Decentralized finance (DeFi) has the potential to revolutionize how assets are transferred and accumulated on a global scale. One product that many projects have set out to create is a decentralized and permissionless money market. This would allow anyone to effortlessly take out a loan rather than go through the tedious processes of the traditional financial system.
Radiant Capital is a DeFi money market specifically designed to unify liquidity across blockchains. In doing so, they’ve created several breakthrough processes that unify liquidity and create unprecedented incentive alignment between the sustainability of the protocol and its users.
What Is Radiant?
With the launch of their lending platform in July 2022, Radiant became one of the first Arbitrum-native DeFi platforms. Since then, they’ve evolved into an omnichain money market protocol with over $750 million in market size.
The omnichain expansion was a key feature of Radiant V2, which went live in March 2023. Currently, Radiant V2 supports lending and borrowing on Arbitrum, Ethereum Mainnet, and BNB Chain. It’s also the largest lending market on Arbitrum and the second largest on BNB Chain.
In addition to omnichain functionality, Radiant V2 features a novel tokenomics solution called Dynamic Liquidity, which aims to align user incentives with the sustainability of the protocol.
How Radiant V2 Unifies Liquidity
Radiant V2 integrates Layer Zero’s interoperability protocol to seamlessly deploy markets to and transfer assets between multiple blockchains. This integration unifies liquidity between different blockchains by freeing up the flow of assets.
A prominent problem in DeFi is fractured liquidity, which means that money is sitting idle in one spot. Specifically, the siloing of assets on different blockchains severely limits what those assets can do and how much a newer or smaller blockchain can grow. After all, DeFi users with the most assets will always use the protocols and blockchains with the most available liquidity, as it makes it easier for them to operate with less slippage.
Omnichain technology solves this by pooling assets from all enabled chains into a single place. In other words, Radiant is creating a platform of unified liquidity.
Radiant is live on Ethereum Mainnet, Arbitrum, and BNB Chain. This allows them to take advantage of the vast pool of liquidity on Ethereum while also accessing cheaper and faster blockchains. And because of their omnichain functionality, Radiant can easily launch on additional chains within the Layer Zero ecosystem.
Radiant V2 Fees
In the spirit of capital efficiency, Radiant V2 not only aims to be one of the highest fee-generating protocols in DeFi, but it also needs an efficient way to transfer those fees back to users. This is another area where omnichain functionality thrives.
These fees are generated from users' interest repayments on their loans and liquidations. This means that lockers receive a basket of blue-chip cryptocurrencies as rewards. 85% of protocol fees are distributed to Radiant’s users.
As of December 2023, Radiant V2 has accrued over $24 million in protocol fees – that means nearly $20 million has been distributed to protocol users in 1 year!
RDNT is the native token of Radiant Capital. Consistent with Radiant’s omnichain theme, RDNT is an “Omnichain Fungible Token” or OFT, which means it can be natively bridged between blockchains using the RDNT cross-chain bridge. This enhances the token’s capital efficiency by eliminating the need for wrapped assets, which carry additional risks such as de-pegging and vulnerabilities in the wrapper’s contract.
Dynamic Liquidity Provisioning (dLP)
A top priority of Radiant is capital efficiency, which is why cross-chain functionality is such a large priority. Similarly, the Radiant DAO aims to make the RDNT token as capital-efficient as possible, which is evident in their Dynamic Liquidity (dLP) mechanism.
Typical staking mechanisms are static; the staked tokens are literally frozen in a contract. Radiant’s “DeFi 3.0” solution to this problem is dLP.
Radiant employs an 80/20 liquidity provisioning model to avoid removing liquidity from the market. So, instead of staking RDNT, users can lock RDNT/ETH or RDNT/BNB liquidity tokens.
In addition to creating a more capital-efficient solution, dLP also serves as a mechanism to align the incentives of the protocol and its users.
In exchange for users enhancing the utility of Radiant by locking Dynamic Liquidity tokens, there are three primary rewards:
Activate RDNT emissions on deposits & borrows.
Share in platform fees comprised of blue-chip assets such as Bitcoin, Ethereum, and stablecoins.
Obtain voting power for governance via the Radiant DAO.
In order to build a sustainable protocol, there must be a solid foundation of liquidity.
While token emissions can be useful to onboard new users, they can also lead to two negative consequences: dilution and mercenary capital. With dLP, Radiant seeks to negate both of those while focusing on fee sharing to protocol users.
Radiant approaches this by enabling RDNT emissions to lenders and borrowers who lock dLP. This mechanism incentivizes users while also ensuring that Radiant’s markets have long-term liquidity.
In order to earn emissions, the dLP value must stay above 5% of their deposits into Radiant’s lending markets. So, if you deposit $100 in BNB, you can lock $5 of dLP to activate RDNT emissions. If this ratio drops below 5%, emissions will stop until it’s increased back above the 5% threshold.
Radiant Capital has undergone multiple audits with some of the world's best auditing firms, such as Open Zeppelin, Blocksec, Zokyo, and PeckShield. In addition, Radiant deploys Open Zeppelin Defender to detect and halt threats in advance.
Radiant has posted bug bounties on ImmuneFi, with the scope of impact covering the v2 smart contracts and the front end. Bug bounty programs are open invitations to security researchers to discover and responsibly disclose potential vulnerabilities.
Radiant’s story is a beacon of innovation in a sea of traditionalism, showcasing that the future of finance lies in decentralization, interoperability, and user empowerment.
The platform’s ability to unify liquidity across multiple blockchains represents a leap forward for the DeFi space. By embracing omnichain functionality, Radiant has effectively addressed the pressing issue of fractured liquidity, turning it into an opportunity to craft a seamless experience for users, thereby fostering a more robust and flexible financial ecosystem.
With Radiant V2, the platform has shown that it’s not just about the volume of transactions or the size of the market but about creating real value for its users. The substantial $24 million in protocol fees generated within a year, of which $20 million have been distributed back to users, stands as a testament to their commitment to capital efficiency and the principle of sharing prosperity.
The introduction of RDNT as an Omnichain Fungible Token further solidifies Radiant’s vision, as it streamlines the process of asset transfer across blockchains, enhancing the token’s utility without the added risk of wrapped assets. The Dynamic Liquidity Provisioning mechanism, a centerpiece of their DeFi 3.0 philosophy, provides capital efficiency and fosters a sense of community through aligned goals and shared governance.
In closing, Radiant Capital exemplifies a forward-thinking entity in the DeFi landscape, one that is not afraid to challenge the status quo and pave the way for a new era of finance. With a solid foundation of liquidity, a user-centric reward system, and a steadfast dedication to security and efficiency, Radiant is at the forefront of DeFi innovation.