token allocations, as outlined
  • Calculate adjusted Lend/Borrow Allocation Points
  • Setup DAO Reserve as recipient of surplus emissions
  • Execute changes via Timelock

TIMELINE

• 23-September 2022 – RFP-2 Emission Reductions Proposal goes live, with 24h warmup and 24h vote window (ref. “Process – Procedural Exceptions” in RFP-1).
• 25-September 2022 – Pursuant to quorum and majority “In favor” vote, RFP-2 is ratified and enters 48h timelock. RDNT DAO Reserve multisig formed; address shared to public via https://docs.radiant.capital.
• 26-27-September 2022 – Emission reductions instated

OVERALL COST/IMPACT

OUTLAY

No significant operational costs.

IMPACT

It is possible that we will see a decrease in Arbitrum TVL in the short term due to the lowering of yields. However, we believe that emissions will be better served by the RDNT DAO Reserve, and that they will likely be put to better use on subsequent chain deployments, relative to the current structure (with all emissions focused on Arbitrum). The belief is that this to be in the best long-term interest of the protocol, in order to achieve its omnichain vision.

The utility of Radiant will be enhanced because yields will remain competitive for lenders, even with the proposed emission reductions. Furthermore, the "real yield" earned from locking RDNT remains industry-leading (currently >150% in BTC/ETH/Stables), relative to competitive money markets. Consequently, while we can’t predict the future, we don't anticipate emission reductions as outlined in this proposal to induce significant retail migration to other yield platforms.