Radiant Capital Community Report 2 — Economic Ideas
Community Report 1: Radiant Capital Community Report 1 | by Novin | Nov, 2024 | Medium
Table of Contents
- RDNT Is Holding Up
- Relaunching the Flywheel
- Side-Story: Revenue Calculation
- Stability First, Recovery Follows
- RDNT Financial Engineering
- Putting This All Together
- Summary
This report is an unofficial community-created document and not an official Radiant communication.
This article seeks to propose potential solutions for raising funds to compensate hack victims. The ideas outlined here may or may not be included in a formal proposal.
RDNT Is Holding Up!
Considering the circumstances, RDNT has been holding up remarkably well during the last few months. The RDNT token benefits from significant market-making activity and bots that are unaware of the hack, and trade purely on price movements. Despite the setback, the protocol still holds considerable value. It is a well-established brand, exchange-listed token, combined with unique technology.
Radiant remains a first mover in many aspects. The token price, which dropped during the bear market, seems to have bottomed out, reflecting its fair value now (once all markets are restored) even without much TVL. Without the hack, it’s plausible that the token would be trading at much higher levels, especially given the recent DeFi/ETH rally.
I have had the opportunity to speak with both big and small stakeholders, and many didn’t sell even though their DLP was unlocked. There is still anticipation for a potential recovery.
Relaunching the Flywheel
The core lending markets have three primary levers to restart the flywheel effect:
- Incentivizing Depositors and Lenders through RDNT Emissions: High RDNT emissions can attract users despite the increased protocol risks compared to larger, more established platforms. For depositors, these emissions make participation appealing, while for borrowers, if the emissions exceed or closely match the interest rates, loans effectively become “free.” So far, this has been the primary driver of Radiant’s adoption, with innovation playing a strong but secondary role.
- Liquidity in Pools: Liquidity attracts more liquidity. A well-funded pool encourages users to deposit funds due to several factors:
Communal Safety: Greater liquidity reduces perceived risk.
Stable Interest Rates: High liquidity normalizes interest rates and prevents sharp fluctuations.
Ease of Withdrawal: Ample liquidity ensures users can withdraw their funds without issues, as not all deposits are actively loaned out simultaneously. Establishing a strong initial liquidity base is critical to kickstarting the flywheel effect. - Competitive Interest Rates: Offering higher interest rates than competitors can justify the additional risks for users.
Recommendation: Increase RDNT Rewards by changing the Emissions Schedule
Boost RDNT emissions as a subsidy to attract depositors and borrowers until the market reaches a certain level of recapitalization. This incentivizes early re-adopters by offsetting risks associated with smaller or less liquid pools. We could set TVL goal bands with different weights and also calibrate the rewards based on chain-specific requirements.
The emissions schedule should incentivize chains proportionally based on the gap between their current TVL and the target. Chains with the largest gap (lowest TVL) get the highest rewards to attract users.
Key Principles for Allocation:
- TVL Gap Weighting: Reward emissions proportional to how far each chain is from the goal.
- Liquidity and User Momentum: Chains with smaller or less liquid pools may need higher reward multipliers to offset risk.
- Duration: Rewards should scale down gradually as each chain approaches its TVL goal.
As TVL approaches the goal on each chain, reduce the incentives proportionally to avoid over-subsidization: Monitor TVL. Reduce RDNT emissions as a chain gets closer to the target.
Different chains have varying levels of capital availability and user activity:
- Base: A newer, growing chain with lower TVL compared to established ecosystems like Arbitrum. Targets should be conservative yet ambitious.
- Arbitrum: A leading Layer-2 with strong DeFi activity. Higher TVL targets make sense given the liquidity and user base.
- BSC: A mature chain with large retail participation and significant liquidity. TVL targets can be more aggressive.
TVL Bands with Variable Emissions per Chain
TVL bands are intended as guidelines, not precise figures, and the DAO should consider additional factors as well.
- Base
- < $5M → High Emissions
- $5M - $10M → Moderate Emissions
- $10M - $20M → Reduced Emissions
- $20M < → Minimal Emissions
- Arbitrum
- < $10M → High Emissions
- $10M - $25M → Moderate Emissions
- $25M - $50M → Reduced Emissions
- $50M < → Minimal Emissions
- BSC
- < $10M → High Emissions
- $10M - $20M → Moderate Emissions
- $20M - $30M → Reduced Emissions
- $30M < → Minimal Emissions
We have to ensure that RDNT rewards and interest subsidies are time-limited and strategically adjusted to maximize the initial recapitalization of the markets without creating long-term dependencies. The exact metrics that we will use should be part of the proposal.
We should release a proposal regarding the Emissions Schedule Changes in early 2025 right after the Arbitrum and BSC core markets are restored.
