As the market picks up, DeFi projects rebound. The TVL of Radiant, a full-chain lending market, has risen by 124% in the past month, becoming the largest and fastest-growing lending protocol on Arbitrum. The price of RDNT has also risen 20 times from its low point. If borrowing is taken into account, Radiant's TVL will rise to $247 million, second only to GMX among all Arbitrum projects.

Full-chain lending market

With the development of multi-chain ecology, cross-chain lending has become a necessary demand. Aave, the leading lending project, will also support cross-chain lending in version V3, but the function has not yet been launched. Just like Uniswap V3 will be deployed on the BNB chain, the choice of whitelist cross-chain bridge is also controversial.

Radiant aims to be an all-chain money market where users can deposit assets on any supported chain and borrow a variety of assets across multiple chains. Cross-chain interoperability will be built on LayerZero, leveraging Stargate's routing interface to allow lenders of collateral to withdraw funds across chains.

As of February 6, Radiant has only launched version v1 on Arbitrum. It is expected that Radiant v2 will be launched on Arbitrum around February 16, and then deployed on the BNB chain, and then further expanded to other chains.

Among the functions that have been launched, Radiant's cross-chain lending is to select the target chain for receiving the payment while borrowing. After the loan is generated, Radiant uses Stargate to help users cross the chain. If the loan is to be repaid, the funds need to be transferred back to the source chain Arbitrum.

Radiant data: Stablecoin fund utilization rate reaches the upper limit, most of which is for liquidity mining needs

According to data compiled by Dune Analytics @Shogun, the total deposits on Radiant have continued to rise recently, currently about $240 million, including $106 million in USDC, $66.46 million in USDT, $38.36 million in DAI, $20.57 million in ETH, and $9.61 million in WBTC. The three major stablecoins account for 87.5% of the deposits, with only a small amount of ETH and WBTC remaining.

Radiant’s total borrowings are approximately $176 million, including $77.41 million in USDC, $52.8 million in USDT, $29.95 million in DAI, $10.95 million in ETH, and $4.59 million in WBTC (WBTC borrowing data has not been updated, so the data from the previous day is used). The three major stablecoins account for approximately 91.2% of the borrowings.

Overall, Radiant's capital utilization rate (total borrowings/total deposits) is about 73.3%, which means that for every $100 of deposits in Radiant, $73.3 is borrowed, and the capital utilization rate is very high. In comparison, Aave, the leader in the lending field, has a total deposit of $6.81 billion, a total borrowing of $2.18 billion, and a capital utilization rate of 32.1%.

Specifically for each asset, the capital utilization rate of USDC is 74.62%, that of USDT is 80.97%, that of DAI is 79.42%, that of ETH is 54.1%, and that of WBTC is 47.26%. According to official documents, when borrowing occurs, the LTV of USDC and USDT is 80%, and that of DAI is 75%, that is, for every $1 of USDC and USDT deposited, a maximum of $0.8 of assets can be borrowed. The capital utilization rates of the three major stablecoins have almost reached the upper limit, indicating that almost all funds are for the purpose of liquidity mining rather than real borrowing needs.

Liquidity mining: High returns will further promote growth

According to data on Radiant's official website, deposits and loans of five assets, USDC, USDT, DAI, ETH, and WBTC, can obtain RDNT tokens through liquidity mining, and the loan mining yield of each asset is higher than the interest required to be paid for borrowing, which gives funds the motivation to engage in liquidity mining.

Combining the deposit APY, loan APY, RDNT mining yield and official LTV of each asset, the highest mining yield of each asset can be calculated. If the same funds are borrowed at the highest ratio after deposit, the current mining yields of various assets are DAI 52.2%, USDC 58.6%, USDT 62.8%, ETH 55.4%, and WBTC 37.2%.

If we consider that only 50% of the RDNT produced can be unlocked at one time, the mining yields after immediate unlocking are DAI 21.3%, USDC 22.5%, USDT 24.2%, ETH 15.8%, and WBTC 12.6%.

If the price of RDNT remains unchanged or increases, the deposit and borrowing volume in Radiant is likely to continue to rise due to high liquidity mining incentives.

Radiant’s revenue distribution: protocol fees up to 50%

Radiant's native utility token, RDNT, is an ERC-20 token with a total supply of 1 billion, of which 50% is used as an incentive for depositors and borrowers, 20% is used as a liquidity incentive for the Sushi RDNT-ETH pool, and the remaining 30% is allocated to the team, core contributors, and the treasury. The RDNT produced by mining has a 28-day vesting period, and can also be unlocked in one go by paying a 50% penalty.

50% of the actual interest generated by the loan will be used as the agreement fee (the other 50% is paid to the lender). The RDNT that has not been collected after the vesting (RDNT Vester) and the RDNT directly locked by the user (RDNT Locker) can obtain this part of the agreement fee. The 50% penalty will be allocated to the RDNT Locker, but the locked RDNT cannot be withdrawn early.

Compared with other similar projects, Radiant's 50% protocol fee is almost the highest, and Radiant's depositors can only get 50% of the loan interest generated. Aave's reserve factor is only 10% to 20%, and only 20% of the interest is collected by the protocol, and the rest is distributed to depositors.

Then Radiant can only compete with other projects through higher liquidity mining income. In the absence of mining income, Radiant's competitiveness will decline.

Due to the demand for liquidity mining, the utilization rate of various funds in Radiant is relatively high. The higher the utilization rate of funds, the higher the loan interest. When the protocol fee is as high as 50%, the income of RDNT Locker and Vester is quite considerable. As of January 31, the income of RDNT Locker has exceeded 5 million US dollars, and the current lock-up APR of RDNT Locker is 31.4%.

Radiant v2: You need to provide liquidity to get RDNT rewards

According to Radiant’s official description, Radiant v2, which is expected to be launched on February 16, will bring revolutionary changes to the core mechanisms, token release, utility, and cross-chain functions of the protocol. Specific updates include the following points.

1. Token migration: Migrate the current ERC-20 RDNT token to LayerZero OFT (Omnichain Fungible) format to support cross-chain fee sharing.

2. Change the vesting conditions of liquidity mining rewards from the current 28-day vesting period and 50% penalty to a 90-day vesting period, and early vesting will only receive 10-75% of RDNT.

3. The vested RDNT needs to be re-locked to obtain the agreement income.

4. Change the profit distribution. The interest share obtained by the lender is reduced from 50% to 25%, 60% is used as agreement fee, and 15% is used as operating expenses.

5. Set up dynamic liquidity supply. To obtain liquidity mining rewards for deposits and loans, you need to first provide 5% of the deposit value in RDNT and ETH or BNB liquidity. Otherwise, you can only obtain the real deposit income generated by the loan.

6. Extend the release of RDNT to 5 years (initially 2 years).

7. Support for more than 20 new collaterals.

Summary

Radiant's current cross-chain lending implementation principle is "lending + cross-chain", that is, after the user's loan is generated, Stargate is used to help the user cross the chain to other chains. Most of the existing users are for the purpose of liquidity mining. Now the income is high, which may continue to promote the growth of deposits and loans.

The update of Radiant v2 may be intended to change the unsustainability of current liquidity mining, but it will also bring uncertainty to existing lenders and borrowers, with reduced interest sharing, longer vesting period, more penalties, the need to provide liquidity to obtain mining rewards, and longer release time of RDNT, which is very unfavorable for users who want to realize their income as soon as possible.