RFP-51: THE NEW RADIANT CAPITAL ECONOMIC PARADIGM

ABSTRACT

The Radiant DAO proposes a comprehensive overhaul of its economic framework to enhance long-term sustainability, reduce token inflation, and boost protocol competitiveness. Key initiatives include implementing Dynamic Reserve Factors, transitioning to Dynamic Revenue Distribution, introducing a Weighted Emissions Allocation Model, establishing the Radiant Guardian Fund, phasing out the qRDNT/qLP anti-dilution stream, and diversifying DAO treasury assets. By supporting RFP-51, the DAO commits to a bold but necessary transition into a more sustainable and competitive future. Each component of the proposed paradigm is designed to complement the others, generating compounding benefits across protocol fees, TVL, security, and trust.

This RFP is a refactored version of Feedback 103.

MOTIVATION AND RATIONALE

On October 16, 2024, Radiant experienced a sophisticated security breach, leading to the loss of over $50 million in core market deposits across the Arbitrum and BNB chains. The incident effectively reset the protocol on those chains, presenting an opportunity to implement much-needed economic reforms to ensure long-term sustainability and competitiveness.

Key Challenges

Lack of long-term TVL retention: While RDNT emissions effectively attract users to the protocol, they primarily lead to short-term leveraged looping rather than long-term retention. A well-calibrated Emissions Policy and a competitive and dynamic Reserve Factor structure can give users a compelling reason to stay.

Inefficient reward distribution: dLP lockers provide deep swap liquidity but have been overcompensated and rely on unsustainable, inflationary mechanisms, such as subsidies necessitated by the high Reserve Factors and the anti-dilution stream. Since dLP lockers are otherwise unproductive, their rewards were artificially elevated.

Loss of trust and solvency risk: Trust in Radiant has been severely compromised. The DAO must initiate the remediation process but also offer new depositors a way to hedge against typical DeFi lending protocol risks. Additionally, the DAO's holdings are heavily concentrated in RDNT, representing solvency risks.

Key Objectives

1. Reduce RDNT inflation.

2. Boost competitiveness through Dynamic Reserve Factors.

3. Align emissions with high-impact markets.

4. Build back trust with the Radiant Guardian Fund.

5. Diversify treasury for long-term financial stability.

KEY TERMS

• Reserve Factor: % of borrower interest retained by the protocol.

• qRDNT/qLP: Quantum RDNT/dLP with anti-dilution stream benefits.

• Subsidies: RDNT incentives distributed to promote economic activities.

• Emissions Reserve Wallet: RDNT held for emissions, linearly unlocked over a specified period (about 2 years remaining).

ECONOMIC AND FLYWHEEL ADJUSTMENTS

Adjustment 1: Dynamic Reserve Factors

Since its inception, Radiant has implemented significantly higher Reserve Factor values (75%) rigidly across all assets compared to competitors. The unique economic model fueled Radiant's hyper-growth by allocating 60% of all fees to dLP holders, encouraging deep liquidity for the RDNT token while providing substantial subsidies for both lenders and borrowers. As a result, it attracted users from the broader lending-borrowing ecosystem quickly.

The shortfall for these subsidies was covered by emissions from the DAO’s emission reserve wallet through RDNT rewards. However, this approach has led to inflation and an unsustainable system. To address this, the Radiant DAO plans to use a Dynamic Reserve Factor system to be market competitive, increasing borrow fees that flow directly from borrowers to lenders.

Key Changes

• Market-oriented Reserve Factors

• More fees are directed to lenders

• dLPs lockers still receive 60% of protocol revenue

Expected Outcomes

• Less emissions required

• Competitive base yields to attract sticky liquidity

• Increased protocol TVL

  See addendum 1 below for reserve factor example changes

Adjustment 2: Dynamic Revenue Distribution

Legacy Model (RFP-7)

• Fixed Reserve Factor (75%) across all markets

• Fees split: 60% dLP, 25% lenders, 15% DAO OpEx

New Model (RFP-51)

• Dynamic Reserve Factor

• Relative fee-based distribution:

  • Lenders: 100% - RF%
  • Protocol Revenue: RF% * Protocol Fees

    • 60% dLP Lockers

    • 15% Emissions/Remediation

    • 15% DAO OpEx

    • 10% Guardian Fund

      Example: For $100 in fees, with a 20% Reserve Factor:
      * $80 to lenders
      * $20 revenue split:
      * $12 dLP
      * $3 DAO OpEx
      * $3 Emissions/Remediation
      * $2 Guardian Fund

See addendum 2 below for the revenue distribution math

Expected Outcomes

• Enhanced emission reserve sustainability
• Enables recalibrated, revenue-driven dLP rewards

Adjustment 3: Weighted Emissions Allocation Model

Problem: Emissions are asset-agnostic, leading to inefficiencies and waste.