Side-Story: Revenue Calculation
With the total owed to depositor hack victims being around $100 Million, here’s how the recovery timeline would look based on revenue projections:
- Hack-date dollarized Depositor losses: $52 Million
- Hack-date in-kind Depositor losses: $80+ Million
- Unlimited Allowances Exploit losses: No aggregate data available yet
For example, let’s calculate the first case. How long it would take to pay back Hack-date dollarized Depositor losses from revenue alone:
Current Revenue ($40k/month) -> 52,000,000/8,000 = 6,500 months -> approximately 541.7 years
10x Revenue ($400k/month) -> 52,000,000/80,000 = 650 months -> approximately 54.2 years
100x Revenue ($4M/month) -> 52,000,000/800,000 = 65 months -> approximately 5.4 years
Increasing revenue drastically shortens the repayment timeline, but even then it is over 5 years. If we achieve a big increase in protocol revenue, the price of RDNT would rise to a level where repaying $50-100 million could be easily accomplished by selling RDNT alone.
I would recommend not to allocate protocol revenue for victim recovery: Directly using revenue for victim recovery long-term could strain the protocol’s financial resources and limit its ability to invest in growth. Instead, alternative funding mechanisms, such as leveraging RDNT as a collateral asset to raise funds directly, or petitioning angel investors should be used.
Stability First, Recovery Follows
The most crucial factor for depositors is ensuring the survival of both the team and the protocol. Many projects fail not directly because of a hack but because they run out of funds. For Radiant to achieve a full recovery, the team must remain active and operational.
Two critical actions are required to make this possible:
- The team must operate in a lean, productive, and agile manner.
- There must be sufficient stablecoins in the OPEX wallets to sustain funding for operations.
I understand that the team is not popular at the moment. However, the remaining team members are the ones who chose to stay and did so fully aware of the criticism and anger they would face from the community. Please show kindness to the current team members — they are the ones who have the integrity to stay and are actively working to help you.
RDNT Financial Engineering
In a typical economic model, the compensation a protocol seeks to repay victims comes from revenue, which places a strain on the project. The larger the hacked amount, the heavier the burden. These funds must come from somewhere — either from the revenue allocated to DLP holders or the revenue earned by the team — both of which result in losing some competitiveness. The challenge lies in designing an economic mechanism that integrates victim repayment into the flywheel effect itself.
When we break the problem down to first principles, an intriguing solution emerges. Hack victims need capital, and Radiant is fundamentally a capital market. What if the DAO itself became an active participant in its own capital markets? Introducing RDNT into RIZ unlocks a whole new dimension of economic opportunities for both users and the DAO. By depositing and borrowing funds within the RDNT RIZ markets, we create a mechanism that transforms what would otherwise be a negative impact into a positive force, enhancing the overall health of the protocol.
If the DAO deposits RDNT into the RDNT RIZ markets:
- It will earn interest which can be used to either offset USD interest rates, or fund the project itself.
- It will add a collateral position that can be used to take out USD loans from the RIZ USD vaults.
The effects would be the following:
- Borrowed USD could be used to quickly repay hack victims.
- Total Value Locked (TVL) would increase by $10 million overnight.
- The interest paid by the DAO on USD loans would boost returns for USD depositors.
- Users borrowing RDNT would effectively pay interest back to the DAO, as the DAO would become a large depositor.
All of the above are Positive Feedback Loops.
There are a few considerations:
- The DAO must exercise caution to avoid liquidation by implementing low LTV requirements for the entire RDNT RIZ markets.
- The DAO must have sufficient RDNT reserves to withstand potential 50-80% price drops.
- The positions should be built gradually over time, allowing interest rates to adjust dynamically.
- The health ratio should always be kept at 3 or above.
- The DAO’s maximum share of the RDNT RIZ market should be less than 50%.
- The DAO’s maximum borrow rate should be less than 20% of the USD vault.
- The data must be publicly available on a dedicated page that displays the DAO’s allocations across the various Radiant markets, including health ratios and other relevant details.
Minting additional RDNT tokens is a necessary step. The RDNT currently held by the DAO is essential for routine operations or allocated to other expenses. While minting additional funds would dilute the holdings of existing token holders, it would not have an actual effect on the price as very little RDNT is sold under this idea.
While users can short RDNT using borrowed funds from the RDNT RIZ markets, they already have the ability to do so through other platforms like Hyperliquid. The difference is that, in this case, the fees would flow back to Radiant. Additionally, this process is ultimately market-neutral, as any borrowed RDNT must eventually be repaid to the RIZ markets.
The target should be to mint 150 million (10%) RDNT tokens.
This does not mean that these tokens will be sold on the open market. Out of the 150 million tokens minted, 125 million should be strictly reserved for purposes that do not generate sell pressure on the open market.
Inflation is often misunderstood as inherently harmful. However, this idea shows how limited and purposeful inflation can catalyze recovery, growth, and value creation. The new RDNT supply (83% of which does not add selling pressure) isn’t being created to flood markets but to invest in Radiant’s future—rebuilding trust, restoring liquidity, and driving adoption.
