A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?

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BadgerDAO adopts the “fair start” model that is popular with the community, and in just a few months after it went online, it has attracted more than one billion U.S. dollars in locked assets.

Original title: “BTC+DeFi topic丨How does BadgerDAO empower BTC?”
Written by: Steve Walters
Translation: Li Hanbo, Jeremy

Decentralized finance (DeFi) is growing at an alarming rate in 2020 and is entering 2021 with incredible momentum and a large number of interesting and useful projects.

One of the indicators clearly shows how popular DeFi is and how much it has grown, and that is the total value lock (TVL) of DeFi projects . You can see from the chart below how much TVL has grown in 2020, and how strong TVL will remain above US$40 billion in 2021.

Badger DAO and its BADGER Token are one of the more interesting projects. The reason why this project stands out is that it uses Bitcoin in DeFi, which we haven’t seen in many projects.

Badger DAO also borrowed from Yearn.finance in some aspects, and followed the “fair Token issuance” model when issuing BADGER Token. This model gives the community ownership of the project from the beginning , instead of selling the Token to investors who have no real interest in the project other than the profit potential.

In addition, in this DeFi field, the increase in demand for Bitcoin on the Ethereum blockchain (the aforementioned packaging Bitcoin) is also helpful.

In just a few months after its launch, Badgerdao’s TVL exceeded 40 billion. Picture from DeFiPulse.com

There are many blockchain supporters claiming that Bitcoin is the most robust form of currency in history. They think it is both the soundest mortgage method and the best exchange method. However, the use of Bitcoin in DeFi has always been limited to the small Bitcoin ecosystem, at least until Bitcoin can be packaged in ERC-20 Token and used on the Ethereum network.

Since the invention of the Bitcoin anchor coin, we have seen a dramatic increase in the number of Bitcoins on the Ethereum network .

Although this is helpful in some ways, it is certainly not ideal, especially because the current infrastructure for using Bitcoin on Ethereum is still new and quite underdeveloped. This means that minting Bitcoin anchor coins still relies on centralized platforms and all the custody, trust, and KYC requirements that these platforms bring.

The good news is that you can use Bitcoin in DeFi because there are many borrowing and lending protocols that use synthetic Bitcoin as collateral. However, the bad news is that there are few large liquidity pools to trade such synthetic Bitcoin .

Therefore, with the increasing growth of DeFi and the current challenges faced by all Bitcoin holders who wish to participate in DeFi, the team behind Badger DAO is motivated to find a better way to incorporate Bitcoin into the DeFi revolution. Let’s take a closer look at how it works.

What is Badger DAO?

You may already be familiar with the term DAO, which is short for Decentralized Autonomous Organization. Therefore, the creation of Badger DAO adopted a decentralized governance structure, allowing the community to control the project from the beginning.

Moreover, Badger DAO is trying to build the required infrastructure to accelerate the use of Bitcoin in decentralized finance, as well as in Ethereum and other blockchains .

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?Badger DAO hopes to bring Bitcoin to DeFi. Picture from YouTube

The original Badger DAO development team designed it as a complete ecosystem, which will allow any DeFi protocol project to collaborate and build joint products. Because Badger DAO is created with a DAO governance structure, no matter what the developer is doing, it is possible to unify their incentive mechanism with decentralized governance . Our idea is to create a spirit of cooperation in the DeFi ecosystem, not a spirit of competition.

In addition, since the establishment of the project, one of the main goals has been to ensure that Badger DAO will be led and governed by the community from the beginning . Community governance will make decisions about new products, and community governance will be responsible for ensuring the fair distribution of BADGER Tokens to all participants. All of this shows the founder’s commitment to the community first, which is transparent and fair to everyone.

The key to the success of the project will be how they successfully attract all the liquidity needed, not to mention the content creators and coders who need to join the community to keep the Badger DAO moving forward.

More people and a wider range of technical talents will be of great benefit to the project and everyone involved in the project. In addition, the success of the project has the greatest interest relationship with community members, because the income generated will create profits, and these profits will be distributed to those who have contributed the most to the development of the DAO .

How does DAO work

A few years ago, DAOs were fairly rare, but as projects saw that community-led governance is preferable to centralized governance, the formation of DAOs has increased. To some extent, this has led to the transformation of governance tokens into a new utility token.

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?What is the structure of DAO. Picture from Dev.to

When designing a community-led DAO, there is an ideal, but in the real world, DAO usually does not attract too much participation from the community. There are a number of reasons, including GAS fees related to on-chain voting.