New Strategy:

• Weighted RDNT emissions across asset markets

• Prioritization criteria:

  • Stimulate new market adoption
  • Increase support for low TVL markets
  • Ecosystem partner incentives and alignment
  • Promote organic, emissions-free markets
  • Gradually phase out asset-agnostic subsidies over the remaining 2-year runway

Implementation

• Gradual shift to weighted emissions over the remaining 2-year runway.

Expected Outcomes

• Higher emissions return on investment

• Phased reduction in inflation

• Accumulate more RDNT than distributed

• Sustainable TVL and market depth growth

Adjustment 4: Radiant Guardian Multisig Wallet

Goal: Rebuild trust and provide electable loss protection from non-market risks.

Mechanism

• Electable coverage for dLP stakers

• Proportional dLP stake requirement for eligibility

• Covers:

  • Smart contract exploits and hacks
  • Severe oracle manipulations and failures
  • Custodian failures
  • Major liquidation failures or bad debt

Implementation

• Set up Guardian Fund Multisig wallet

• Begin capital accumulation

• Separate RFP to finalize full feature mechanics

Expected Outcomes

• Restored depositor confidence

• Competitive advantage in DeFi lending security

Adjustment 5: Repurposing qRDNT/qLP Stream

Problem: Anti-dilution stream now inflates without the intended impact as core deposits were drained for the majority of locked dLP.

New Use of Funds:

• Remediation

• Guardian Fund

• RDNT/USDC RIZ liquidity

• DAO Treasury diversification

Policy: No RDNT sell pressure; DAO commits to holding.

See addendum 3 below for the qLP/qRDNT stream remaining lifecycle

Expected Outcomes

• Deflationary pressure

• Higher net real yield for dLPs

• Better alignment of incentives, subsidies, treasury diversification & resilience, remediation goals, and contingency plans

Adjustment 6: Adding Stability and Yields to Treasury

Problem: Treasury is overexposed to RDNT, risking solvency.

New Diversification Tactics

• OTC deals with institutions

• Private DAO-to-DAO token swaps

• Borrowing USDC via RDNT in RIZ

• TWAP selling above $0.2 RDNT

Goals

• Sustainable operating capital

• Balanced exposure (USDC, ETH, BTC, etc.)

Expected Outcomes

• DAO financial resilience

• Strategic liquidity and yield generation

• No impact on market stability

Projected Effects

• dLP Lockers will continue earning 60% of protocol revenue as real yields in USDC, WBTC, BNB, ETH, and more.

• RDNT inflation should be significantly reduced, targeting zero within 2 years.

• Both Core and RIZ markets should become more competitive even without emissions, making zero-emission assets viable.

• Restore confidence by establishing the Radiant Guardian Fund.

• The DAO will secure essential funds for the remediation effort without selling RDNT on the open market, or in market neutral transactions.

• Diversified DAO Treasury assets will allow for long-term operations and stability while generating yield.

STEPS TO IMPLEMENT

1. Gradually reevaluate and reduce Reserve Factors.

2. Change the Fee Distribution to be dynamic and to also allocate fees to the Emissions Reserve, Remediation, and the Guardian Fund.

3. Develop a new Weighted Emissions Allocation Model.

4. Create the Radiant Guardian Fund multisig wallet.

5. Redirect the qRDNT/qLP stream for new purposes.

6. Diversify DAO Treasury long-term.

COST ANALYSIS

• No direct costs to the DAO Treasury

• Infrastructure built on existing multisig and UI tools

VOTING

In Favor: This proposal represents a major leap forward in economic sustainability, competitiveness, and growth. By voting in favor, you agree to ALL that has been proposed within.

Against: Rejecting RFP-51.

Abstained: Undecided, but contributing to quorum.

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ADDENDUMS

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Addendum 1: Reserve Factor Example Changes

Addendum 2: Fee Distribution Math

Addendum 3: qLP/qRDNT Stream Remaining Lifecycle