Feedback 101: Deploying Merged Claim Contracts for Radiant Depositor Reimbursement
(This proposed remediation plan represents a complete rewrite of @Novin’s feedback 47a and RFP Idea 47a after collaboration with the council. This version introduces enough new ideas that it warrants another full collaboration cycle with the community as a feedback for a few more weeks over this holiday period to afford ample time for the community to inform the team on which of the proposed options should be implemented.
Note: This proposal focuses only on the remediation of the core market losses. A separate follow-on proposal will address the unlimited approval losses)
Abstract
Feedback 101 proposes the orderly repayment of Arbitrum and BSC core lending market depositors by deploying claim contracts on Arbitrum while merging assets, and liquidating all outstanding loans.
This proposal outlines how funds will be distributed and not how they will be raised. A different proposal will be submitted that outlines how Radiant plans to raise funds, however that aspect of the recovery plan is more dynamic as we engage partners and angel investors.
Motivation and Rationale
On October 16, 2024, Radiant suffered a sophisticated security breach, resulting in the loss of over $50 million in user assets. While the team collaborates with authorities to retrieve funds, an immediate plan is necessary to start compensating depositors and restore confidence as the protocol restarts on Arbitrum and BSC.
Useful Links
Announcement: x.com
Post-mortem: x.com
AMA: x.com
Remediation Goals
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Ensure maximum possible recovery value for deposits in exploited Arbitrum and BSC core lending markets.
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Design claim contracts with a focus on streamlined and efficient development cadence.
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Provide multiple recovery options that satisfy all user groups.
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Deploy a recovery UI for depositor reimbursement.
Key Terms
Claim Contract: A claim contract is a smart contract that allows users to securely claim assets or funds under predefined conditions.
Recovery Share: A recovery share in a claim contract represents a user’s proportional entitlement to deposited assets based on their claim in %.
Specifications
Radiant will deploy dedicated claim contracts on Arbitrum and BSC, enabling users to withdraw their coins as the contracts are progressively recapitalized.
Token Distribution
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Users with impacted deposits would receive a %-based share on a 1:1 basis following a rToken merge process described below.
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Users with impacted loans would be liquidated and their loans deducted from their deposits. Assets are merged and converted using pricing data on the day balances are recalculated.
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Each claim contract has its own set of %-based shares. For instance, someone might hold recovery shares exclusively in the WBTC contract.
Token Merges
Stablecoins
The following assets will be merged into a USDT (Arbitrum) claim contract:
- USDT (BSC)
- USDC (BSC)
- USDT (Arbitrum)
- USDC.e (Arbitrum)
- DAI (Arbitrum)
- USDC (Arbitrum)
BTC Denominations
All BTC-related tokens will be merged into a single WBTC (Arbitrum) claim contract:
- BTCB (BSC)
- WBTC (Arbitrum)
ETH Denominations
All ETH tokens, including staked versions, will be merged into a single WETH (Arbitrum) claim contract:
- wBETH (BSC)
- ETH (BSC)
- WETH (Arbitrum)
- wstETH (Arbitrum)
- weETH (Arbitrum)
Arbitrum Denominations
- ARB (Arbitrum) → ARB (Arbitrum)
BNB Denominations
- WBNB (BSC) → WBNB (BSC)
Double-Sided GMX LP Tokens
The GMX LP tokens will be split into 50% BTC or ETH and 50% USDT:
- gmBTC (Arbitrum) → 50% WBTC (Arbitrum) and 50% USDT (Arbitrum)
- gmETH (Arbitrum) → 50% WETH (Arbitrum) and 50% USDT (Arbitrum)
Conversion Prices
The conversion will take place on the conversion effective date but will likely be no earlier than January 1, 2025.
Converting wrapped tokens is simple since their value is generally tied to the price of the native asset. If there’s any difference, it can be calculated using basic arithmetic.
For example, to determine how much ETH each wstETH represents, you divide the price of wstETH by the price of ETH. Let’s assume:
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Price of wstETH = $2,370
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Price of ETH = $2,000
The value of one wstETH in ETH would be:
wstETH in ETH = Price of wstETH/Price of ETH = 2370/2000 = 1.185
So, 1 wstETH equals approximately 1.185 ETH.
This method can be applied for any amount or pricing to quickly calculate conversions.
