Top warehouse research report: Cross-chain DeFi lending agreement Radiant Capital

Investment Summary

At present, with the continuous development of public chains and second-tier tracks, the liquidity between ecology will inevitably be further divided. Compound Finance, a leading lending project, has previously launched Gateway to provide a test network for cross-chain lending; Aave will also support cross-chain lending in the V3 version. The recent Aave V3 proposals have been approved. V3 Portals will add Hashflow/Wormhole and Stargate as “whitelists” “Bridge” voting; mainstream DEXs such as Uniswap and Sushiswap are deployed on multiple chains at the same time. The entry of many established DeFi blue chips also shows that they do not want to miss the early industry dividends of the multi-chain market.

Radiant Capital is a cross-chain DeFi lending protocol. The team positions itself as an omnichain lending protocol, aiming to achieve leveraged lending and composability between different chains, allowing users to leverage on the DeFi protocols it supports. Obtain leverage and simplify the operations of cross-chain lending and borrowing of assets between different chains.

The highlights of the Radiant Capital project are:

1) As the first cross-chain lending protocol launched in the LayerZero ecosystem, Radiant has completed the cold start of early projects and captured a certain size of market share and user groups, giving it a first-mover advantage in this track.

2) The improvements to the Radiant V2 version have extended the life cycle of the project and alleviated the inflation problem of the $RDNT token. The design of dLP is also expected to bring more liquidity to the protocol, but its impact is long-term. The process remains to be further observed.

3) Radiant based on LayerZero, at the cross-chain lending level, shares a token standard (OFT), so it can achieve liquidity sharing on all LayerZero-supported chains without relying on additional trust assumptions of external third-party cross-chain bridges. . If Radiant can make good security assumptions between oracles and relays in its V3 and V4 versions in the future, and achieve trustlessness at the contract level, then in terms of cross-chain security assumptions for assets, it will be better than the current mainstream on the market with the help of third-party technology. The three-party cross-chain bridge may be more advantageous in realizing cross-chain assets.

The risks of this project are:

1) The team is anonymous. Although Radiant has briefly introduced the team in its official documents and community, the resumes of specific members have not been disclosed.

2) Radiant does not have any innovative technical advantages in the lending field alone. It mainly follows the design of Aave. As Aave V3 subsequently launches its own cross-chain lending function - Portal, it will have a certain impact on Radiant.

3) Looking back on the history of Radiant’s fortune, a large part of the factors are inseparable from the protocol’s high token incentives. In addition, it is also related to many factors such as the recovery of the macro-level market, the hot Arbitrum ecosystem, and the expectations of the entire LayerZero chain. This also makes Radiant’s expectations a bit over-consumed at the moment. If you look at the FDV/TVL ratio alone, currently (April 25, 2023) Aave is 0.29, Compound is 0.3, and Radiant is about 1.68. This shows that Radiant’s full-liquid market value is higher than its TVL. Compared with lending protocols Aave and Compound, it can be said that Radiant’s current market value is artificially high.

4) Radiant Capital is based on LayerZero’s underlying architecture and uses Chainlink to ensure the accuracy of oracle quotes. The choice of relay has not been disclosed for the time being, and there are still certain security risks.

Taken together, although Radiant Capital is still facing some problems, with LayerZero’s full-chain technology and the project’s current first-mover advantage, there will still be opportunities to achieve more achievements in the field of cross-chain lending in the future. Therefore,Worth paying attention to.

Note: The final assessment of [Follow]/[Not Follow] for the first-class warehouse is the result of a comprehensive analysis of the current fundamentals of the project in accordance with the first-class warehouse project evaluation framework, rather than a prediction of the future price rise or fall of the project token. There are many factors that affect the price of tokens, and project fundamentals are not the only factor. Therefore, just because the research report is judged as [not paying attention], it does not mean that the project price will definitely fall. In addition, the development of blockchain projects is dynamic. If a project judged by us to be “not concerned” undergoes significant positive changes in its fundamentals, we may adjust it to “concerned”. Likewise, if a project judged by us to be “not concerned” If a project that is [Follow] undergoes major malignant changes, we will warn all members and may adjust it to [Not Follow].

1.Basic overview

1.1 Project Introduction

Radiant Capital is a cross-chain DeFi lending protocol. The team positions itself as an omnichain lending protocol, aiming to achieve leveraged lending and composability between different chains.

1.2Basic information[1]

2. Detailed explanation of the project

2.1Team

The official document of Radiant Capital disclosed 16 team members, but only their names and responsible positions were disclosed. The resumes of the team members were not disclosed. It is essentially an anonymous team.[2]。

In addition, Radiant mentioned in an official blog post in April this year that Radiant Capital has a team of 14 people who previously came from Morgan Stanley, Apple and Google. The team members have been engaged in the DeFi industry since the beginning of summer 2020 , and has many team members who have been working on cryptocurrencies since 2015[3]。

If team members of a blockchain project are anonymous, there may be the following risks:

1) Trust issue: The anonymity of team members may cause distrust among investors and users. Because the anonymous team cannot provide personal identification and background information, this may lead investors and users to believe that the project may be a scam or fraud project, thereby reducing their trust in the project.

2) Liability issues: Anonymous team members may allow team members to evade responsibility. If there is a problem with the project, it will be difficult for users and investors to find relevant team members to solve the problem.

3) Lack of transparency: Anonymous teams usually do not disclose information such as their experience, skills, and educational background, which makes it impossible for investors and users to determine the credibility of the project and the professional level of the team.

4) Marketing issues: Anonymous teams may encounter obstacles in publicity. Because investors and users usually prefer to work with real, transparent teams, if team members are anonymous, they may think that the project does not have enough integrity and credibility to attract enough investment and users.

To sum up, anonymous teams may have a negative impact on the development of blockchain projects. Therefore, investors and users should carefully consider whether to participate in projects developed by anonymous teams.

2.2 Funds

Since the establishment of the Radiant Capital project, there has been no participation from IDO, private equity or venture capital. All operating costs of early projects are raised by team members themselves.Since its development, the Radiant protocol has successfully completed the early cold start and attracted a certain user base, which can bring stable income to the protocol (as shown in Figure 2-1 below), thus covering a certain operating cost. However, the specific status of the agreement’s current treasury is unknown.