Without this step, the protocol risks stagnation, prolonged victim debt, and an inability to compete. By leveraging these tokens strategically, we are creating compounding benefits that far outweigh the risks. Skeptics should ask: What’s the cost of doing nothing? Can we afford to let inaction erode Radiant’s potential? Together, we can ensure this temporary measure unlocks a far stronger, more sustainable future for RDNT
Costs of Inaction:
- Prolonged Debt and Loss of Trust: Without inflation, compensating victims through protocol revenue alone would take decades or centuries, eroding trust and making RDNT less attractive.
- Missed Growth Opportunities: A stagnant protocol is a dying protocol. Without fresh liquidity and incentives, the platform risks losing its competitive edge to rivals with more aggressive recovery and growth strategies.
- Team Sustainability: Without funds for operations, the protocol could fail to retain or attract the talent necessary for its recovery.
A total of 150 million (10%) RDNT should be minted for the following purposes:
- Recapitalizing the DAO Reserve: Following the January hack, the Radiant DAO used up all of its non-earmarked reserves, leaving the DAO exposed to potential risks. To address this, 25 million RDNT should be sent to the reserve.
- Funding the OPEX Wallet: Despite team members taking reduced or no salaries, the OPEX wallet may face funding shortfalls in the next 6–12 months which constraints growth. To ensure operational continuity and growth for the next 5 years, 25 million RDNT should be sold over the next 12-24 months to recapitalize the OPEX wallets with stablecoin assets like USDT and USDC. This enhances the DAO’s resilience and maximizes flexibility, ultimately supporting victim recovery efforts.
- Collateralized Distributions to Hack Victims: The remaining 100 Million RDNT will be used as collateral to raise capital for victim reimbursement:
- Selling Long-Term Locked RDNT OTC to Angels: Identify angel venture capital investors or high-net-worth individuals willing to deposit into the claim contract in exchange for fully locked long-term RDNT. The tokens would be locked under a multi-year agreement, ensuring alignment with long-term goals and avoiding immediate sell pressure.
- Using RDNT as Collateral for Loans: Engage with OTC lenders who accept RDNT as collateral or a deposit for loans. These tokens would also be locked in multi-year contracts, maintaining stability and mitigating market impact.
- Leveraging RDNT for Bailout Swaps: Collaborate with DAOs interested in providing a bailout by incorporating RDNT into their DAO balance sheets in exchange for their native token. This is essentially a token swap, RDNT would remain on their balance sheets, such as within an entity like Arbitrum DAO.
- Establishing a New RDNT RIZ Pool: As outlined above, add a dedicated RDNT lending pool to RIZ to enable loans against RDNT holdings. While the marginal cost of borrowing USD might rise, the increased in-kind APY would attract more USD deposits in return.
Once hack victims have been fully compensated, Radiant can prioritize repaying these obligations to partners and then the borrowed amount to the RIZ markets.
A new DAO wallet should be created specifically for the 100 Million RDNT used only for collateralized fundraising.
The 3rd point in the process above can be repeated annually to consistently generate funds for hack victims. This would not impact the price of RDNT. Ultimately, the goal is for Radiant to repay all obligations in full.
Putting This All Together
As TVL increases, Radiant will be able to deposit more into the RDNT RIZ markets, enabling faster repayment to hack victims. Higher TVL, also drives up the price of RDNT, allowing the DAO to borrow more and earn higher interest on its RDNT deposits, creating a positive feedback loop.
Increased TVL → Higher RDNT price → Greater borrowing capacity → Faster victim repayment → Stronger community trust → More ecosystem growth. →
These loops are self-sustaining and ensure that the initial inflation generates far greater long-term value than its immediate costs.
Radiant should release two proposals, one regarding Adding RDNT to RIZ Markets and another regarding minting RDNT sometime Q1-2 of 2025.
Summary
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Mint 10% of the RDNT supply. But only sell around 2.5% overall.
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Ensure the team not just survives but grows while being lean and productive. Recapitalize the DAO wallet with RDNT reserves and the OPEX wallets with stables.
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Restart the flywheel with big incentives then continue incentives based on chain-specific requirements.
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Use minted RDNT as collateral to raise funds to reimburse victims either through angels, DAOs, or RIZ.
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Radiant DAO should become a depositor and borrower in RIZ through new a DAO wallet.
The next Radiant Capital Community Report will focus on: DAO Governance, Petitioning Partners, and Increasing Organizational Efficiency!
It may take months, or even years before this situation fully resolves itself. In the meantime, try to focus on living your lives and avoid letting the stress get to you!
If possible, please consider participating in community discussions. Your input and engagement are invaluable as the community works together toward a resolution.
I hope that this report becomes a regular post I can share.
Best regards,
Novin
Discord — novundev