In many cases, the lack of participation is simply because people believe that there is a lack of ownership or responsibility for the DAO. Voting and community participation are a good ideal, but when most people ignore them , or worse, when the proposed changes are rejected and categorically rejected, voting and community participation become useless. If voting is not important and the chance of change is small, people will quickly lose interest.

DAO’s Attempt

The founding team of Badger DAO believes that the most active DAO can be seen in DAO attempts. It seems clear why this is the case, because such DAOs are not only responsible for all aspects of the business and platform, but they also have an incentive to see the agreement and the product perform well. DAOs who are more focused on products can learn from DAOs how to maintain a participating community and share the value created by products.

Although creating DAOs is popular, Badger DAO didn’t decide to create DAOs just to follow the trend. They have a real desire to build a community that can promote a cooperative environment and be able to share their goal of fully bringing Bitcoin into the DeFi ecosystem . They hope to be more than just a legally established organization, nor just a general DAO. They claim to cultivate a community, but they never seem to be able to build a community.

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?Part of the architecture of DAO. Picture from LinkedIn

This is why the team will take the shared ownership of the platform as one of the cornerstones, and why all products will be launched by community members. In addition, any value created through fees and income will also flow back to product creators and BADGER Token holders .

One problem here is that sometimes the reward sharing may not be completely clear. For example, there may be questions about which community member put forward which ideas first. Or suppose a product is fully funded by the DeFi agreement, including providing developer talent for the project. In this case, some accounting needs to be done on the resources allocated to the project, and appropriate rewards need to be determined.

It may not be very clear now , but now is the early stage of Badger DAO development, and many problems are likely to be solved in a suitable way that is accepted by the majority of the community .

Badger developer

Badger developers are the lifeblood of Badger DAO. This is a group of community members who collaborate with other developers and create new products in the Badger DAO ecosystem. Badger developers are not necessarily individuals, they can be a group of developers, or even the entire company.

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?Anyone can become a Badger Builder. Picture from Badger blog

For Badger developers, the biggest advantage is that there is no requirement to participate and can benefit from DAO. Anyone who wants to become a Badger developer can become a developer and use their skills to help create some great things with open source code and a small amount of governance tokens.

Make suggestions for products

It’s not just product creation that is open to anyone. Any community member can freely put forward new product ideas on the Badger DAO Discord channel . They will get feedback on their ideas, and they can also find partners to cooperate.

If a proposal is proposed and the community shows interest, the proposal can be further developed and then voted off-chain to decide whether to promote the idea to the entire community. If it is decided to proceed, the final step is to vote on the chain to obtain approval of the project.

Whenever a project is approved, the development team will get involved, help fund the project, build the project, and then market it. Off-chain voting on Telegram and Discord channels is used to determine solutions to any product or operation related issues. The governance method designed in this way is to prevent individuals from isolating them when they make suggestions. On the contrary, we hope that contributors can unite and contribute some of the best DeFi products ever .

cooperation

The developers of Badger DAO are really just waiting to collaborate with anyone with an idea. This will be a cool and potentially profitable project. With the development momentum of the project, they hope that not only individual developers will join, but also the entire DeFi agreement.

This type of cooperation is exactly what the DeFi ecosystem needs to discover the best products. This is why the Badger DAO remains open so that any individual, developer, team or company can participate. And every product released will be transparent and fair, and it is hoped that everyone involved in the creation can benefit from it.

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?The collaboration is expected to help Badger Builders do great things. Picture from IvanonTech.com

The Badger DAO team has a sincere belief that a community can come together to create a product that is better than any product that a centralized control organization might make. In addition, the Badger DAO Treasury provides funds for new projects, and BADGER Token can be used to motivate new users at any stage after the project is launched.

BADGER Token released

When Badger launched their Token, it took the same direction as Yearn.financial, clearly stating that BADGER Token has no monetary value and its purpose is to be strictly used for DAO governance. And like Year, BADGER Token was also started with fair liquidity mining.

This means that there is no centralized control over the protocol at any time. There are no early investors, no venture capital funds, and no anonymous supporters. If they choose to sell all their holdings, it may cause the token to collapse in the future .

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?

All of this means that Badger DAO avoids the bad examples and mistakes of many blockchain projects being launched in a rudimentary environment, or giving more than 90% of the project Token control to the founders, consultants and early investors. In addition, all smart contract codes and systems have been fully audited by the third-party audit company Zokyo to ensure that they are safe and free from any hidden dangers.

