Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Chris Spadafora: BadgerDAO – Bridging Bitcoin and DeFi

Episode Date: August 10, 2021

Badger is a decentralized autonomous organization (DAO) with a single purpose: To build the products and infrastructure necessary to accelerate Bitcoin as collateral across other blockchains. BadgerDAO is extremely community focused and has succeeded in creating a seamlessly operating DAO out of a group of random people with a shared set of values and a mission.BadgerDAO's founder, Chris Spadafora, joined us to talk about how he built this decentralized community, why Bitcoin & DeFi, and the products they have created including Sett and Digg.Topics covered in this episode:Chris' background and how BadgerDAO came aboutHow they successfully built a strong communityWhy Bitcoin and DeFi?Who is the target audience for Badger?The Sett vaults - strategiesDigg - the rebase systemChris' thoughts on “DeFi on Bitcoin”Episode links:Badger websiteBadgerDAO WikiDiscordBadger on TwitterChris on TwitterSponsors:CowSwap: CowSwap is a Meta-Dex Aggregator built by Gnosis. It taps into all on-chain liquidity offering the best prices on all trades and provides some UX perks (no gas costs for failed transactions!) and protects traders against MEV - https://epicenter.rocks/cowswapThis episode is hosted by Friederike Ernst & Sunny Aggarwal. Show notes and listening options: epicenter.tv/404

This is Epicenter, episode 404 with guest Chris Baderfora. Welcome to Epicenter, the podcast where we interview crypto founders, builders and Dodd leaders. I'm Friedricha Ernst and I'm here with Sunny Agarwal. Today we're speaking with Chris Badafora, who is the founder of Bergerdao. Bergerdao brings Bitcoin to D5 in all sorts of ways. We'll talk about this with Chris in a little bit. But first let us tell you about our sponsor this week.

Dexes, they're great, but they're vulnerable to a lot of problems like MEV, and MEV is not fun. And you also get a lot of failed transactions, high gas costs. So there's a cool protocol called Cow Swap, which tackles a lot of these issues head-on and offers a new type of training experience. It's built by the NOSIS team. It's basically a meta-dex aggregator. And so what that means is it actually aggregates over other aggregators. So, you know, now if it's too much, to work about thinking of whether, you know, do I go to one inch or do I go to a peroswap?

I go to macha. Well, cow swap is able to aggregate over multiple of these aggregators itself. Obviously, and Federica is here and, you know, what is the co-o? So, Vindigo, tell us what's new about cow swap this, you know, recently? Yeah, so basically we hit 200 million trading volume this week and have more than 7,000 distinct traders at this point in time. There is also a public discussion going on around the launch of a new token for NOSIS protocol. So basically, go to the NOSIS forum if you want to partake in that. There was a Discord launch for KOWSwap. And I promise it's not just memes. Actually, people talk about MEP and stuff, for real. And there are public testing sessions of new features on Discord. And if you join, you'll get a

pope. Do I get a poe up for every trade I do? Do I get one pull-up? Upboard. You only, if you go, if you join the public testing session on Discord. So you don't get it for trading. For trading, you just get the best prices. I see. I feel like I should earn an NFT for every single trade I do. And it's like, so I can memorialize every single.

I want an NFT for every transaction I ever make on Ethereum, which I'd like to see. I think basically if the token goes through, you will probably get a token. So I think that that'll be, not quite an NFT, but. you know, that may be good enough. Cool. Cool. So let's go back to Badgerdao. So, Chris, tell us a bit about yourself and what brought you to the space and what moved you to actually start Badgerdao and, you know, try to bring Bitcoin to Defi.

Sure. Hey, guys. Thanks for having me. So my story, you know, I've been in the space quite a few years, almost, you know, year, 2020, almost nine years, actually, when I purchased my first Bitcoin. I was actually in New York at the time. And my office just so happened to be right below the Bitcoin Center. And a friend from college was like, hey, we've got to go, you know, check out this new thing, Bitcoin.

And they were doing live auctions with a gentleman with a bowtie and an Excel spreadsheet on the wall behind. And everyone brought their, you know, rigged up miners and stuff. It was pretty funny. Was this the Bitcoin Center on World Street? That was, yeah. Okay, yeah, I remember that. Long time ago.

And, you know, that's really just piqued my interest, but I've always been a believer in, you know, just people owning their life and taking control for, you know, how they live their life and why, rather than, you know, taking societal standards and making those just how you live your life because that's how you're supposed to live your life, right? So I've always just believed in people taking free.

that way and owning their freedom. So that's what obviously attracted me to Bitcoin. And then over the years, I continued to invest and be part of Bitcoin, talk forum and things along those lines. And then being from Toronto when Ethereum launched, that was kind of when a lot of light bulbs were going off of my mind. And I started seeing the potential for what was going to come. And that's where I decided to stop doing what I was doing, which was primarily in e-commerce

and digital marketing and sales and things along those lines and invest my time full time in crypto. And I started helping a few projects with those specific things, right? You know, digital marketing and so forth. Continue to invest in different projects. And then, you know, as the years went on, got involved in a variety of different things, helped doing some crypto community events, like, you know, helped do San Francisco Blockchain Week in 2018, you know, with the Norris crew and a few folks. and primarily just was consulting for different crypto projects until the middle class close to end of 2019.