Figure 2-1 Radiant Capital revenue sharing[4]

In addition, Radiant Capital, as a full-chain lending protocol on Arbitrum,In the previous Arbitrum DAOs Airdrop event, 3.34 million $ARB tokens were received. As of now (April 7, 2023), they are worth nearly $4 million, which is the seventh largest amount among DAOs that have received airdrops.

2.3 Code

According to the team, Radiant Capital’s code is built on the 2021 Fantom lending protocol Geist, which in turn was built using the Aave code base[5]。

The Radiant Capital code base is not yet open source. However, according to the team, Radiant v1 has been audited by PeckShield and Solidity Finance, and Radiant v2 (which mainly consists of the same code base as Radiant v1) has also undergone multiple comprehensive audits with Peckshield and Zokyo. At the same time, Radiant also hired BlockSec to conduct white hat attacks to test the security of the network. Full reports from these audits are available through official Radiant documentation.

Currently, Radiant Capital is partnering with Immunefi to launch a bug bounty program with a bounty of up to $200,000. In addition, Radiant will use OpenZeppelin Defender’s security system to monitor the network around the clock and respond immediately to potential attacks/risks.

2.4 Products

Radiant Capital is a cross-chain DeFi lending protocol. The team positions itself as an omnichain lending protocol, aiming to achieve leveraged lending and composability between different chains, allowing users to leverage on the DeFi protocols it supports. Obtain leverage and simplify the operations of cross-chain lending and borrowing of assets between different chains.

2.4.1Run process

Figure 2-2 Radiant Capital platform fee structure[6]

The operating mechanism of Radiant Capital can be referred to Figure 2-2 above. It is essentially similar to the lending protocols currently on the market (such as Aave, Compound, etc.). The difference is that Radiant wants to be a full-chain lending protocol, that is, users can Collateral is deposited on the chain, and then borrowed and borrowed on chain B.

Radiant’s overall operating mechanism is relatively simple: when users need to use Radiant’s cross-chain lending service, they need to first deposit certain assets on the chains supported by the platform (currently the platform only supports Arbitrum and BNB Chain), which becomes a dynamic flow. Provider (dLP) before lending the assets required by the target chain. The fees earned by the Radiant V2 protocol are distributed: 60% to dynamic liquidity providers (dLP), 25% to depositors (Lenders), and 15% to designated DAO-controlled operating wallets.

In addition, Radiant also providesOne click cyclefeature, users can increase the value of their collateral (achieving up to 5x leverage) through multiple automated deposit and borrow cycles.

For example, users can deposit ETH, WBTC or other corresponding assets as collateral on Arbitrum through Radiant, and then lend BNB on BSC, thereby amplifying their own leverage. In this lending process, users do not need to perform cross-chain operations of assets (for example, in this example, there is no need to cross-chain their ETH on Arbitrum to BSC in advance). In other words, from the user’s perspective, cross-chain lending operations can be completed on different chains or L2 without having to cross-chain assets to other chains.

2.4.2Radiant V2

Figure 2-3 Radiant V2 improvements[7]

Figure 2-3 above shows the improvement process of the V2 version released by Radiant Capital on January 16, 2023.

Specifically, compared with Radiant V1, the changes in Radiant V2 mainly focus on two aspects:

1) Economic model

Radiant introduced to solve the inflation problem of $RDNTDynamic Liquidity Provisioning (dLP, Dynamic Liquidity Provisioning)The concept is that in the V2 version, users who simply deposit can only receive the basic interest rate, but no longer receive $RDNT token rewards. If you want to receive $RDNT token rewards, you need to lock dLP tokens that are at least 5% of the total deposit value (because the value of LP changes dynamically, it is called dynamic liquidity supply). This means that for a user’s $100 equivalent USD deposit, the user needs to hold at least $5 equivalent in dLP tokens to earn $RDNT token incentives.

Radiant currently provides two locked LP pools:
• Decision: Balancer 80/20 composition (80% RDNT & 20% ETH)
• BNB Chain：Pancakeswap 50/50 (50% RDNT & 50% BNB)

For example, user A deposits $1 million on Radiant and locks $0 in dLP tokens. Then the user can only get the basic interest rate (APY), and there is no liquidity mining reward of $RDNT.

User B deposited $1,000 on Radiant and locked up $50 worth of RDNT/BNB dLP. Then User B will be eligible to receive $RDNT liquidity mining rewards (meeting the minimum 5% lock-in threshold).

A simple understanding is that in the V2 version, users not only need to provide LP, but also need to Stake a certain ratio of RDNT/ETH or RDNT/BNB dLP to obtain $RDNT token rewards.

dLP currently supports a locking time of 1-12 months. The longer the locking period, the higher the corresponding token incentives. The token rewards obtained will be released linearly within 3 months. During this period, if users do not want to wait, they can also apply for an early exit penalty to obtain 10%-75% of the token rewards (as shown in Figure 2-3) .

Figure 2-4 Radiant official website page

As shown in Figure 2-4 above, the content displayed on the Radiant official website page, users who only provide deposits but do not lock dLP will only be able to obtain the normal market lending rate on the Radiant platform (the red part in the picture above). Users who meet the dLP lock-up conditions will receive additional $RDNT token incentives (APY is the blue-purple part in the picture above).

Overall, the dynamic liquidity supply (dLP) launched by Radiant requires depositors on the platform to provide a certain proportion of liquidity if they want to receive $RDNT token rewards. On the one hand, it gives $RDNT more token demand and increases the amount of its tokens locked. On the other hand, it will also help improve the liquidity of $RDNT, attract more mid- to long-term liquidity contributors, and achieve a symbiotic development relationship with the platform.

In order to facilitate user operation experience, Radiant has added the “Zap” function to almost every component introduced in the V2 version: adding liquidity, revolving loans, adding dLP, and you can also realize revolving loans and lock 5% of dLP with one click.