There is no anonymous hidden team. They are completely transparent and open. They hold 10% of the token supply to keep in touch with the project. There is also 35% of the token supply, which is held for the community to decide on the distribution. These funds can be used for cooperative incentives, operations, more liquidity mining, or many other things, but they must be used after the community votes and approve the use of the Token .

Because the control of the project and Token is handed over to the community from the beginning, there is one thing you won’t find on the Badger DAO website, that is, graphs and tables showing the allocation to VC funds, angel investors, early advisors, etc. proportion. Instead, the community will decide how to use Badger Token from the very beginning of the project. Given that the token has risen by approximately 600% since its launch, this may be a correct decision.

Time-locked founder rewards

As mentioned above, 10% of BADGER’s total supply is allocated as founder rewards. These Tokens are to motivate the success of the founding members, and they will be gradually distributed to public wallets .

In addition, the founder rewards are locked for 1 year, and tokens will be released every week for 52 weeks. This is to prevent the founder from dumping a large amount of BADGER Token into the market at one time, thereby drastically lowering the price.

SETT vault of Badger DAO

Badgers are animals that fiercely protect themselves and their loved ones from large animals. So Badger DAO chose this name to promote this intense desire for unity and creativity . Real badgers use leaves and grass to build homes, and these homes are called Setts. They are durable and can provide a home for several generations of badgers in the course of decades of use.

Badger DAO hopes to provide a home for the cryptocurrency held by users, so the first product created is SETT, and an automatic DeFi aggregator. Because Badger DAO was created with Bitcoin products as the center, SETT vaults are modeled after Year.finance vaults, but they only use tokenized Bitcoin. SETT also plans to be the only way for users to earn BADGER tokens, but this may change with the voting of the governance layer .

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?

Like any other DeFi vault setup, users can deposit assets and earn returns . These assets are put into smart contracts, and then various strategies are executed to make the assets play a role in the universe of the DeFi protocol . This allows Bitcoin holders to maximize the rate of return that their tokens receive without having to participate in the psychological stunts and effort required to manually execute a typical rate of return farming strategy.

For an unspecified limited time, users can deposit in the SETT vault to obtain the rate of return and BADGER tokens. Those who have pledged for a long time enjoy the benefits of applying multiples to their rewards.

Currently, withdrawal of funds from the vault requires a 0.5% withdrawal fee, but there is no lock-up period. In addition, an additional fee of 4.5% is levied on any profit. These fees are to cover transaction fees and gas costs.

Issue Badger DAO SETTs

At the time of release, five SETTs were created. Four of them are compound interest strategies: Curve-SBTC, Curve-RENBTC, Curve-TBTC, and Badger-WBTC. In addition to these four, there is a fifth SETT strictly used to pledge BADGER to earn more BADGER.

Since then, 6 SETTs have been added, including one for staking DIGG to earn more DIGG.

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?

SETT Treasury is only a few months old and is still in a very early stage of development . But what seems certain is that with the continuous development of the community, new strategies and innovations will emerge quickly.

It is not said just what will be created next, but some possibilities are single asset vaults with multiple strategies, native Bitcoin deposits, other compound interest strategies, and strategies that help prevent Bitcoin price fluctuations.

Badger DAO DIGG

The second product launched by Badger DAO is a community project called DIGG. It adds to the list of Bitcoin composites, but unlike other platforms, it is non-custodial.

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?

Basically, you can think of DIGG as a stablecoin because it is a flexible supply of cryptocurrency, which is linked to the price of Bitcoin . Every day, the supply of DIGG will be adjusted in all wallets holding the token. These adjustments are based on the value of DIGG to the U.S. dollar and Bitcoin.

In practice, this means that when the price of DIGG rises relative to Bitcoin, the number of DIGG tokens in each wallet will increase. Conversely, if the value of DIGG decreases relative to Bitcoin, the amount of DIGG in each wallet will decrease. In addition, a price oracle is called every day to decide whether to increase the supply of DIGG to lower the price, or reduce the supply to increase the price of DIGG.

The goal of the DIGG project is to remove the centralized control of synthetic Bitcoin assets and deploy elastic parameters as an alternative means of maintaining the peg . And the role of the agreement is much more than simply maintaining the link. It can also add new incentives to influence prices and send them higher or lower prices, and it can re-determine the benchmark for each block.

The DIGG token also has a SETT vault, where users can pledge to earn more DIGG.

