RFP-19: Radiant Expansion & Deployment to Ethereum Mainnet

Abstract

RFP-19 seeks to secure approval from Radiant DAO stakeholders to deploy the Radiant protocol on Ethereum Mainnet.

Motivation

Now that the Radiant v2 model has been successfully demonstrated on both Arbitrum and BNB Chain, the time has come for Radiant to pursue further expansion opportunities.

As Radiant approaches its first anniversary, the DAO has seen significant growth over the course of 2023:

• 10x the number of RDNT token holders and protocol users
• #1 money market on Arbitrum in terms of TVL and DAUs
• #2 money market on BNB Chain and #1 in terms of DAUs
• Over $60M in dLP locked between Arbitrum and BNB Chain deployments and Total Market Size briefly exceeding $700M
• More than $10M in protocol fees generated since inception
• Regularly ranked #1 in terms of protocol revenue across all lending protocols on all chains, despite only having Arbitrum and BNB chain deployments

Significant effort went into making Radiant v2 easily composable for all EVM chains. In addition, for the past two months, the DAO has been engaged in a comprehensive audit with OpenZeppelin. This audit serves as a necessary prerequisite for implementing major gas and protocol optimizations.

The next phase of Radiant Protocol’s growth should be driven by a deployment to Ethereum Mainnet.

Why ETH Mainnet?

1. Largest Market

Despite the growth of Layer 2 solutions in 2023, Mainnet still holds $26B in Total Value Locked (TVL), which is five times the combined value of Arbitrum and BNB Chain. There are $70B worth of stablecoins on Ethereum, many of which are not being utilized to generate yield or are producing minimal yield.

2. Ripe Opportunity in DeFi

ETH Mainnet presents the most complex competitive landscape for a new entrant in the DeFi space, but there is significant opportunity for an improved incentive model to grab market share:

Staked ETH (Lido wstETH, Coinbase cbETH)

• The biggest opportunity in DeFi right now, with Staked ETH on Lido reaching almost $14B.

• There is $2.5B of wstETH (Wrapped Staked ETH with Lido) on Aave earning 0% or 0.01% as a base yield, and 0% as an incentivized yield.

• In contrast, on Radiant’s Arbitrum deployment, lenders of wstETH are receiving 0.48% base yield and 3.11% incentivized yield in RDNT tokens, 3.5% in total on top of the staking yield.

• With a directed program of incentives (in collaboration with Lido Finance), and a different approach to collateral parameters, Radiant believes that it can capture some of the staked ETH market share. This alone could surpass the total TVL of the Arbitrum and BNB Chain deployments.

Stablecoins

• There are $70B in stablecoins, with the vast majority earning meaningfully less than US treasuries, or the “risk free rate” (around 2.5%), or worse.

• Billions of dollars in ETH and wBTC are currently earning near-zero percent returns.

• This is not taking into account the additional risk of protocol insolvency (see: current bad debt concerns), smart contact risk, or hacking risk. Users should be adequately compensated for this risk.

• Some members of the DAO believe that by adopting a different strategy for interest rate curves, collateral parameters, and incentives exclusively to those who provide value back to the protocol in the form of dLP, users can potentially achieve significantly improved yields.

• Context: Current Radiant stablecoin yields at time of writing @ ~6% (2-2.5% base yield and 3.5-4.5% incentivized yield).

LP Tokens

• LP Tokens have presented an interesting challenge for lending markets in the past, often the source of protocol hacks due to easier manipulation of the LP token price. We believe that there is an opportunity to tap into stable LP pools (e.g., 3Pool) with the right approach to oracle parameters, though this is still in investigation via the research and protocol risk teams.

• Despite the work and auditing required to safely add support for the billions in TVL across Uniswap and Curve LP tokens, the DAO believes that this strategic move will potentially generate significant dLP locking and propel Radiant into the forefront as the premier money market in DeFi.

Given the requirement for lenders to supply a minimum of 5% dLP (RFP-4) in order to unlock incentivized emissions, this proposal suggests that introducing collateral support for any or all of the aforementioned assets could generate substantial growth in both TVL and dLP for the protocol.

Key Terms

• dLP - Dynamic Liquidity Providers within the Radiant protocol
• Interest rate curves - Model by which Radiant determines how interest rates change in response to different utilizations

Specifications

• Deploy the RDNT token on Ethereum Mainnet
• Initialize Radiant smart contracts on Ethereum Mainnet
• Update app.radiant.capital to reflect the addition of a third chain
• Update governance system to reflect the addition of a third chain

Steps to Implement

If RFP-19 passes, the Radiant DAO will begin development and operational efforts to prepare for an ETH Mainnet launch.

Overall Cost/Impact

• Auditing Costs: To ensure the security of the protocol, comprehensive audits are required. There may be some additional ad-hoc auditing costs, in addition to the nearly $1,000,000 already spent on audits.

• Development Resources: This has been scoped as a “medium” effort project given the existing work already completed and under review from OpenZeppelin. Deployment on Ethereum Mainnet would include allocating resources of front and back developers, system architects, project managers and testing, as well as any modifications required for compatibility with Ethereum and implementation of notes from auditors.

Timeline

Q3 2023 launch

Voting

• In favor: Supportive of RFP-19, agreeing with the decision for the DAO to deploy an instance of Radiant Protocol on ETH Mainnet

• Against: Against implementation of the RFP-19 proposal, which would not allow the DAO to deploy Radiant Protocol on ETH Mainnet

• Abstain: Undecided, but contributing to quorum