RFP Idea 47: Deploying Merged Claim Contracts for Radiant Depositor Reimbursement
This RFP idea is a rewrite of RFP Idea 47a and replaces it.
This proposal represents the first post-hack remediation plan that originated from the community, reconciled with the DAO inaugural council resulting in significant modifications, and then reconciled again with the community including an associated 14-day survey that narrowed three (3) recommended recovery options down to one (1). This proposal prioritizes and addresses the remediation of the core market losses on Arbitrum and BSC chains only. A separate follow-on proposal in Q1.2025 will address the unlimited approval losses.
Abstract
RFP Idea 47 proposes the orderly repayment of Arbitrum and BSC core lending market depositors by deploying claim contracts 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 the Radiant DAO 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 while also delivering additional v3 features overall. A well-designed remediation plan could significantly enhance the likelihood of securing recapitalization and bailout support from other parties as well.
Remediation Goals
- Ensure maximum possible recovery value for deposits in exploited Arbitrum and BSC core lending markets.
- Design claim contracts with a focus on streamlined and efficient development cadence.
- 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
The Radiant DAO will deploy dedicated claim contracts on Arbitrum and BSC, enabling users to withdraw their tokens as the contracts are progressively recapitalized.
Token Distribution
- Users with impacted deposits would receive a %-based share on a 1:1 basis following a rToken merge process described below.
- 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.
- 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 (BNB)
- USDC (BNB)
- USDT (Arbitrum)
- USDC.e (Arbitrum)
- DAI (Arbitrum)
- USDC (Arbitrum)
- USDe (Arbitrum)
BTC Denominations
All BTC-related tokens will be merged into a single WBTC (Arbitrum) claim contract:
- BTCB (BNB)
- WBTC (Arbitrum)
ETH Denominations
All ETH tokens, including staked versions, will be merged into a single WETH (Arbitrum) claim contract:
- wBETH (BNB)
- ETH (BNB)
- WETH (Arbitrum)
- wstETH (Arbitrum)
- weETH (Arbitrum)
Arbitrum Denominations
- ARB (Arbitrum) → ARB (Arbitrum)
BNB Denominations
- WBNB (BNB) → WBNB (BNB)
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 31, 2025. The price used for the conversion will be based on the daily closing price of the tokens on the conversion effective date, rather than their price on the date of the hack
Converting wrapped tokens is simple as their value is generally tied to the price of the native asset. If there’s any difference, it can be calculated using basic arithmetic.
Example:
For example, to determine how much ETH each wstETH represents, you divide the price of wstETH by the price of ETH. Let’s assume:
- Price of wstETH = $2,370
- 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
- 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.)
- 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 blue chip assets such as BTC and ETH.
Liquidation Logic
- Loans are first repaid in-kind, meaning assets are deducted from the same type (e.g., ETH is used to repay ETH loans).
- Loans are then repaid using USDT.
- Next, loans are repaid using ARB.
- After that, loans are repaid using BNB.
- Any remaining loans are repaid using BTC and ETH deposits, split equally at 50% each.
- If either BTC or ETH deposits are depleted, the remaining loans are repaid using the other asset.
- If all deposits are depleted, the user is fully liquidated, regardless of whether their balance is zero or negative.
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
-
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.
-
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
-
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.
Dust
- All balances below $1 prior to merges will be classified as dust and set to zero. Balances under $1 are always treated as dust in these cases to simplify recovery efforts, reduce complexity, and streamline the process.
- All balances below $10 after merges will be classified as dust and set to zero. Retaining balances under $10 in the claim contracts would be gas-inefficient, as claims are repaid incrementally in small chunks. Balances below $10 would incur gas costs higher than the payouts received at each stage.
In-kind Recovery Claim Contracts
- It involves merging assets into BTC, ETH, BNB, ARB, and USDT and distributing them through 5 in-kind claim contracts, as the proposal outlines.
- Simple and straightforward: requires no action from users.
- Preserves the original crypto holdings for users.
