WTF is Badger?
Yup, that was the exact question I had myself when I first heard of it.
I was quite surprised to find that this project, which went well beneath my radar, is ranked in the top 10 on DeFi Pulse. It has a Total Value Locked (TVL) that is almost two times bigger than Yearn Finance;
So, what exactly is BadegerDAO?
In a nutshell, it is a Decentralzied Autonomous Organization (DAO), created by Chris Spadafora, designed to build products and infrastructure to bring Bitcoin as collateral to DeFi. Also, it's not a legal LLC or LTD company. It's purely a community.
The principle behind the DAO is fairly straightforward. The shared ownership in the DAO allows builders to have aligned incentives to build products that it needs with the decentralzied governance ensuring that the incentives remain fair to all parties involved.
The governance token, $BADGER, was launched in the spirit of a fair-distribution model - exactly like Yearn Finance. There was no pre-sale, ICO, or venture capital involved. The minting contracts were burnt upon launching, and all smart contracts were audited by Zokyo - a 3rd party security firm.
The first project from the BadgerDAO was Sett;
It is an automated Defi aggregator focused on tokenized BTC assets. Users deposit their assets into the Sett to earn a yield and get rewarded in $BADGER. This is the only way for people to earn $BADGER.
The introduction of Sett allowed BadgerDAO to achieve a sweet TVL. In fact, BadgerDAO has the best Market Cap/TVL ratio;
The ratio is currently at 0.02, with over $600 million in TVL against the $13 million market cap value.
Bitcoin & Ampleforth = $DIGG?
The next product set for release by BadgerDAO is called DIGG. It is described as an elastic supply cryptocurrency that is targeting a peg toward the price of Bitcoin. You won't find it on coingeko or cmc yet as of 12th of Jan 2021.
Elastic supply currency?
I’m sure you guys have heard of Ampleforth before. An elastic supply cryptocurrency that rebases daily with the goal for AMPL to be as close to $1 as possible.
Well, $DIGG is a mixture of both Ampleforth and Bitcoin - combined!
Digg is actually based on the AMPL codebase itself. This is a promising start when you consider the fact that AMPL has already been battle-tested with over 600 daily rebases on record - all without a hitch going wrong.
The rebasing mechanism automatically adjusts the supply for $DIGG based on the USD value of $DIGG against $BTC. So, if the price of $DIGG is higher than $BTC, the supply will adjust upward - and so will the balance in your wallet. On the other side, if the price of $DIGG is lower than $BTC, the supply will be adjusted downward.
The supply rebasing mechanism is designed to drive price action according to the adjusted supply level. If you have more $DIGG in your wallet, you will likely sell the additional tokens you made. If there are less $DIGG in your wallet, users are incentivized to buy more - driving the price higher again.
One of the great things about $DIGG is its approach to composability with DeFi protocols and exchanges. Due to their elastic supply, rebasing tokens such as $AMPL have proven difficult to be added to centralized exchanges and even DeFi money markets.
BaderDAO is combating this by creating a totally different system.
You see, when you deposit into the BadgerDAO $DIGG vault system, you get ‘b’ tokens back, which represents your share of the vault. So when you deposit $DIGG into the vault, you will receive $bDIGG, which acts as a representation of your share of $DIGG.
Now, the rebasing mechanism is isolated in the vault. This means that $DIGG will only experience the rebase - $bDIGG will not. However, what is essential to understand here is that your share of the vault remains the same. So, when you withdraw your $DIGG, by handing over your $bDIGG, you will receive the exact amount post-rebase. Of course, you can still hold $DIGG outside the vault and experience the same rebasing supply.
$bDIGG will be the token that is free to use in DeFi, and will be the ERC-20 token that exchanges can add easily. $bDIGG is also a yield-bearing token, and the owner of it can easily claim the $BADGER and $DIGG rewards in the dApp.
Most importantly, $DIGG is set to be a non-custodial method of bringing Bitcoin onto the Ethereum blockchain. This means that users will no longer have to trust a centralized party to wrap their BTC and bring it to the ERC-20 realm. Instead, users can now rely on the $DIGG smart contract's elastic parameters to maintain the BTC peg and keep complete custody of their own assets.