Badger Finance Report by Jesse

Welcome to this week’s coin review and Issue# 31 of Wealth Mastery. With Dogecoin mania in full effect and carrying with it an almost 300% gain this week. Congratulations to those of you sitting on the sidelines doing nothing as much as those who capitalized on the run. With both these strategies being commendable. If you’re not already a part of the fun, don’t FOMO your way in to get REKT at the same time, those holding onto their DOGE bags shouldn’t miss an opportunity to profit. In this week’s report, we’ll be looking at a new DAO that’s looking to expand the use and function of Bitcoin in the Defi space. Developed as a community effort in collaboration with some of the best yield farmers in the space is Badger Finance.

Introduction

Badger Finance is a brand new decentralized autonomous organization protocol that has a singular and distinct purpose. That is to build the products and infrastructure necessary to accelerate Bitcoin as collateral across many other blockchains. In a similar manner to how we’ve seen renBTC and WBTC operate with regards to their utility. Badger Finance expands on this by integrating a community DAO via Aragon with a liquid governance token, a yield aggregator product focused on providing the best bitcoin yield strategies, a BTC-pegged elastic supply currency based on the Ampleforth protocol, and a strong focus on fair distribution. This includes other traditional backend services like oracles, keepers, and system monitors to provide all necessary updates to Badger. A long-term goal for Badger is to “flip the stack” so to speak. Instead of Badger being the end-point in a cycle of smart contract transactions that currently operate as; wrapping your BTC, pooling your WBTC with Ethereum, and then depositing pool tokens into Badger for yield. The team looks to Badger Finance as becoming more of a base-layer when developed further. Allowing users to unlock an illiquid position and borrow against it. Whether that’s buying more Bitcoin or reinvesting it into the protocols vault to increase your APY in the Badger App. Badger is looking at the next evolutionary step in Defi to better calibrate where their energy should focused.

One of the first protocols developed by Badger Finance is an elastic supply cryptocurrency pegged to the price of Bitcoin and governed by the Badger DAO called Digg (DIGG). At its core, Digg is based on the Ampleforth system. At the smart contract level, it is composed of an Orchestrator, uFragmentsPolicy, and uFragments. The Orchestrator allows the entry point of rebasing actions, and can forward notifications of the rebase to other contracts. The Digg system requires regular updates to react to market prices. But, this rebasing process that’s designed to occur daily isn’t necessary for function, as Badger can still operate fine without it. Digg’s rebase of supply is distributed on a 10-day rolling period. Based on the direction Bitcoin price is moving, it can be used to hedge against a known increase or decrease in BTC price. The uFragmentsPolicy manages supply policy functions by consuming data from Oracles to determine the market value of the DIGG token and giving it unique permissions. The purpose of oracles in the Digg system is to track the market price of Digg relative to Bitcoin and adjust the Digg supply to maintain its peg. UFragments itself maintains all balances and approval data as per ERC20 standards and makes changes in its displayed supply as per Ampleforth mechanics. Unlike other elastic supply cryptocurrencies, Digg does not try to be stable. Instead, it’s always working to peg against the current value of Bitcoin with its price intended to mimic that of BTC. Digg launched its token through an 8-week liquidity mining event with control of the protocol given to the Badger DAO prior. On launch, 15% of the supply was airdropped to Badger app users, while 40% of the total DIGG supply will be mined over time by the community (with no ability for new DIGG to be minted outside of the rebases), and 5% for the Founding Team with a one year vesting period. The remaining supply will be distributed to the DAO for the community to decide what to do with it. With a maximum supply of 6,083 DIGG, there is currently 1,327 DIGG in circulation.