Withdrawal Mechanism
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The claim contract will issue a %-based allocation based on the final tally of token merges. (For example: If you have 1 WBTC in a 10 WBTC claim contract, you have a 10% claim.)
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Capital injections will occur in multiple phases, and after each phase, the claim contract will allow users to withdraw assets proportionally to their share.
Loan Liquidations
The liquidation mechanism will prioritize leaving users with as much BTC and ETH as possible.
Liquidation Logic
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Loans will be deducted from USDT deposits first.
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The remaining loans will be deducted from BTC and ETH deposits in a 50/50 split.
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If either BTC or ETH deposits are exhausted, the remaining assets (BTC or ETH) will be deducted.
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If all deposits are exhausted, the user is fully liquidated.
Example
Price Assumptions
- BTC: $100,000
- ETH: $3,500
User A’s Deposits
- 1 BTC
- 5 ETH
- 10,000 USDT
User A’s Loan
- 20,000 USDT
Liquidation Process
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Deduct USDT Deposit:
The 10,000 USDT deposit will be used to partially cover the 20,000 USDT loan, leaving a remaining loan of 10,000 USDT.
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Deduct Remaining Loan (50/50 from BTC and ETH):
The remaining 10,000 USDT loan will be equally deducted from the BTC and ETH deposits.
BTC Deduction
- 10,000 USDT 50% = 5,000 USDT
- 5,000 USDT ÷ 100,000 (BTC price) = 0.05 BTC
ETH Deduction
- 10,000 USDT 50% = 5,000 USDT
- 5,000 USDT ÷ 3,500 (ETH price) = 1.4286 ETH
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Remaining Deposits After Deduction
- BTC Remaining: 1 BTC - 0.05 BTC = 0.95 BTC
- ETH Remaining: 5 ETH - 1.4286 ETH ≈ 3.5714 ETH
Final Outcome
After liquidation, User A will have approximately 0.95 BTC and 3.57 ETH remaining.
Treatment Selection
Feedback 101 introduces a flexible, tiered recovery strategy that gives users three options: Option A, Option B, or Option C.
Option A: Default Treatment (Opt-out) - In-kind Recovery Claim Contracts
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This is the default pathway for all users. If users take no action, their claims will automatically be handled under this treatment.
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It involves merging assets into BTC, ETH, BNB, ARB, and USDT and distributing them through 5 in-kind claim contracts, as already outlined in the proposal.
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Simple and straightforward: requires no action from users.
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Preserves the original crypto holdings for users who may wish to avoid conversion or selling.
Repayment Timeline: Repayment could take many years. The Radiant DAO will make its best effort to fulfill its obligations while balancing financial stability and ensuring on-going operations. The repayment timeline will depend on various factors, including available resources, future revenue streams, and unforeseen challenges. Radiant is committed to maintaining transparency throughout this process and will provide regular updates to all stakeholders regarding progress and any changes to the repayment schedule.
However, there will be no deposits into the non-priority claim contracts (Option A) from the Radiant DAO during the first year. After which there will be a progressively equalizing split between the non-priority claim contracts (Option A) and the priority claim contract (Option B).
For Advanced Users:
Option B: Electable Treatment (Opt-in) - Priority/Dollarized Recovery Claim Contract
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An optional, user-elected treatment where users can choose to “dollarize” their claims at hack-date prices, denominating their recovery amounts in USD.
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Users opting for this treatment agree to accept an additional haircut, determined dynamically based on how many participants (measured in TVL) elect this option.
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The USD claims are placed in a separate prioritized USDT claim contract (deployed on Arbitrum) and repaid first during the first year of the recovery.
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Radiant will liquidate DAO assets as required and during the first year, deposit exclusively into the priority claim contract.
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Users can allocate claims to the priority claim contract at will with a slider. (They do not have to convert their entire claim.) However, the minimum allocation per asset is 10%, maximum is 100%.
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The dynamic haircut will appear in the UI. If the haircut becomes too large, users will have the option to opt-out again via the slider.
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A price snapshot of assets at the time of the hack determines the USD value (dollarization) of user claims.
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A dynamic deduction (haircut) is applied to these claims. For BTC, ETH, BNB, and ARB it dynamically adjusts based on the proportion of users opting for this treatment measured in TVL. (E.g., If only a small number of users choose this option, the haircut might be lower; if many choose it, the haircut could be higher.)
