In order to keep improving our on-chain liquidity, we need to cut the dependence on liquidity provided only by stakers and lockers. We need to ensure deep stable liquidity in the future to attract larger capital and also reduce slippage for these transactions. For this purpose, the development of a PODL module is proposed.
What is PODL?
PODL can be defined as a product that buys LP Tokens. The idea is to use tokens collected from protocol fees (Borrowed fees in this case) to buy these LPs. The purchased LPs have to be locked forever, reducing circulating RDNT. This would cause also a positive price impact. Also, to encourage people to purchase the tokens, a royalty has to be implemented. As an example, if a RDNT-WETH LP is $0,9 USD, the module should purchase each LP for $0,99 (10% bonus).
With a PODL mechanism, it could not only help our liquidity to get deeper but also it can help the protocol to collect transaction fees when people trade RDNT instead of temporary liquidity providers.
Keeping in line with the real-yield strategy, it provides another source of income that can be used for different purposes like deepening liquidity, and buybacks of RDNT to burn afterward. Enhance certain pools for added rewards.
Steps to Implement
Develop an RDNT treasury on every deployed chain with its L1 Token (ETH, BNB, AVAX, MATIC).
Treasury can be built using 50% of L1 Token borrowing fees.
Once a week, the collected fees can be enabled for the swap on the module.
Collected LPs should be staked on the designated DEX as soon as possible.
LP definition and L1 token used for purchase should be defined on every blockchain RDNT is deployed.
Valas Finance has an excellent example of a PODL module.
The technical team should realize a discovery to define time and resources needed for developing.
Why is there a need to pay the 10% royalty to people while it’s the protocol that would be doing the purchasing? The protocol could also create these POL LPs itself. Also, currently, there is no ETH owned by the RDNT treasury. So there would be no ETH to sell at a discount.
Perhaps this royalty is worth considering for another use case but not for the PODL module?
Yes, the protocol could simple distribute a % of borrowing fees to form LPs and lock them on any DEX. However this mechanism would mean more utility for the rdnt token. This would create a positive peice impact as people will buy rdnt to form LPs and get the opportunity to get a L1 token + a royalty. I think it is an interesting approach to gain traction for new people.
Regarding treasury, you can simple define a % of the L1 tokwn collected from all borrowing fees collected and send them there. You would use those L1 tokens to purchase LPs.
Maybe another option, instead of offering royalty, you could generate some kind of GMX mechanism like multiplier points along with the swapped eth to improve rewarda from locked rdnt.
Hi @Gerhard - first of all thank you for your feedback and well thought out idea. Regarding a POL/PODL type approach, to Hung’s point, there would need to be some ETH in the RDNT Treasury (meaning, owned by the protocol directly) for it to offer this kind of mechanism. There have been a lot of discussions around there being a % of protocol fees being routed to a RDNT Treasury in order to have assets to pay for salaries, exchange listings, contractors, etc. given up till now the entire project has been funded by the team and over $1.5M invested.
Alternatively, if Radiant were to raise some outside capital, via VC investment, or OTC, then there would be funds for this type of initiative.
In terms of the level of effort required, it is possible to bring this on as a separate module, in the way Geist did it, although the mechanism was not particularly successful for Geist (very little POL)
I like the idea of PODL. It would be nice if I had a one-button action that allows me to provide liquidity. For example, I already have ETH deposited on the platform and some locked RDNT that is ready to unlock (withdrawal – past 28 days). It would be great if I had a button that simplified the entire process by allowing me to add liquidity by selecting the asset from my existing deposits to LP. Is that a realistic approach? That way, as an end user, I don’t have to go off-platform to convert tokens and it makes the entire process simple and easy to perform. The approach of selecting assets from my wallet to LP is okay too, but the process should be self-contained on Radiant (if possible) and super simple to use.
There is a new bond service that launched on arb a couple weeks ago. Don’t know much about it other than they spun off from Ohm and it’s like a dutch auction where the discount rises until someone bonds. Might be worth looking at if bonds are the chosen path.