Badger Finance has developed a completely new yield aggregator based on the extension of Yearn finances Vaults V1 known as Sett Vaults. Expanding it with new strategies, a new fee structure, and slight modifications to the governance of the system. There are two Sett systems, one for core Badger strategies (Native), and one for partner strategies (Super). To access Sett Vaults you can head over to the Badger App. Here you will see the available Setts that you can deposit in or withdraw from and the current APY% on each one to include the total locked value (TVL) deposited in that Sett. You’ll have access to “Featured Setts” with an image in the top right. This is usually is the most recent addition or highest yield producing vault. When you deposit in a Sett you will receive a “wrapped Sett token” that represents your position in the vault. Wrapped tokens have an “s” in front of them (ssbtcCRV, srenbtcCRV, sbadger etc.) To begin earning BADGER on top of the yield you’re already earning you must stake that wrapped token in the corresponding pool. To unstake your wrapped Sett tokens, simply click withdraw and verify the transaction. You can claim your $BADGER at any time without having to unstake from the pool or lose your reward multiplier. To reward early stakers and those that stake longer, Badger has implemented a rewards multiplier that increases linearly with time. The number of rewards you receive will increase according to a multiplier (1–3x) based on the length the assets are staked. Once you stake your wrapped Sett tokens, the timer starts. If you unstake that position, you lose your reward multiplier. But, you can unstake partially with the remaining assets maintaining the multiplier you earned. A central rewards management contract called “Badger Tree” uses Merkle trees to distribute rewards from across the system to users. This allows users to realize their gains from all liquidity mining programs, special Sett rewards, and any other rewards programs in the Badger ecosystem accessed in one place at a very low cost to users. The Badger Tree batches all the activity from across the system for each claim period (currently 4 hours) to determine what rewards each user is entitled to.

The Token

Governing the platform and distributed among the community to users who demonstrated an enthusiasm for Bitcoin in DeFi or community governance through DAO participation is the ERC-20 BADGER token. With a total supply of 21M BADGER, community members that helped Badger DAO during the pre-launch phase with feedback, suggestions, guidance and operational support were rewarded with 5% of the total BADGER supply in addition to the 10% DIGG supply mentioned previously. Of these tokens, 30% of the rewards were distributed at launch with the remaining 70% to be distributed monthly over a 6 month period. All users who are eligible for the airdrop could claim their BADGER in the badger hunt. Users who had completed any of the following were available to claim an airdrop of BADGER. (Participated in SUSHI Governance, Supplied/Borrowed wBTC on Compound, MetaCartel DAO Members, Deposited/Borrowed wBTC on Aave, Participated in Yearn.Finance Governance, Participated in Yam Governance, Minted wBTC, Minted renBTC, Minted sBTC, The LAO Members, Deposited in sBTC and renBTC pools on Curve.fi, Participated in 1Hive Governance, Provided liquidity for wBTC/ETH pool on Balancer, Supplied/Borrowed wBTC on Maker, Donated to Gitcoin, Provided liquidity for wBTC/ETH pool on Uniswap, Member of dORG DAO, Minted tBTC, or Participated in Harvest.Finance Governance). This makes BADGER undoubtedly one of the most fairly distributed airdrops in recent history. While it gave users many ways to qualify, the airdrop also came with a catch. Every 24 hours after launch, 20% of your possible BADGER rewards were redistributed to a community pool. Making it critical that users claim their rewards as fast as possible. At the end of the first 5 days, there were no more rewards left available to claim. Users were then able to earn BADGER (the catch) from that pool based on actions they take within the protocol like holding Badger for a period of time, using Sett Vaults, and participating in Badger governance. The more a user does the bigger the reward is from this pool and currently one of the best ways to earn BADGER tokens. Liquidity provision rewards will also be provided to (wbtc<>badger) Uniswap LP token holders through the Sett Vault program. Users can add their LP tokens to the appropriate Sett, and receive BADGER rewards as a result. This strategy will auto-stake tokens into the Badger Meta-Sett to automatically compound Badger rewards and distribute a part back to your LP position.

Operating as the backbone of governance is the Badger DAO. This autonomous organization is meant to be a community where all the best in the space can come together and build products to help speed up BTC in DeFi. The DAO elects trusted parties to have various permissions for Sett activities (such as strategic decisions and entering emergency withdrawal mode). There is a trade-off between DAO-wide decision making and speed, so the option also exists to delegate these speed-critical decisions to elected “subcommittees”. The BADGER token being the native governance token for the DAO, grants users voting rights over the future direction and use of the treasury. The initial circumstances of the DAO are noteworthy in that there is a large initial supply of governance tokens minted, which are locked & distributed over time. In Aragon DAOs, the ‘canonical’ way of distributing governance is to mint new tokens for participants entering the system as they join. The effect of this initial minting is that during the first days of the DAO it will not be possible to pass actions via the governance process, as a vast majority of the governance weight will be locked. To reduce the duration of this effect, the smallest approval threshold was reduced to 10% (from the default 20%). In the first thirty days, before the remaining 50% of tokens were released from the timelock.