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USDT follows the same process as described above, but with an extra flat 20% haircut applied.
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Users opting for this treatment could receive funds earlier, as claims in this contract take priority in repayments.
Anyone can deposit into any of the claim contracts. The priority claim contract simply determines where the Radiant DAO allocates its funds. Partners, however, are free to deposit into any claim contract, including into the non-priority recovery contracts. The Radiant DAO will strive to follow the logic outlined in this proposal. However, partners and third parties may independently decide which contracts they wish to deposit into directly.
Dynamic Haircut for Option B - Priority Recovery Contract
A mechanism will be implemented to calculate the haircut percentage dynamically, based on the proportion of TVL opting for Option B.
For example:
- Below 20% TVL, the haircut is 20%. (40% haircut for Stablecoins)
- Between 20% and 60% the haircut is dynamic based on demand by TVL. (Dynamic haircut + 20% haircut for Stablecoins)
- Above 60% TVL, the haircut is 60%. (80% haircut for Stablecoins)
This creates a self-balancing system (a.k.a. Prediction Market) where the haircut adjusts to account for early cashout demand.
The TVL/Haircut value is rounded to two decimal places (0.01).
There will be a 20% minimum and 60% maximum haircut range implemented.
Users can decide what recovery strategy best fits their needs—preserve original holdings or receive prioritized payouts in USD.
The treatment selection UI will be available for 1 month, after which no change is possible. During the 1 month period, users can change their selection/allocation at any time.
This is the option to choose if you’re willing to dollarize your claim at hack-day prices, accept an additional haircut, but potentially receive a much faster payout.
Repayment Timeline: Radiant may liquidate some of its assets and may redirect a portion of its operating expenses (OPEX) income to deposit funds into the priority contract. The exact timeline will be determined once the opt-in results are available.
For Advanced Users:
Option C: Electable Treatment (Opt-in) - RDNT Interest Bearing Claim Contract
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An optional, user-elected treatment where users can choose to convert their claims to RDNT at hack-date prices, denominating their recovery amounts in RDNT.
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The RDNT claims are placed in a separate Interest Bearing RDNT claim contract (deployed on Arbitrum).
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Users can allocate funds to the Interest Bearing RDNT claim contract at will with a slider. (They do not have to convert their entire claim.) However, the minimum allocation per asset is 1%, maximum is 100%.
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A price snapshot of assets (including the price of RDNT) at the time of the hack determines the RDNT value of user claims.
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Radiant will allocate 30% of OPEX revenue (5% of total revenue) to the interest-bearing RDNT claim contract without a set maturation date.
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The interest will be distributed every 6 months.
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Radiant will buy out the Claim Contract once 1. Both Option A and Option B claim contracts are fully settled. 2. A proposal is voted on to buy out the claim contract.
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Buying out the claim contract means that Radiant deposits 100% of the outstanding RDNT into the contract, effectively halting any further payment of additional interest.
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The fewer people who choose Option C, the more attractive it may become to a certain segment of the user base, thanks to its interest-bearing feature.
Users can decide what recovery strategy best fits their needs—preserve original holdings, receive prioritized payouts in USD, or allocate funds into the interest-bearing RDNT claim contract.
The treatment selection UI will be available for 1 month, after which no change is possible. During the 1 month period, users can change their selection/allocation at any time.
This is the option to choose if you are a Radiant maxi and you believe the project will flourish long-term as it provides the biggest upside.
Repayment Schedule
First Year (2025):
Priority Recovery Claim Contract (Option B) → Available funds allocated for repayment: 100%
Second Year (2026):
Priority Recovery Claim Contract (Option B) → Available funds allocated for repayment: 70%
In-kind Recovery Claim Contracts (Option A) → Available funds allocated for repayment: 30%
Third Year (2027):
Priority Recovery Claim Contract (Option B) → Available funds allocated for repayment: 60%
In-kind Recovery Claim Contracts (Option A) → Available funds allocated for repayment: 40%
Fourth Year (2028):
Priority Recovery Claim Contract (Option B) → Available funds allocated for repayment: 50%
In-kind Recovery Claim Contracts (Option A) → Available funds allocated for repayment: 50%
Fifth Year (2029):
Priority Recovery Claim Contract (Option B) → Available funds allocated for repayment: 50%
In-kind Recovery Claim Contracts (Option A) → Available funds allocated for repayment: 50%
If the Priority Recovery Claim Contract (Option B) has been fully repaid 100% of the funds will flow into the In-kind Recovery Claim Contracts (Option A).
