Announcing Radiant v2: A New Era in Decentralized Finance

Radiant Capital
8 min readJan 15, 2023

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Most crypto projects do not run profitable organizations.

98% of all projects in crypto are not even mentioned in “profit” conversations because they simply have no revenue.

In DeFi’s new emerging narrative of sustainable “real yields”, a lack of revenue is simply not acceptable.

The goal is for Radiant v2 to be named the protocol with the lowest price to fee ratio in all of crypto — whilst continuing to offer seamless omnichain lending.

The chart below tracks the Price to Fees ratio of all DeFi projects (similar to P/E ratios for stocks).

A low ratio is indicative of a token with high fees and low market cap.

Token Terminal ranked Radiant Capital as the #1 “Fees to Market Cap” project in all of DeFi

There are thousands of projects that will never make this list because they not only have zero fee capture, but they distribute tokens at 20x or 100x their fee capture (this distribution model essentially treats native tokens as marketing & “customer acquistion” expenses).

DeFi 1.0 has been plagued by copycat protocols featuring zero utility and high-emission governance tokens that inevitably get farmed to zero.

Current Emissions Models have unequivocally failed at holding value over time.

The chart below tracks the value of DeFi 1.0 tokens against ETH.

Most of these protocols have gotten farmed into the ground. RIP.

This occurred for several reasons:

  1. The tokens did not provide sufficient utility, and “governance-only” tokens with zero value accrual got appropriately re-priced to the value of governance over time
  2. Extremely low barrier to earning DeFi tokens for mercenary liquidity providers. LPs could deposit tokens, earn yield, sell off tokens, then move on once yields compressed. This was seen time and time again on >95% of DeFi protocols

The combined brainpower of the DAO’s advisors, core contributors and community means that this post is several years in the making after watching DeFi 1.0 and 2.0 unfold in a predictable fashion.

We will be outlining various strategies to solve some of Radiant’s initial mistakes in V1 while ushering in a new ecosystem that our community has colloquially labeled as “DeFi 3.0”.

An ecosystem focused on:

  • Various mechanisms in place (see below) to prevent mercenary farming
  • Use cases with real utility for the future and longevity of DeFi (seamless cross-chain borrowing within minutes)
  • True governance with fully implemented Discourse Discussion Boards and Snapshot voting
  • Support for 20+ new collateral options with extremely safe LTV limits, generating more platform fees for the DAO

It’s been a long road to get here, but we couldn’t be more excited about the progress we’ve made so far.

Wait — What Wasn’t Working With Radiant v1?

Since our launch months ago, the elected counsel of the Radiant DAO has spent significant time in discussions with advisors and community members about how to address some of our earlier constraints.

Here is a summary of key takeaways from our conversations:

  • Initial emissions were unsustainable and led to too much inflation. While this sparked an early surge in the total value of deposits (peaking at around $500M), mercenary liquidity was not “sticky” and did not further the protocol’s capabilities. This emissions model prompted band-aid solutions such as RFP-2 to reduce emissions.
  • Insufficient runway. The original tokenomics detailed how lender/borrower emissions would expire after 24 months, which is insufficient to achieve the long-term cross-chain vision.
  • A low incentive to provide on-chain liquidity to the protocol. Single-sided staking gave users utility in the form of fee capture, even with emissions distributed at high rates for RDNT LPs.
  • Exit penalties were not optimally designed. A user who exits on the final day of a vest shouldn’t be penalized in the same way as someone who exits within the first minute of a vest. This system forces users into a suboptimal binary decision (whether to exit or fully vest). Consequently, this led to a high exit rate in the early days and further highlighted the need for inert liquidity.
  • Fixed unlock periods create unnecessary FUD. Grouping unlock events into universal weekly epochs creates weird game theory dynamics which aren’t particularly helpful or useful.
  • Mercenary capital is incentivized. This is not exclusive to Radiant but there is a general trend in decentralized finance toward mercenary capital — users who extract as much value from the protocol as possible before moving.

So, How Is Radiant v2 Different?

Two main concerns emerged from discussions with community members and advisors:

  1. How will the next version of Radiant create a better utility exchange between lenders/borrowers and the protocol?
  2. In keeping with the Foundation’s core value of “collective benefit,” how should the protocol decide who is eligible for the utility of receiving RDNT emissions?

To address these concerns, Radiant V2 will include revolutionary changes to core protocol mechanics, emissions, utility, and deeper cross-chain functionality.

Welcome to Radiant v2

One of Radiant v2’s first priorities will be to move our current ERC-20 RDNT token to the LayerZero OFT (Omnichain Fungible Token) format. This migration — developed from many conversations with the LayerZero and Stargate teams — will make cross-chain fee sharing much more seamless, enable quicker launches on additional chains (BNB chain slated to launch shortly after Arbitrum v2), and permit native ownership of bridging contracts rather than relying on third-party bridges.

Treatment of Exit Penalties in v2

  • In Radiant v1, users must either vest their RDNT emissions for 28 days or incur a 50% reduction in claimable emissions in order to instantly receive their tokens.
  • In v2, the DAO will implement a linear scale that gives users who exit early between 10–75% of all emissions, depending on the remaining vesting time (RFP-4)
  • Vesting time increased from 28 to 90 days (RFP-6)

Treatment of Expired Locks

  • Expired locks (liquid RDNT) in v1 received the same treatment as locked RDNT, in that both received protocol fees.
  • In v2, the community has voted to remove expired locks from the emissions pool (RFP-5). Users will now be able to enable an “auto-relock” option in the UI, which will allow them to receive emissions as they normally would automatically.