The Founders

As an independently developed and community-driven project, there are no specific details on team members outside of Founder and well-known cryptoholic Chris Spadafora. As a partner at Angelrock Chris served in being a strategic asset in the advising and assistance of long-term Bitcoin investors for years. Chris is said to have already on-boarded all participants to what is being called the “War Room”. In this setting Badger’s systems operate in a pre-built test environment, and establish many communication channels through a schedule for who would be awake and available to respond to an attack at any moment. It’s a system designed with the reality in mind that it’s impossible to predict where the next exploit might come from but constructed to better analyze and reduce the harm such an exploit might cause. Designing Badger Finance to be a community instead of a corporation. The project currently has an Inaugural Job Board with openings for an Airdrop Issue Reconciler, Grants Curator, Badger Support Member, Front-end Developer, Smart Contract Developer, and Front-end Developer to redesign the UI for DIGG. This is also in addition to the Badger Dev Grants Program. Badger has partnered with many protocols to advance the features and functions of Badger Finance including a bug bounty program with Immunefi, Kyber Swap, Ren, and Keep as builders in the Badger cross-chain collective, well-known DeFi Club Enoki will be collaborating on NFT initiatives and integrating them with yield-reward systems soon, collaboration with Pickle Finance and Harvest Finance to cook up better yields for tokenized BTC; primarily with the Sett product, and Gitcoin to bridge the gap between the Bitcoin and Ethereum ecosystems.

Market Impacts

Since the airdrops began unlocking tokens on December 4th, 2020, BADGER has had a phenomenal response from the community. Starting out it ran between $3 USD and $6 USD following release the token has remained relatively stable after slightly breaking above $10 USD. Averaging $6.50 per BADGER the first month of release, BADGER broke above the $10 USD mark on January 15th, 2021, and hasn’t looked back since. Where in the last 2 weeks it’s gained an amazing 400% increase in token value to its recent high of $43 USD on February 1st, 2021. Of the total 21M BADGER supply currently, there is 2.5M in circulation. In social channels, Badger Finance has amassed a Twitter following of over 16k, a Telegram group of 5k, and a Discord channel of 2k+. Defi and DAO writer Ingalandia curates a weekly newsletter with all the new updates and events happening around Badger. As well as Badgers’ own Community Forum where discussion and participation in governance have been taking place. The project’s Github shows updates to the core code being made every couple of days, with five contributors accessing the code.

Concerns

No serious concerns have been found during my review of Badger Finance. While they did have a rocky start with a not so user-friendly UI. They quickly updated and fixed these issues shortly after launch. Your standard warning for impermanent loss would be the main concern to apply here for participating in Badger Finance.

Conclusion

Badger Finance is currently the highest-ranked Defi protocol with $1.07B USD Total Value Locked (TVL) in relation to having the lowest total market capitalization at only $95M USD. To put this into perspective Synthetix has a TVL almost double that of Badgers with $1.87B USD. But, the total market capitalization is almost $2.4B USD, and that gives SNX an over 2,000% higher market capitalization with only 50% more TVL. Meaning that Badger might be one of the most undervalued Defi propositions I’ve reviewed. As far as DAOs go there’s nothing super special about Badgers code that sets it apart from everyone else. But, what does cause Badger to stand out is the passion of its community. Badger has managed in a short time to grab the hearts and minds of coiners and no-coiners alike. After reviewing interviews with the Founder Chris, it is clear that his passion for Bitcoin is reflected in the community-driven development of Badger. Making up one of the most diversified exchanges of ideas currently happening in the crypto space. Creating a metaphorical pressure cooker of innovation that will undoubtedly push the development of BADGER and DIGG well beyond what I could imagine or the future of the protocol. However, keep in mind that with any of these yield products, the point is to use them in order to earn more and not to simply hold and tuck away.

Until next time, remember that the only guarantee is BTC. So keep stacking that Satoshi.

-Jesse Koz

#MrHarrilasagna

Follow Jesse on Twitter

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