In addition, in order to maintain the sustainability of the economic model, in the Radiant V2 version, Radiant has extended the original 2-year token release cycle to 5 years (July 2027). Radiant also modified the reward and penalty mechanism of Radiant V1 to increase the vesting time from 28 days to 90 days. Users who apply for withdrawal in advance can only receive 10%-75% linear rewards. Users who have not withdrawn their rewards after expiration will be removed from the pool and will no longer receive incentives. Users can activate the re-lock option in the interface. The protocol fees have also been changed accordingly, and dynamic liquidity providers (dLP) have become the biggest beneficiaries. Details can be found in the above description.The overall design is more reasonable than the V1 version.

2) Cross-chain mechanism

One of the first tasks of Radiant V2 is to convert RDNT’s token standard from ERC-20 toLayerZero OFT（Omnichain Fungible Token）Format. In Radiant V1, its cross-chain function mainly relied on Stargate’s cross-chain routing. In V2, Radiant first replaced the Stargate routing interface of its native token $RDNT with LayerZero’s OFT cross-chain standard. This can help $RDNT deploy to new chains faster and control the ownership of cross-chain contracts. The specific mechanism of LayerZero OFT is detailed in the technical section below.

summary:

Previously, as the price of $RDNT continued to rise, coupled with the incentives of liquidity mining, Radiant’s TVL was in a continuous upward period. But historical experience also tells us that most liquidity mining can only bring false prosperity to the project in the early stage. As the rate of return declines, the competitiveness of the project will also decline. Of course, the Radiant project team is also aware of this problem, and among the many improvements in the V2 version, they have taken a series of measures such as extending the release cycle of $RDNT tokens, adjusting fee allocation, modifying the vesting time of the reward and penalty mechanism, and setting up dynamic liquidity supply. , to achieve sustainable development of the project.

Theoretically, Radiant V2 alleviates the inflation problem of $RDNT tokens to a certain extent. The design of dLP is also expected to bring more liquidity to the protocol, but its impact is a long-term process and cannot be effective in the short term. Verification remains to be further observed. For the subsequent development of the project, we can continue to follow up on the overall liquidity situation within the ecosystem.

In addition, for a cross-chain lending agreement, the improvement and innovation of the economic model can only be regarded as the icing on the cake. In essence, the success of the agreement lies in whether it can generate actual lending demand and effectively retain users. Just like the current leading lending agreement Aave, even without token incentives, its overall scale is still far ahead of latecomers.

2.5 Technology

2.5.1interest rate model

Borrowers pay an interest fee when lending an asset, which is accumulated into the user’s loan value. Radiant Capital’s interest rate model refers to the design of Aave (the document also directly references Aave’s interest rate model formula) and adopts a dynamic interest rate model, which is essentially a general model of a lending agreement. The core idea is to maintain the lending demand for specific assets at within the optimal range.

Radiant’s interest rate algorithm is calibrated to manage liquidity risk and optimize utilization. The borrowing rate is derived from the utilization rate “U”. U is an indicator of the funds available in the pool.

Interest rateR_tModel to follow:

Radiant’s interest rate model supports liquidity through user incentives and manages liquidity risk in the protocol. The interest rate will change with the utilization rate of the loaned assets. When the utilization rate reaches a critical level, the model will adjust the interest rate to change user behavior and bring the utilization rate back to the optimal range:

If the utilization rate U is lower than the optimal utilization rate (), the borrowing interest rate will slowly increase with the utilization rate, attracting users to borrow money through lower borrowing costs;

If the utilization rate is higher than the optimal utilization () value, then the borrowing rate will rise rapidly, encouraging lenders to deposit more funds. At the same time, borrowers will repay their debts in a timely manner due to high borrowing costs.

Since this part of Radiant completely refers to the design of the Aave contract, more details can be found in the official documentation of the Aave interest rate model.[8]。

2.5.2liquidation mechanism

Radiant’s liquidation mechanism is still similar to Aave, using the Health Factor standard to determine whether a user will be liquidated.When the health coefficient is less than 1, that is, when the collateral value < the borrowing/debt value, the user’s collateral will be liquidated.

Collateral value = collateral * mortgage rate, debt value = borrowing value / lending rate

Once a liquidation is triggered, the liquidator can take over the borrower’s debt and collateral, help repay the debt and receive discounted collateral in return (also known as a liquidation reward). Like Compound and Aave, liquidators in Radiant can liquidate up to 50% of a borrower’s debt at a time.

Figure 2-5 Radiant Capital market risk parameters[9]

Liquidation incentives. In Compound and Aave, in order to encourage liquidators to participate in liquidation, a 5%-10% discount on the borrower’s collateral is usually provided as a liquidation reward. In Radiant, if the borrower is liquidated, the collateral bad debts need to be paid15%Half of the liquidation penalty (7.5%) will be distributed to the liquidator as a bonus, while the other half (7.5%) will flow into the team treasury. But it should be noted thatThis design may result in clearing trades being front-loaded, and large depositors may be required to bear higher losses.Therefore, in order to ensure that liquidation is completed as quickly as possible, liquidators often choose to pay relatively high gas fees.

For the liquidation scenario in Radiant, let’s take an example:

Suppose user A is in Radiant, deposits 10 ETH and lends DAI worth 5 ETH. If the price of ETH plummets during the borrowing period, causing user A’s health coefficient to fall below 1, his loan will be liquidated.

At this time, the liquidator can repay up to 50% of User A’s single loan amount (in this case, DAI worth 2.5 ETH). In return, liquidators can claim a single collateral, ETH, with a 7.5% liquidation reward. The liquidator requires 2.5 + 0.1875 ETH (0.1875 ETH is claimed by the protocol with a 7.5% liquidation reward, and a total penalty of 15%) to repay User A’s bad debt (DAI worth 2.5 ETH).

After liquidation, User A still has 7.125 ETH (10-2.5-0.1875-0.1875 ETH) of collateral and a DAI loan worth 2.5 ETH.

2.5.3RDNT OFT（Omnichain Fungible Tokens）

As mentioned above, Radiant V2 converts the RDNT token standard from ERC-20 to LayerZero OFT (Omnichain Fungible Token) format.