Of the tokens not distributed during the liquidity mining process, 50% are controlled by Badger DAO . Through their first product, $BADGER token holders will manage such things as token supply, future smart contract changes, marketing decisions, and protocol parameters for current and future projects constructed by DAO.

bBadger token

When betting on BADGER, users will receive bBADGER tokens, and bBADGER tokens are a synthesizable yield farming token . In addition, the pledged rewards will also be delivered in bBADGER, so that the pledged rewards can be automatically synthesized. This should encourage tokens to have a larger amount of lock-up, because staking does not require gas, but it is necessary to release the staking. In fact, since DAO passed the decision to let bBadger automatically synthesize, the lock rate of bBADGER has exceeded 90%.

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?

Currently, the Badger DAO team is working hard to add utility to the bBADGER token and integrate it into other DeFi protocol collateral types. This will allow users to mint stablecoins on UMA and earn additional yields. It also saw the token being added to the CREAM platform, which will allow users to borrow assets using bBADGER as collateral. This effectively allows speculators to use leverage to go long/short bBADGER.

Another suggestion is to create a liquidity pool for CLAWS on the Sushi platform and create an additional Sett vault for SLP tokens, which will be created as collateral for stablecoins.

Basically all the current proposals related to bBADGER are ways to increase the rate of return on the basis of the rate of return. Its purpose is to use the composability of bBADGER to create a passive income currency machine with a wide range of income sources.

CLAWS

Although CLAWS is described by some as a stable currency, it is essentially a “yield dollar” rather than a stable currency. In essence, the yield dollar is a mortgage asset with a maturity date. Once the yield in USD expires, it can be redeemed with collateral worth 1 USD on the UMA agreement. Before expiration, the market determines the price of the asset-but generally speaking, as the expiration date approaches, its price should approach $1.

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?

Yield dollars like CLAWS are secured assets. In other words, when users take out some collateral according to the set loan-to-value ratio, they will be minted . In the case of CLAWS, there are two types of collateral that can be used to mint tokens-bBadger and wBTC/ETH SLP tokens. This will be the main method of obtaining CLAWS tokens, although they can also be purchased on the open market. However, if you buy CLAWS on the open market, speculators need to be careful, remembering that as the expiration date gets closer, the token will approach $1.

One of the miracles of DeFi synthesizable is the ability to earn multiple forms of income with the same basic assets-maximizing your potential returns . This is the case with CLAWS. Once users mint CLAWS tokens, they will be able to deposit their CLAWS into the Sushiswap liquidity pool and receive CLAWS-SLP tokens in return. These CLAWS-SLP tokens can then be pledged in a dedicated Badger Sett vault to obtain additional rewards (in the form of additional UMA, xSushi, bDIGG and bBadger).

The CLAWS Sett vault has a total of nearly 10 sources of income-making it itself a diversified passive income basket. Ultimately, the CLAWS Sett vault will change the yield farming game by providing stable assets with multiple yield streams.

Badger DAO Team

Since the project is under the control and management of the community, it did not put a huge focus on the founding members. In other words, the four founding members brought the Badger DAO project to life and worked hard to incorporate Bitcoin into the DeFi revolution. These four are:

A detailed explanation of BadgerDAO: How to bring Bitcoin to DeFi?

  • Chris Spadafora is the head of operations. He is a serial entrepreneur and has founded many companies over the years. His latest project before Badger Dao was Alwayshodl.com. He is also a partner of Angelrock, which provides strategic consulting for long-term cryptocurrency holdings.

  • Ameer Rosic is also a member of the Badger DAO operations team. Another serial entrepreneur, he is the founder of Blockgeeks.com. He is also an integral part of Dollarcake, a browser extension that can be used to monetize social media networks.

  • Albert Castellana is the co-founder and CEO of Stakehound.com and serves as a product consultant for Badger DAO.

  • Alberto Cevallos is the technical consultant for this project. He also advises Travala and is the founder of Metl, a company engaged in the creation of an internet of money infrastructure.

to sum up

As with any blockchain project, proving whether it is feasible or just another existing project will decide whether to adopt it. In the case of the Badger DAO, this will largely depend on the ability of the community and the team to promote cooperation, which is very important for the platform. It needs developers and content creators to publish applications and other content, such as videos, memos and art, but it also needs communities to consume these products .

Looking at the development of the total lock-up amount of tokens and projects, it seems to be successful, but it is very new. A few months of history is certainly not enough to let us know what the long-term will bring. In terms of Badger and its fully decentralized DAO governance model, you can’t even rely on the project leader to make the project successful, because there is no leader.

Badger DAO has a good start, and if it can continue to maintain the momentum it has generated, it may find itself one of the top DeFi projects . Of course, enough users can benefit from this platform, and it will bring DeFi into the Bitcoin ecosystem more comprehensively.

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