Repayment Schedule
Repayment could take many years. The Radiant DAO will make its best effort to fulfill its obligations while balancing financial stability and ensuring ongoing operations. The repayment timeline will depend on various factors, including available resources, future revenue streams, and unforeseen challenges. The Radiant DAO 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.
The Radiant DAO will allocate funds to the In-Kind Recovery Claim Contract on a semi-annual basis. The allocated amount will be distributed proportionally according to the Total Value Locked (TVL) of each claim contract.
Recovery UI
An easy-to-use interface will be provided to hack victims to review and verify on-chain information and follow the remediation process and status.
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 show the various merges and conversions after an RFP is accepted. Calculations will be visible.
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 deposit and loan balances from the exploited contracts.
- See Hack-date and the plan effective date crypto prices for convenience.
- See their post-merge, post-liquidation balances (USDT, BTC, ETH, BNB, ARB).
- See the mathematics for verification purposes.
Phase 2: Claim contracts will become available.
- Wallet connection will be enabled
- Claim contracts will be deployed and will be available in the Recovery UI.
Hacked Fund Recovery
If hacked funds are partially recovered the coins will be returned proportionally based on contract TVL into the claim contracts.
If hacked funds are fully recovered, regardless of whether you have a share in the claim contract 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:
- An angel or DAO partner might deposit into one of the in-kind claim contracts, regardless of the proposal schedule.
- Prices could fluctuate, making one asset more or less appealing.
- Radiant might raise enough funds, or might not raise enough.
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
- Generate a snapshot (rToken and vdToken balances) based on the timestamp/block after the last legitimate transaction (non-hack) TX.
- Develop a methodology to ensure 100% data accuracy.
- Build a Web2 database from the snapshot. (Firebase, MySQL, or another suitable option.)
- Merging all tokens into BTC, ETH, BNB, ARB, and USDT based on the merge logic.
- Merging then liquidating all loans as per the liquidation logic.
- Develop an off-chain user interface (UI) that allows individuals to verify their claims, show pre and post-merge assets, and show pricing data.
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 BNB.
- 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.
DISCLAIMER
RADIANT IS NOT A BANK OR OTHER DEPOSITORY INSTITUTION. THE SMART CONTRACTS ARE NOT A DEPOSITORY OR BANK PROGRAM. NEITHER YOUR DEPOSITED ASSETS NOR ASSETS DISTRIBUTED VIA THIS REMEDIATION PLAN ARE COVERED BY INSURANCE AGAINST LOSSES OR SUBJECT TO FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR SECURITIES INVESTOR PROTECTION CORPORATION (SIPC) PROTECTIONS OR THE PROTECTIONS OF ANY COMPARABLE ORGANIZATION ANYWHERE IN THE WORLD. YOU SHOULD INFORM YOURSELF OF ANY LEGAL OR TAX CONSEQUENCES OF PARTICIPATING IN THE RECOVERY OPT-IN PROGRAM. THE RADIANT DAO IS NOT RESPONSIBLE FOR ANY SUCH CONSEQUENCES TO YOU.
You acknowledge and agree that you do not possess, and shall not assert any legal claim, right, or entitlement against the Radiant DAO, Supernova Holdings, or any of their affiliates, officers, agents, or representatives, whether arising under contract, tort, equity, or any other legal theory.
The Recovery Plan is provided solely as a voluntary initiative by the Radiant DAO and is implemented on a best-effort basis. It is expressly understood that participation in the Recovery Plan does not create, constitute, or imply any binding claim, legal obligation, enforceable promise, or guarantee of performance on the part of Radiant DAO, Supernova Holdings, or any related entities.
Furthermore, any percentages or figures referenced in connection with claim contracts, agreements, or related documentation are strictly representational and do not confer, represent, or guarantee monetary value, financial return, or any other tangible or intangible benefit. These percentages are provided solely for the purpose of facilitating participation in the Recovery Plan and shall not be construed as constituting consideration, compensation, or a legally binding financial obligation.