OFT (Omnichain Fungible Tokens)

OFT is a wrapper token that allows free movement between LayerZero supported chains. OFT is a shared token standard on all LayerZero-supported chains that can be seamlessly transferred on these chains without adding additional costs (such as cross-chain fees for assets). When OFT is transmitted between chains, it will be destroyed directly on the source chain through the token contract, and the corresponding token will be minted on the target chain (destruction and minting mechanism).

Radiant V2 currently only supports the OFT form of its native token $RDNT, which will enable $RDNT to be combined and fragmented on chains supported by LayerZero, thereby reunifying the liquidity of the asset. This means that $RDNT has an elastic supply on each chain. By being deployed on more chains and Dapps, more complex strategies and high-frequency arbitrage opportunities can be created around $RDNT, broadening the use of the token. Scenes.

Radiant also plans to get rid of its dependence on the third-party cross-chain bridge (Stargate) in the V3 version and fully integrate LayerZero to achieve a seamless cross-chain experience for Radiant and support cross-chain lending of more EVM chains.The biggest advantage of integrating LayerZero is that it solves the problem of fragmentation to a certain extent and can use a unified token standard on multiple chains.(Of course, the premise is that LayerZero can be widely expanded).This is also conducive to the frictionless process of pledging and borrowing the native tokens of any LayerZero-supported network during the Radiant cross-chain lending process.

First Class Warehouse Note: LayerZero is a full-chain interoperability protocol designed for passing lightweight information across chains without the need to run nodes on connected chains, through dependenciesOracles and Repeaters, transmit messages between endpoints on different chains[10]. Radiant Capital is based on LayerZero’s underlying architecture and utilizes oraclesChain linkTo ensure the accuracy of the oracle quotation, the choice of relay has not been disclosed for the time being. The editor speculates that the subsequent V3 version may first use LayerZero’s own relay. Therefore, if cross-chain communication is to be performed on Radiant, the message will be forwarded to the target chain only after the oracle (Chainlink) and the relay successfully verify each other.

Summarize:

Looking back on Radiant’s early successful launch, a large part of the factors are inseparable from the protocol’s high token incentives. In addition, it is also related to many factors such as the recovery of the macro-level market, the hot Arbitrum ecology, and the expectations of the entire LayerZero chain. When the Radiant protocol initially achieved certain results, the team itself realized that the initial high token incentives were unsustainable, which led to excessive inflation. Therefore, in the subsequent V2 version, the shortcomings of the V1 version were also Corresponding improvements have been made and the overall design is more reasonable.

For Radiant, it is undoubtedly the completion of an early successful project launch. But from a technical perspective alone, Radiant does not have any innovative technological advantages in the lending field. In terms of products, Aave’s design is mainly used. The future turning point of the project lies in whether it can make full use of LayerZero’s full-chain technology, further promote its full-chain lending to the market, and capture more real user groups.

3.Development

3.1 History

Table 3-1 Radiant Capital major events

3.2 Current situation

3.2.1Business data situation

As the first officially launched cross-chain lending project in the LayerZero ecosystem, Radiant Capital has already delivered a good answer.

Figure 3-1 Radiant TVL Scale[11]

According to the Token Terminal data port, as of April 21, 2023, the TVL on Radiant was approximately US$236 million, of which the TVL on the Arbitrum chain was US$142 million and the TVL on the BSC chain was US$93.9 million.

Figure 3-2 Radiant Capital’s accumulated reserves[12]

According to the Dune Analytics data port, as of March 30, 2023, the total deposit amount on Radiant (Ethereum chain) was approximately US$435 million, including USDC 190 million, USDT 36.39 million, DAI 34.68 million US dollars, and WETH 127 million USD, WBTC USD 46.57 million. The combined proportion of deposits of the three major stablecoins has reached60.09%。

Figure 3-3 Radiant Capital borrowing status

As of March 30, 2023, the total borrowings on Radiant were approximately US$296 million, including USDC US$141 million, USDT US$37.1 million, DAI US$22.78 million, WETH US$792.1 billion, and WBTC US$16.39 million. The proportion of the three major stablecoins in borrowings is approximately67.71%。

Overall, Radiant’s fund utilization ratio (total borrowings/total deposits) is approximately 68.05%, meaning that for every $100 of deposits in Radiant, $68.05 is lent out. According to official documents, when borrowing occurs, the LTV of USDC, USDT, and DAI is 80%, that is, for every USD 1 of USDC and USDT deposited, up to USD 0.8 of assets can be borrowed. The capital utilization rates of the three major stablecoins have almost reached their upper limit.This shows that a considerable part of the funds in Radiant are for the purpose of liquidity mining rather than real borrowing needs.

From another perspective, although a considerable part of the funds in Radiant are aimed at liquidity mining, they have also brought actual benefits to the project. According to the official blog post in April 2023,The Radiant protocol has generated approximately $7 million in cumulative revenue[13]。

First Class Warehouse Note: Since the above-mentioned Dune’s Radiant Capital cumulative reserve data is currently only disclosed until March 30, 2023, for the convenience of comparison, the editor also took the data on March 30 for the borrowing data on Radiant. However, based on the latest data, as of April 19, 2023, the total borrowings on Radiant were approximately US$355 million, including USDC US$131 million, USDT US$41.36 million, DAI US$26.33 million, WETH US$123 million, and WBTC 3,146 Ten thousand U.S. dollars. The proportion of the three major stablecoins in borrowings is approximately55.91%. There is a certain difference compared with the data 20 days ago, so the editor speculates that,The main reason for this difference is that with the increase in market volatility, a certain amount of actual borrowing demand has arisen in Radiant (especially as can be seen from Figure 3-3 above, WETH’s borrowing demand has increased significantly), so stablecoin lending The proportion decreased relatively.

Currently, in Radiant, deposits and borrowings of 7 assets including USDC, USDT, DAI, ETH, WBTC, ARB, and wstETH can obtain RDNT tokens through liquidity mining, andThe loan mining yield of each asset is higher than the interest required for borrowing, which gives funds an incentive for liquidity mining.