And that's where for me it was, you know, I wanted to have a bigger impact on the space that I grew to love and have an impact that lasted a really long time. And I wanted to be a builder, right? That's really, you know, what I wanted to do. And I believed in the power of Bitcoin and Bitcoin being used in financial applications and being accelerated by, you know, blockchains like Ethereum, obviously, and potentially a variety of others. But that's where the journey started. And going back to this idea of freedom, I also have never been a big fan of, you know, centralized corporations and just hierarchical decisions and, you know, all the lack of transparency on a day to day. And, you know, you start combining those things and the acceleration of decentralized organizations in the beginning of 2020 and actually seeing real value and real, you know, assets inside of these decentralized orgs. That's where, you know, this is called the Star started lining in my head and decided to push forward with creating a decentralized organization.

That really had one core focus. And that was to build the infrastructure to bring Bitcoin to decentralize. centralized finance. So how did the team meet or was their core team? And how did you get more people pulled in to decentralize it? It's pretty wild. I still can't believe some of the stuff came together. But it was me and two other folks, one lead solidity developer and one lead front-in

and U.S. And I pretty much handled, you know, the business development, the marketing, token structure, things along those lines. And we brought it to market December 3rd. And the way that we brought it to market, we didn't raise any money. We self-funded it. And we wanted to launch with a product that people wanted to use. So we launched with our first product, which are our set vaults where people can deposit tokenize Bitcoin and earn interest on it in an unkustodia way. And it was through that leading up to that launch, we launched our Discord in September. And we had a program that we called the early contributor program.

Right? So, you know, we came up with a bunch of wild stuff and we essentially took all those ideas from like the token breakdown to how the products are going to work to everything. And we just spewed it on this Discord and all these different channels. And people just started joining. People started joining through Word of Mouth. People started joining just through other protocols sharing that they were excited about our launch, upcoming launch.

And then the early contributor program was that kind of incentive where people, people with aligned values wanted to help, wanted to help figure some of these things out. And that's exactly what they did, right? Months in advance, I call it day zero type stuff. There was over 100 people that were rewarded as part of the early contributor program. And these people just not knowing that Badger would be anything, you know, just wanted to help from everything from design to development to economic, you know, economic decisions run the token structure and liquidity mining program and a variety of things.

And then that just started snowballing. And from that point on, every day we'd have new contributors that wanted to help. And some people that helped a bid and then kind of left. And then some people that helped a bid and then helped a lot and then stuck around. And now there's almost 20 people that work full time every day on the Badger Protocol. and a community of, you know, 15,000 people that are avidly excited about what's coming next and adding value and helping and just being a part of it, right? And it's been just interesting for us because, you know, there's no bank accounts,

there's no legal entities, there's none of these things. So you have to attract certain types of people. And it's not like, you know, we can put a job post out and say, hey, come on, you know, join. And, you know, that really, we've never done that. We've never done a job post. We've never done anything like that. This has all been people from the community getting involved and just having, again, that shared vision

for what could be if we were able to actually accomplish this thing. As someone who's been in this ecosystem a long time and whose background is in business development and marketing and so on, I mean, what we actually see is that there are these communities that are basically their grassroots and they emerge and they are self-sustaining and so on. And then there are communities that never really take off, right? So basically there are communities where there's lots of push and money and everything behind it,

but still for some reason they fail to actually garner that critical mass and in a way they're dead on arrival. What do you attribute that to? I mean, basically, Badger Dao was super successful in how it took off from nothing and how dynamic, and big the community is, what do you think are the contributing factors? Well, there are a few. I think the main one is having shared values, a shared value in belief system. Like everyone in our community believes that Bitcoin is going to be, and when I use the term Bitcoin, I don't necessarily just need native Bitcoin on the Bitcoin network. I mean tokenized Bitcoin, rap Bitcoin, really a representation of Bitcoin is going to be a

paramount, a critical asset to decentralized finance infrastructure and the future of decentralized finance, really what we're all building. And that shared belief in Bitcoin as that leading horse is really what brings everyone together. And I think another key piece is how you identify the right people to even kickstart that community. Right. So for us, what we did as part of our launch is we looked at 32,000 wallets for two years prior to our launch and identified 19 different actions, things that we believe aligned with our values. So, for example, anyone that participated in on-chain voting with yearn or sushi or even off-chain through snapshot, yearn, sushi, harvest, one hive, things along those lines,

or people that use tokenized Bitcoin on Ave or compound or provided liquidity on balancer or sushi or uniswap or whatever it may be. And it was those types of actions that really aligned the people that we believe would be the right community members to really take this and lead it. And those are the types of things that we identified early. and when we identified those, we also built a product that we felt those same people would want to use day one. And then by saying, hey, you're sharing our values, you're there from day one. It's not like you're coming day 40 after, you know, venture capitalists and a bunch of different groups kind of facilitated a certain startup. No, you're there from, you know, day zero, the ups and the downs. And you now have a product that you've been looking to use, we thought, at least.