Changes to Protocol Fees:

  • In Radiant’s initial design, protocol fees generated from borrowers were emitted equally between RDNT lockers & lenders (50% to lockers of single-sided RDNT, and 50% to lenders)
  • Radiant v2 aims to provide a stronger utility proposition for liquidity providers by improving the ratio of protocol fee splits while concurrently reducing the dilutionary impact of vesting RDNT
  • Radiant DAO stakeholders voted on the following split for v2: 60% of protocol fees will be allocated to lockers, 25% will be allocated to the base fee for lenders, and 15% is designated for DAO controlled Operating Expenses Wallet, of which the use will be governed by a future on-chain proposal. This aligns incentives through the DAO governance model, while ensuring that the project remains independent of external funding sources such as grants and VC support
  • As a reminder, Radiant received $0 of Venture Capital financing and was entirely bootstrapped by the initial team

In addition to the changes outlined above, the Radiant Protocol contributors have also dedicated hundreds of hours to comprehensively redesign the Radiant website/app, with a focus on simplifying the user experience and matching (or exceeding) industry standards for design quality.

This top-to-bottom redesign intends to better attract new users via a more intuitive onboarding and education process, as well as streamline the migration process for current v1 users.

Last but certainly not least: Radiant will continue to allow all users to borrow and lend cross-chain, seamlessly. However, in order to be eligible for RDNT emissions, users will be required to maintain a minimum 5% threshold in locked Dynamic Liquidity relative to the total value of their deposit.

P.S. All these features have already been built and are currently undergoing testing.

Why “Dynamic Liquidity” Is Better Than Sliced Bread

The flywheel that emerges from dLP (Dynamic Liquidity Provisioning) is going to revolutionize the way in which DeFi 1.0’s pain points are tackled.

The dLP system is built around two core concepts, and it’s explained in more detail in this Radiant DAO proposal (RFP-4)

  1. Users that provide value to protocol unlock the ability to receive emissions.
  2. Users that simply deposit but don’t add value to the protocol will have exposure to natural market rates, but won’t be eligible for RDNT emissions.

If User 1 deposits 1M USDC into the Radiant market but has $0 of dLP tokens locked, they would be eligible to receive a base deposit yield but would NOT be eligible for RDNT emissions.

On the other hand, if User 2 puts 1M USDC into Radiant and has $50,000 worth of RDNT/BNB dLP locked, this user would be eligible for RDNT emissions (assuming the minimum 5% threshold continues to be met).

Logic dictates that farmers will be attracted to the higher yields, since only a few participants will initially qualify for the dLP-boosted emissions threshold.

Hypothetically - if only 5% of the $100m in current deposits qualifies for RDNT emissions, this would 20x current yields, thereby driving further demand for dLP until an equilibrium is reached.

Here is how the proposed mechanism would function:

This dichotomy fosters a healthy flywheel of value capture & new utility mechanics

What will happen to the current single-sided staking mechanism?

The DAO is transitioning the locking mechanism from single-sided RDNT (v1) to Dynamic Liquidity tokens (v2).

In order to ensure there are no unlocks which occur AFTER the v2 migration, we will disable all new locks of RDNT on Wednesday, January 18th at 22:00 UTC.

We will inform users on all social platforms with final 48 hour and 24 hour warnings, so that users have ample time to lock their final RDNT if they so choose.

Therefore, during the final month leading into Radiant’s launch of v2, the only staking options available for liquid RDNT would be via staking RDNT/WETH on our staking tab.

In Summary

Radiant v2 is simply far better than Radiant v1 across every single facet of the protocol.

V2 aims to implement improvements in tokenomics, utility, new cross-chain capabilities, multiple new EVM chain launches, LayerZero OFT implementation — and most importantly, it will focus on legitimate value accrual for the DAO, aiming to be crowned as DeFi’s highest fee-generating protocol.

How To Get Involved

There are a number of ways to get involved with the project. You can join our DAO governance discussion on Discourse, where the DAO develops and refines the Radiant Foundation Proposals (RFPs) that directly impact the future of the project.

Radiant’s Director of Communications hosts a live, town-hall style meeting on Twitter Spaces every other week to answer questions about the project’s current affairs.

If you want to stay up-to-date on all things Radiant, join the community on Discord or Telegram. If you’re interested in joining the community but don’t have time for much else, follow us on Twitter!

Conclusion

If you are interested in learning more about Radiant v2 and its capabilities, please visit our website at radiant.capital. The DAO encourages you to join the conversation and stay tuned for updates on our social media outlets as well.

The Radiant DAO is extremely excited about heralding in a more sustainable and cross-chain DeFi 3.0. We look forward to answering your questions in our Radiant v2 Twitter Town Hall this upcoming Tuesday, January 17th at 18:00 UTC.

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Radiant Capital

Radiant is building the first omnichain money market atop LayerZero. Deposit & borrow across multiple chains, seamlessly. https://twitter.com/RDNTCapital