However, it should be noted that due to the popularity of previous Binance Launchpad activities (commonly known as new activities)[14], the market demand for BNB has increased, which has also led to an increase in BNB lending rates on the Radiant market. As of April 23, 2023, the current borrowing interest rate for BNB on Radiant is as high as 192%, but BNB’s borrowing mining yield is only 67.68% (as shown in Figure 3-4 below)[15]. Therefore, it is currently a loss for users to borrow BNB on a recurring basis on Radiant. Therefore, users still need to do research in advance before participating in mining.

Figure 3-4 Radiant’s lending interest rate and mining yield on the BSC chain

3.2.2user

Figure 3-5 Radiant Capital users

In terms of users, according to the Dune Analytics data port, since the launch of the protocol, after experiencing a slow transition in the early stages, the number of Radiant users has achieved rapid growth in the Arbitrum boom in Q4 of 2022 and Q1 of 2023. But combined with Figure 3-5 above, we can also clearly see that after Radiant launched the V2 version on March 19, 2023, the growth rate of its user number slowed down significantly (the black line part in the figure above), the number of new wallets and the number of existing wallets have dropped from the original hundreds to tens.Dropped more than 90%. As of April 18, 2023, Radiant Capital had a total number of users of 368,799.

3.3 The future

Figure 3-6 Radiant Capital Roadmap[16]

Radiant disclosed a simple roadmap for the project in its official documents. Radiant is currently in the stage of just iterating to V2, and the subsequent team will also plan to launch V3 and V4 versions. Specifically, the team is currentlyIn addition to deploying Radiant cross-chain, the top priority of the V2 version is also planned to expand the collateral on the platform.As part of V2 governance, new collateralized assets can be voted on to be added to the protocol, with the newly formed Protocol Risk Committee determining reasonable staking and lending parameters. The team has just been launched recently$ARB and $wstETHMortgage assets.

In the subsequent Radiant V3 version, the team plans to completely get rid of the dependence on the third-party cross-chain bridge (Stargate) and fully integrate LayerZero; in the V4 version, it will become the “LayerZero” for liquidity and yield, becoming the preferred currency market and cross-border DeFi. Source of chain liquidity.

Summarize:

Radiant has achieved a certain market scale since its development. However, through the above data analysis, we have also seen that in Radiant, although there is a certain ratio of actual borrowing demand, a considerable part of the funds are still used for liquidity mining. Purpose. If the price of RDNT remains unchanged or rises, the amount of deposits and borrowings in Radiant is likely to continue to rise under the incentives of high liquidity mining. But it’s clear that without mining revenue, Radiant’s competitiveness will decline. In addition, judging from user usage, Radiant seems to have stalled after the V2 version was launched.

At the moment, for Radiant, the main thing is to expand to more chains and support more collateral assets, thereby boosting Radiant’s next stage of growth. In the long run, the core of the agreement lies in whether it can truly promote the practical application of full-chain lending.

4. Economic model

Radiant Capital’s native token is $RDNT, with a total token supply of 1 billion. According to the CoinGecko data port, the current circulation of $RDNT is approximately 261 million, accounting for approximately 26.13%.

4.1 Supply

4.1.1Token distribution

The initial distribution of 1 billion tokens is as follows:

Table 4-1 $RDNT token distribution details

Figure 4-1 $RDNT token distribution details[17]

Figure 4-2 $RDNT token release schedule

4.1.2Coin holding address analysis

Figure 4-3 Analysis of $RDNT currency holding addresses[18]

According to data from Arbiscan, as of April 20, 2023, there are currently 23,432 $RDNT holding addresses, with the top 100 holdings accounting for 97.45% and the top 10 holdings accounting for 90.34%.

Among them, 9 of the top 10 addresses are contract/exchange/LP addresses, accounting for 87.69%. After deducting this proportion, the top 100 addresses account for 9.76% in total. It can be seen that the current concentration of $RDNT currency holding addresses is relatively high, and the tokens are mainly concentrated in the hands of teams and market makers.

4.2 Requirements

The token role of $RDNT is currently similar to the governance tokens of most DeFi protocols, and is mainly used for community governance and incentivizing liquidity. The overall token use case is still relatively single. We look forward to the subsequent integration with LayerZero. By deploying $RDNT on more chains and Dapps, more complex strategies and high-frequency arbitrage opportunities can be created around $RDNT, creating more Token usage scenarios.

Summarize:

The total number of Radiant Capital tokens is 1 billion. The V2 version extends the life cycle of token incentives by extending the original 2-year token release cycle to 5 years (July 2027). However, at present, the token function of $RDNT is still relatively single. It needs further development and expansion of more usage scenarios in order to better capture ecological value.

5. Competition

Radiant Capital is a cross-chain DeFi lending protocol, and the team positions itself as an omnichain lending protocol.

5.1 Industry Overview

In recent years, we have taken the lead in seeing application scenarios with practical needs on Ethereum: DeFi, NFT, GameFi, etc., and the ecological construction is booming. But on the other hand, the rapid development of the ecosystem has also exposed the problem of insufficient underlying performance of Ethereum. Network congestion and high gas fees have hindered the further expansion of the ecosystem. At the same time, some people “save themselves” and focus on Layer 2, while some people “want to go out and have a look” and invest in other public chains besides Ethereum.

So in 2021 we saw the rapid development of the public chain track ecosystem outside of Ethereum. Many emerging public chains (such as: BSC, Solana, Near, Avalanche, Fantom, etc.) have made corresponding trade-offs on the impossible triangle, supplementing and expanding in terms of scalability, and because most of these chains are compatible with EVM, It can more easily integrate DeFi and NFT-type projects, thereby completing a simple replica of the applications that have been successfully implemented on Ethereum.

At the Layer 2 level, we are currently seeing various projects entering the Arbitrum and Optimism ecosystems, from the “GLP War” triggered by GMX to the fact that the transaction activity of some projects on Layer 2 has exceeded that on Layer 1. In terms of activity, the Layer 2 ecosystem has developed to a scale that cannot be underestimated. According to the DeFiLlama data port, as of April 23, 2023, the total TVL of the Arbitrum ecosystem was 2.17 billion, and the total TVL of the Optimism ecosystem was 907 million.

