RFP-26: Adding Native USDC & Sunsetting USDC.e

This proposal seeks approval to add native USDC as collateral in the Radiant money market, alongside USDC.e until the option to sunset USDC.e is available, contingent on Stargate's support for native USDC.

Abstract

With Gauntlet’s leadership and guidance, the Arbitrum community seeks to transition its USDC.e stablecoin usage into USDC. It aims to deprecate bridged tokens in favor of native tokens. The Radiant Capital protocol is currently employing Stargate to support its omnichain use cases, so there is a dependency on Stargate’s support native USDC. Stargate doesn’t currently support native USDC and will likely need to go through its DAO governance to garner support to swap out USDC.e. Since sunsetting USDC.e from the Radiant money market in favor of native USDC isn’t an available option at this point, this proposal seeks approval from the Radiant DAO to add native USDC as an alternative option to USDC.e.

This proposal seeks approval for two sequential phases:

• Phase 1: Adding native USDC alongside USDC.e in the money market
• Phase 2: Sunsetting USDC.e when the option is available (contingent on Stargate supporting native USDC)

Motivation

Native tokens offer reduced dependencies compared to bridged tokens like USDC.e, which rely on the dynamics of bridges and other chains. Unlike USDC.e, which is deployed by the Arbitrum Foundation, native USDC is deployed by CENTRE and depends solely on Circle's management of reserves.

Bridged assets, as demonstrated by incidents like the Multichain MPC bridge hack, carry technical and security risks. These incidents underscore the importance of not only robust security measures but also comprehensive risk management in the migration process. As Circle and Gauntlet transition to native USDC, leading to reduced USDC.e liquidity, there's a growing imperative for money markets that support USDC.e to adapt.

Rationale

This proposal aligns with Radiant’s objectives to add omnichain utility for protocol assets and unify cross-chain liquidity, while addressing these relevant risks:

1. Price: Risk of asset prices moving unfavorably.
2. Liquidity: Risk of being unable to buy/sell assets in an expected fashion.
3. Volatility: Risk of unexpected price changes.
4. Flow: Risk associated with asset flow and redemption requests.
5. Credit: Risk of counterparty failure.

Key Terms

Native USDC: Circle’s dollar-backed stablecoin, now cross-chain enabled, supported by CCTP.

USDC.e: Unofficial, bridged versions of USDC utilized across the blockchain ecosystem. Circle products do not support USDC.e.

CCTP: Circle’s Cross-Chain Transfer Protocol (CCTP), a permissionless on-chain utility that facilitates USDC transfers securely between blockchains via native burning and minting. This enables USDC to flow natively across blockchains – unifying liquidity in Web3 and simplifying the user experience.

Max LTV: The maximum loan-to-value ratio indicating the highest possible borrowing power of a specific collateral. For example, if a collateral has an LTV of 75%, the user can borrow up to 0.75 worth of ETH in the principal currency for every 1 ETH worth of collateral.

Liquidation Threshold (LT): The threshold at which a borrow position will be considered undercollateralized and subject to liquidation for each collateral. For example, if a collateral has a liquidation threshold of 80%, the position will be liquidated when the debt value is worth 80% of the collateral value.

Specifications

These specifications lay the groundwork for an orderly transition, ensuring that Radiant's response is aligned with industry standards and protects user interests.

Phase 1: Add native USDC within 30 days of ratification

• Secure a Chainlink price feed for native USDC
• Add native USDC as full collateral and borrow market
• Max LTV: 80%
• Liquidation Threshold: 85%
• Scale allocation points (incentive emissions) for lend and borrow markets as deposits grow for a two-week period, at which point AP will be stabilized

Phase 2: Sunset USDC.e within 60 days from the date of Stargate native USDC support

• Initial actions for USDC.e market:
  • Tuning Allocation Points: Reduce allocation points to zero.
  • Withdrawal Only: Set the USDC.e market to a "withdraw only" state on the user interface, effective sixty (60) days after the date of Stargate native USDC support..
  • Cease Borrowing: Ensure that no further borrowing of USDC.e is permitted.
  • Freezing the Market: Implement necessary contract changes to prevent additional collateralization using USDC.e.
• Wind down USDC.e
  • Communication and Notifications: Develop and disseminate clear communication to users about the status of USDC.e, including the timeline and instructions for withdrawal.
  • Emissions: Terminate RDNT emissions for all USDC.e positions.
• Final removal of USDC.e
• Removal from Supported Assets: Complete the removal of USDC.e from the list of supported assets within Radiant's frontend.
• UI Adjustment for USDC.e Withdrawal: After removal from the main markets page, modify the user interface to add a distinct section where users can withdraw their remaining USDC.e funds. This area will facilitate continued access to withdrawal, separate from the main markets interface.

Timeline

Phase 1:

1. Add native USDC as collateral within 30 days of ratification.

Phase 2:

1. Short-term action: Upon ratification, tune allocation points down to 0 for USDC.e, following a seven (7) day grace period.

2. Sixty (60) days after ratification: Set USDC.e to "withdraw only" status on the Radiant UI.

3. Final removal: Coordinate the removal of USDC.e from supported assets in compliance with the wind-down plan.

Overall Cost/Impact

• User Impact: Guidance is required for users with USDC.e positions.
• System Impact: Modifications to Radiant's protocols and interfaces.
• Legal & Compliance Considerations: Alignment with recommendations from Gauntlet, who is advising the Arbitrum DAO in the overall USDC.e transition strategy.
• Costs: Minimal, primarily internal resource allocation for technical implementation and communication.

Voting

• In Favor: In support of proposed steps to add native USDC & sunset USDC.e
• Against: Against implementation of RFP-26
• Abstain: Undecided, but contributing to quorum