RDNT Interest Bearing Claim Contract (Option C) will be paid out once Option A and Option B have been fully repaid.
Recovery UI
An easy-to-use interface will be provided.
Recovery UI Deployment Phases
Phase 1: A view-only UI, where users can check their balances by copy-pasting their wallet address into a field.
It will not be possible to connect a wallet in phase 1.
After copy-pasting the user’s wallet address, the following is available:
- See their original crypto balances from the exploited contracts.
- See the Hack-date crypto prices for convenience.
Phase 2: A view-only UI, will show the various merges and conversions after an RFP is accepted. Calculations about all options will be visible.
- See their crypto post-merge, post-liquidation balances (USDT, BTC, ETH, BNB, ARB).
- See the mathematics for verification purposes.
Phase 3: Option selection will be available.
Option B Opt-in - Priority Recovery Claim Contract:
To opt-in for the priority recovery contract users will have to connect their wallets and sign a message (no GAS fees), to prove wallet ownership.
- A slider selector for each post-merge asset to allocate funds into the priority claim contract (Option B).
- A checkbox accepting Option B terms and conditions (if any funds were allocated).
Option C Opt-in - RDNT Interest Bearing Claim Contract:
To opt-in for the RDNT Interest Bearing claim contract users will have to connect their wallets and sign a message (no GAS fees), to prove wallet ownership.
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A slider selector for each post-merge asset to allocate funds into the RDNT Interest Bearing claim contract (Option C).
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A checkbox accepting Option C terms and conditions (if any funds were allocated).
Claim Contract Deployment:
After the Option selection period is over, the claim contracts will be deployed and will be available in the Recovery UI.
Balances under $10
Balances or assets valued under $10 per asset will be classified as dust and excluded from the recovery efforts.
Hacked Fund Recovery
If hacked funds are partially recovered, regardless of whether you choose Option A or Option B, the coins will be returned proportionally based on contract TVL into Option A and Option B contracts.
If hacked funds are fully recovered, regardless of whether you chose Option 1, Option 2, Option 3, or are part of the Unlimited Approvals Exploit Victims group the coins will be fully returned to all users reflecting their pre-hack balances minus the balances already withdrawn from any of the claim contracts.
Perceived Inequality
As with any plan, it’s impossible to account for every potential issue, whether perceived or real. Some situations that could come up include:
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An angel or DAO partner might deposit into one of the in-kind claim contracts, regardless of the proposal schedule.
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Prices could fluctuate, making one option more or less appealing in hindsight.
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Radiant might raise enough funds to make an option worthwhile, or might not raise enough.
Ultimately, each user will need to evaluate the risks and benefits for themselves.
Contract Recapitalization
Funding the claim contracts will be part of a new RFP proposal designed to maximize value for recoveries and shareholders alike.
Steps to Implement
User Asset Database
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Generate a snapshot (rToken and vdToken balances) based on the timestamp/block after the last legitimate transaction (non-hack) TX.
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Develop a methodology to ensure 100% data accuracy.
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Build a Web2 database from the snapshot. (Firebase, MySQL, or another suitable option.)
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Merging all tokens into BTC, ETH, BNB, ARB, and USDT based on the merge logic.
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Liquidating all loans as per the liquidation logic.
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Develop an off-chain user interface (UI) that allows individuals to verify their claims, show pre and post-merge assets, show pricing data and make their option elections.
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Users will have 2-week period to make sure their balances are correct, then 1 more month to finalize their option election.
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Finalize the database and publish the final data on a Github repository for final manual checks by users.
Contract Deployment
- Deploy claim contracts on Arbitrum and BSC.
- Add the ‘Recovery Contracts’ to the Radiant Recovery UI.
External Stakeholders
- Reconnect with Binance and other centralized partners for potential collaboration regarding the BNB claim contract on BSC.
- Draft and submit an Arbitrum DAO proposal timed to coincide with the launch of the new ARB claim contract.
- If grants are approved, request deposits into the claim contracts directly.
Cost Analysis
- Build, test, audit, and deploy new recovery UI.
- Build, test, audit, and deploy new claim contracts.
- Cover ongoing costs for management, support, and infrastructure.