In addition, since the second half of last year, projects related to the expansion of ZK Rollup have also begun to focus on efforts to catch up with the progress. Related plans and projects have also begun to emerge, and have received more funds and attention. It is foreseeable that as the fierce competition between Layer 2 intensifies, the mobility between ecology will inevitably be further divided.

Of course, no matter how the market evolves, it is impossible for one chain to cover everything, and Ethereum cannot take over the entire market. Judging from the current market structure, the future development trend is likely to beEthereum and Layer 2 based on it are the core, and other public chains are outnumbered.situation.

In fact, whether it is in the traditional financial field or the DeFi protocol on the chain, the original intention is to satisfy usersInvestment and financial management needs, and this demand has always existed.For cross-chain DeFi, the core point is whether it is necessary to interconnect with other public chains in the financial field to achieve more composability.The successful start of many public chain and second-tier projects has confirmed this point for us. Although the phenomenon of multi-chain coexistence is partly due to the continued operation of external capital, emerging public chains and second layers have indeed hit Ethereum’s pain points in terms of scalability and low gas fees.

Nowadays, in the blockchain world, many ecological flowers are blooming, which also makes users’ asset management on the chain more diverse. As the number of public chains and Layer 2 projects increases and their respective ecology gradually improves, the demand for cross-chain user assets on the chain will most likely increase, and this is precisely where the demand for cross-chain DeFi lies.

Previously, most lending protocols on the market deployed different versions on different chains or Layer 2, such as some blue-chip lending protocols on Ethereum. In order to further expand the market, they will choose to deploy on Arbitrum, Optimism, BSC, Different versions are launched on chains such as Polygon. Although they belong to the same agreement, on different chains, assets cannot be transferred between each other, and the liquidity on each chain is separated. To achieve interoperability, assets need to be cross-chained first. As for the emerging concept of full-chain lending,Essentially, it is to integrate the liquidity on different chains, improve the utilization rate of funds, and lower the user operation threshold.

5.2 Competitive product introduction

At present, many projects have entered the cross-chain lending track, such as: Compound Finance, the leading lending project, provides cross-chain lending through Gateway (Compound previously launched the corresponding test network of Gateway, but due to unknown reasons, the corresponding code of Gateway The sub-library will stop updating after 2021.07[19]); Aave will also support cross-chain lending in the V3 version, but this feature is not currently online. In addition, corresponding cross-chain DeFi protocols have also been launched on public chains such as BSC, Cosmos, and Polkadot. However, at this stage, they are basically the first to achieve bridging with the Ethereum blockchain, and no projects have yet achieved cross-chain implementation. Interoperability between DeFi protocols is still at an early stage.

The Radiant Capital discussed in this article is a cross-chain/full-chain lending protocol based on LayerZero, and its future competition will first begin within the LayerZero ecosystem. Therefore, the competing products in this chapter are mainly focused on cross-chain lending projects that are also part of the LayerZero ecosystem, as well as the development of Aave V3.

5.2.1Aave V3

In the introduction of Aave V3 in 2021.11, Aave mentioned a“Portal”A new feature that will allow assets to flow seamlessly between Aave V3 markets through different networks. Since the official launch of Aave V3 on March 16, 2022, Portal’s functions have actually reached a deployable state, but users are still unable to use it. The main reason is that the integration of the whitelist cross-chain bridge has not yet been completed.

The good news is that with Aave deploying Aave V3 on Ethereum in January this year, in March and April 2023, we saw the proposals for Aave V3 passed respectively. V3 Portals will add Hashflow/Wormhole and Stargate as “whitelists” Bridge” vote[20] [21]. We may see Portal functionality coming online soon.

First Class Warehouse Note: Aave V3 contains many updates, and the Portal function is just one of the highlights.

5.2.2TapiocaDAO

TapiocaDAO is a cross-chain DeFi lending protocol. The team positions itself as an omnichain lending protocol, aiming to achieve leveraged lending and composability between different chains, so that users can use it in the DeFi protocols it supports. Gain leverage and simplify cross-chain asset operations. The project just launched the test network in 2023Q1.

In terms of lending, TapiocaDAO’s core smart contracts include Singularity (Kashi launched based on Sushiswap) - an independent full-chain lending engine, and Yieldbox (Bentobox V2) - a permissionless token vault that allows idle tokens in the Singularity platform to be used. funds for yield farming. Both contracts are made byBoringCryptoCreated[22]。

At the cross-chain level, TapiocaDAO uses LayerZero as its cross-chain infrastructure, and based on the LayerZero OFT20 (Omnichain Fungible Token) standard, it has designed a decentralized over-collateralized stablecoin - “usd0”.

5.2.3Cedro Finance

Cedro Finance is also a cross-chain lending platform based on LayerZero and is currently on the test network. The platform introduces the innovative unified liquidity token CULT to ensure the liquidity supply of the protocol. In addition, the platform also significantly optimizes gas costs by moving some calculation operations (such as interest rate calculations, tracking different assets, tracking different positions and liquidation, etc.) into the Root contract. Currently, users can provide feedback on the test network and obtain reward points by completing tasks.

5.3 Competitive analysis

Since the products of Aave V3, TapiocaDAO and Cedro Finance have not yet been officially launched, there is no data to support horizontal comparison with Radiant for these three projects. This section mainly introduces the mechanisms of the three projects and their respective advantages and disadvantages.

5.3.1Aave V3

Figure 5-1 Aave V3 Portal concept diagram[23]

According to the team, Portal allows users to seamlessly move their assets from V3 deployments across different networks. Its core functionality is very simple: user-provided liquidity can be transferred from one network to another by simply destroying aTokens on the source chain (e.g., Ethereum) while minting them on the destination network (e.g., Polygon). The network interconnection built around this function is called a port.

The implementation of the Portal function relies on the cross-chain bridge protocol of an external third party. It needs to be voted by Aave governance to select a “whitelist” cross-chain bridge protocol, that is, the “burn-mint” operation on different chains, which is not controlled by the Aave protocol. To proceed, third-party security assumptions are introduced.

Previously, the Aave V3 community forum also mentioned that “Portal will be able to bridge Connext, Hop Protocol, Anyswap, xPollinate and other solutions that utilize the liquidity of the Aave protocol to promote cross-chain interactions. Aave Governance will be able to be granted upon receipt of proposals. Any cross-chain protocol access to the port.”

Currently in March and April 2023, we have seen Aave V3 proposals pass the vote that V3 Portals will add Hashflow/Wormhole and Stargate as “whitelist bridges” respectively. This is also the first time that V3 Portal voted for two cross-chain bridge protocols.

In addition, current information shows that Portal will integrate multiple “whitelist cross-chain bridges” in the future and allow each cross-chain bridge protocol to mint corresponding aToken on different networks according to its respective credit limit. Aave V3 will also allow for comprehensive refinement of the fee model. Each port can require a unique fee model, or even a different fee model for each network and asset. Portal proposes to adopt a business model for governance. This helps promote “involution” between different cross-chain bridges on the Portal, thereby bringing lower handling fees and slippage to users on Aave. For cross-chain bridge projects, applying for Portal’s whitelist and integrating with it can also expand potential influence, which is a win-win situation for participants.

First-class warehouse perspective: A simple understanding of the Portal function of Aave V3 will allow users to deposit ETH on Arbitrum for pledge, and then borrow on Polygon. This is exactly the same as Radiant’s full-chain lending concept.

Aave is currently the largest lending protocol in the cryptocurrency market. If it launches multi-chain shared liquidity, it will directly become the lending protocol with the best liquidity on multiple chains. The launch of the Portal function is expected to improve the liquidity and capital utilization of Aave’s entire ecological landscape, and further elevate the entire protocol’s lending business to a higher level. By then, the Matthew Effect may be triggered and may quickly spread to various blockchains, and it will also become Radiant’s strongest competitor.

From another perspective, in fact, as early as 2022.03.16, since the official launch of Aave V3, Portal’s functions have actually reached a deployable state. More than a year later, we saw a corresponding community vote, and there is still no exact time until the official implementation. The main reason is that the Aave team is more cautious in governance proposals and technical execution due to security considerations. After all, as mentioned above, Portal’s asset cross-chain is not carried out by the Aave protocol, but a third-party cross-chain bridge protocol is introduced. Wormhole, the “whitelist bridge” that was recently voted in, has also been hacked before. How to weigh the introduction of this protocolUncertain external security assumptions, the team needs to carefully weigh it.

In contrast, for Radiant based on LayerZero, if the subsequent versions (V3 and V4) can make good security assumptions between the oracle and the relay (see LayerZero operating mechanism for details) and achieve trustlessness at the contract level, then in the asset Cross-chain security assumptions may be more dominant.

5.3.2 TapiocaDAO

Tapioca’s core products areSingularityandYield Box：

• Singularity is an independent full-chain lending engine that was previously adopted by Kashi, which was launched based on Sushiswap. Currently Singularity is a modified version of Kashi, which is licensed to TapiocaDAO.

• Yieldbox (Bentobox V2) is a permissionless token vault that allows idle funds in the Singularity platform to be farmed for yield.

At the cross-chain level, TapiocaDAO usesLayerZeroAs its cross-chain infrastructure, and based on the standards of LayerZero OFT20 (Omnichain Fungible Token), a decentralized over-collateralized stablecoin is designed——“usd0”。

In addition, in terms of economic models, Tapioca introducedtwAML, aiming to change the shortcomings of existing liquidity mining, improve the distribution efficiency of LP and achieve the sustainable development of the protocol.

To simply understand, TapiocaDAO implements the cross-chain lending function through Singularity and LayerZero, and applies a layer of yield protocol (Yieldbox) on this basis to help users farm more income. In addition, TapiocaDAO also introduced the innovation of twAML options mining in terms of economic model.

The operation logic of TapiocaDAO product is shown in the figure below:

Figure 5-2 Tapioca product operation logic

For Borrowers, it is simply a matter of over-collateralizing the assets supported by the Tapioca platform in the Singularity fund pool, borrowing currency ($usd0) and paying interest on the debt.

Depositors (Lenders) can provide liquidity to the Singularity fund pool and earn deposit interest, or earn higher returns by minting $usd0 and staking (normally to encourage users to mint a new stablecoin, the platform There will be higher incentives from the beginning). When depositors provide LP, they will receive receipt tokens of “tOLP”. When the option expires, users can choose to buy $TAP at a discount and sell for profit.

Because in Tapioca’s setting, when user assets are lent to the Singularity market, Singularity will put part of its liquidity (20%) into the Yieldbox for income farming, so depositors can also receive an additional portion of the yield income. .

In Yieldbox, Tapioca connects to Gelato Network[24]Help users realize automatic compound interest, monitor the income of different Yieldbox strategy pools, and regularly rebalance the asset distribution of each fund pool to achieve higher rates of return.

First-class warehouse perspective:

TapiocaDAO and Radiant are two similar projects, both of which use LayerZero to implement cross-chain functions. At the lending level, Radiant refers to Aave’s mature lending model design, while Tapioca is based on BoringCrypto’s contract improvements and has a successful operation case of SushiSwap. What is different is that Tapioca adds a yield function on top of cross-chain lending.

By reading the official documents of Tapioca and Radiant, we can see that in comparison, Tapioca will have more complete disclosure of details in all aspects, as well as innovative economic model design (for more details, please refer to the “TapiocaDAO Investment” previously released by First Class Warehouse) Research Report”). But on the other hand, it should be noted that the twAML introduced by Tapioca is relatively complex, and the education threshold for early users is high, which will also test the team’s operational capabilities.

Therefore, in the editor’s opinion, if Tapioca and Radiant are launched at the same time, they may be two comparable projects. But the current situation is that Radiant already has a first-mover advantage in the field of cross-chain lending and has accumulated a considerable amount of liquidity and user groups. Tapioca has just launched the test network version in 2023Q1, and it will be difficult to catch up in the future.

5.3.3 Cedro Finance

Cedro Finance protocol architecture:

Figure 5-3 Cedro Finance protocol architecture[25]

As shown in Figure 5-3 above, in Cedro Finance, a branch (Branch) is deployed on multiple chains, and all these chains interact with the root (Root). Root is deployed on a single chain and is responsible for storing the protocol. global state and transmit information between chains. Branch and Root use Messenger to interact. Through this modular design, when Cedro wants to add a new chain to the protocol, it only needs to deploy Branch on the new chain and establish a connection with Root.

Cedro Finance’s protocol architecture is mainly divided into 3 parts:

1）Branch

Branch is the main interaction point for users to make deposits and repayments. For example, if a user wants to deposit USDC in Ethereum, the user will interact with the depositRequest() function of Branch in Ethereum. The deposited amount is stored in Ethereum’s USDC liquidity pool, the information is sent to Root via Messenger, and the user receives ceToken on the Root chain.

Branch handles the pool of assets it deploys to each chain. This means that when a user deposits AVAX on Avalanche, it is sent to the AVAX pool managed by Branch itself. Every asset listed in Cedro has a pool that stores funds in Branch but is managed by Root. To add a new chain to the protocol, Cedro will first deploy a Branch on the chain and then establish a Messenger connection between Root and Branch.

2）Messenger

Messenger is a stack composed of multiple common cross-chain information transmission protocols (such as LayerZero). Messenger analyzes different factors such as estimated transaction cost, speed, security, etc. to select a messaging protocol from the stack for a given transaction. The benefit of having a cross-chain information transfer protocol aggregator is that it provides users with another level of freedom. Users can choose the protocol they want, or let Cedro choose based on their priorities around cost, speed, security, and more. Once a protocol is selected, it is used to send the required cross-chain messages to Root and Branch.

3）Root

Root is deployed in a single chain and is the connection point for all branches. Each Branch is connected to the Root in a two-way manner through Messenger.

Root stores global variables of all protocols, including total deposits, total borrowings, total protocol liquidity, etc. on multiple chains. Therefore, whenever a user deposits an asset on the A chain, the information is passed to the Root chain to update the user’s liquidity and the asset’s liquidity.

In addition, Cedro Finance also introduced the innovative unified liquidity token CULT (Cedro Unified Liquidity Token) to ensure the liquidity supply of the protocol. To simply understand, CULT allows users to deposit multi-chain assets from different chains and funnel them into a unified liquidity pool. For example, when a depositor deposits 100 USDC in Ethereum and 200 USDC in Solana, he will receive 300 ceUSDC on the Root chain and earn interest.

First-class warehouse perspective: Overall, Cedro Finance can be understood as a cross-chain aggregation lending protocol, which provides users with the optimal cross-chain method by aggregating multiple cross-chain information transmission protocols (similar to LI.FI). From the perspective of Cedro’s protocol architecture, for security reasons, Cedro has introduced an isolation pool (each asset listed in Cedro has a corresponding pool stored in Branch), which is more secure, but also further fragmented. liquidity. Cedro solved this problem by introducing the unified liquidity token CULT.

It seems that Cedro has set up another set of standards based on the standards of other full-chain protocols. It is currently unknown how many people will use this set of standards. The development of early projects will test the team’s operational capabilities. In addition, we can also see that Root is a very important part of Cedro, but currently not much corresponding information has been disclosed. The editor speculates that in the early stages of its subsequent launch, there is a high probability that it will adopt a relatively centralized approach, and the protocol may not be so “sexy”.

Summarize:

Although LayerZero’s technology is still controversial at the moment, it is undeniable that its ecological territory has grown to a considerable scale. This chapter analyzes several cross-chain lending protocols based on LayerZero: TapiocaDAO, the lending section is based on the contract improvement of BoringCrypto, and there is a successful operation case of SushiSwap, which is relatively convincing in terms of feasibility; Cedro Finance is built on LayerZero Another layer of cross-chain aggregation protocol is currently in the test network stage. There may be certain centralization issues in the early stages of the development of subsequent protocols.

Overall, Radiant Capital is already at the forefront, and its early incentives for liquidity mining have now begun to take shape. Relying on its first-mover advantage, Radiant is expected to form a certain “moat” in the cross-chain lending field of the LayerZero ecosystem.

But this is only limited to the LayerZero ecosystem. With the official launch of the Aave V3 Portal function, it will naturally cause a “dimensionality reduction blow” to Radiant, making it its strongest competitor. Of course, if Radiant’s subsequent versions (V3 and V4) can make good security assumptions between oracles and relays and achieve trustlessness at the contract level, then it may be more advantageous in terms of security assumptions for cross-chain assets.

6.Risk

Protocol security

The code base of the protocol is not yet open source, and there are still some uncertainties.

Team Anonymous

Although Radiant has briefly introduced the team in its official documents and community, the resumes of specific members have not been disclosed.

Competitive pressure on the track

Radiant does not have any innovative technical advantages in the lending field alone. It mainly follows the design of Aave. As Aave V3 subsequently launches its own cross-chain lending function - Portal, it will have a certain impact on Radiant.

Market value is artificially high

Looking back on the history of Radiant’s fortune, a large part of the factors are inseparable from the protocol’s high token incentives. In addition, it is also related to many factors such as the recovery of the macro-level market, the hot Arbitrum ecology, and the expectations of the entire LayerZero chain. This also makes Radiant’s expectations a bit over-consumed at the moment. If you look at the FDV/TVL ratio alone, currently (April 25, 2023) Aave is 0.29, Compound is 0.3, and Radiant is about 1.68. This shows that Radiant’s full-liquid market value is higher than its TVL. Compared with lending protocols Aave and Compound, it can be said that Radiant’s current market value is artificially high.

Security risks behind the relay mechanism

Radiant Capital is based on LayerZero’s underlying architecture and uses Chainlink to ensure the accuracy of oracle quotes. The choice of relay has not been disclosed for the time being, and there are still certain security risks.

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