people would want to use something like this. It turned out they did. And then by the way, you have the ability to decide all the factors and the direction of said app and whatever the protocol ends up becoming and the value that it ends up incurring. So those were some of the critical things that we did early on that I think most aligned our community and made them really a strong force. And I think as well, another big,

big thing was, you know, when you look at those actions, like another key action that we looked at was anyone that donated to Gitcoin for the first seven rounds at the time. And we were the first ones to, you know, airdrop to people that participated in Gitcoin and work with the team to help that, help gather that information. But also, we carved off 2% of our supply to Gitcoin, right from like right from the beginning. And this is something that was decided as part of the other contributors. And again, these are the types of things that those are, actions align certain types of individuals and with those types of individuals if you actually want to build something that's led and run by a

community you better hope that you have some really good community members with the right skill set and mindset to take this where it needs to go because it's not about you know me or the other few people that started it all becomes about the people that that lead it moving forward to which like I'm just you know I consider myself just another contributor to the to the organization So, you know, you mentioned that like, sort of the guiding flag right now of a lot of the Badger community is this, you know, Bitcoin on Defi. What is it about like Bitcoin and Defi together that like excites you so much? Well, you know, Bitcoin, in my opinion, I get some flat for it, but I feel like it's the best money ever invented.

And it also, and just from a pure, you know, fax perspective, right, it represents 50% of the entire cryptocurrency market cap, the highest number of wallet addresses in the world. And obviously, you know, the amount of years that it has behind it since launch and, you know, organic growth and things along those lines, that in my opinion, it becomes that asset that everyone wants to use when they want to, use a financial application. And, you know, the proof was really in the pudding in the last year and a half, right? I think in the beginning of 2020, there was a thousand bitcoins that were bridged to other chains. I think now there's like 290,000 or little more than 1% of the entire Bitcoin supply that's been bridged to other chains and tokenized or wrapped in some form or fashion. And if you look at like what's happened during that time, you know,

it's been the explosion of defied apps. And it's really those apps and the ability to earn on it, lend it, borrow against it, a variety of things while still being able to control your assets and see exactly what's happening with your Bitcoin almost to the second that it makes it that attractive. And if you rewind and look at some of the use cases for Bitcoin, which admittedly there hasn't been much over the years, you know, one of the things that picked up quite a bit was centralized lenders.

I think, you know, Genesis trading just came out with their Q2 report. And the numbers are just staggering, like billions and billions and billions of dollars worth of lending and borrowing with Bitcoin being the primary asset that's being used for these types of things. And not pointing at Genesis for anyone, but just in general, you know, you give up control of your assets and you don't have the ability to see what's actually happening. with your Bitcoin. And that's a big, big, big, big, big problem. And it goes directly against the whole ethos of Bitcoin. And I don't think that's going to be able to last for that long before the people want to be able to have that level of control and have that transparency. I think a hurdle that, you know, Bitcoiners, as they call them, are going to have to get over is like, how is that enabled, right? And that it's not on the Bitcoin network. I'm not saying

that it will never be on the Bitcoin network, but I think the Bitcoin network in general, it's going to take much longer, and I don't think it's ever going to capture the type of market share that something like Ethereum has been able to capture or will capture moving forward. So that's why I think Bitcoin is going to be one of the biggest assets and most used assets and all of Defi, obviously Ethereum and obviously stable coins are up in that bucket as well. Yeah, I mean, I completely agree with you. Someone a couple weeks ago described me as the most Bitcoin maxi shit coiner they know, which is like I'll take that as a compliment.

You know, I definitely agree with you that like, you know, I think I also, you know, I think Bitcoin is probably the best asset that exists in all of crypto right now. And, you know, so there's this, you know, there's also like what I like to say is like everyone in crypto is a Bitcoiner, right? And I bet I, it'll be very hard to find anyone who is not, like, you know, doesn't have Bitcoin. But is Badger sort of, who is the target audience right now? Is it these people who are already into Defi and are like, you know, you know, I already did defy with my ETH and USDC? And it's like, oh, but I also have, you know, a third to half of my portfolio on Bitcoin. Let me bring that and use that in Defi as well.

Or are you actually going to like, you know, this. larger a Bitcoin community that's outside of Defi right now and trying to bring them into Defi? Well, it's the former right now, right? So right now, the majority of the people that use our applications and products are those that are already comfortable with tokenized or wrapped versions of Bitcoin, are already comfortable using applications on Ethereum, and are already comfortable participating in decentralized finance.

That's where our main target audience has been. In the last three months, we've worked hard to try and bring more Bitcoin into DeFi, essentially. And I feel like we've done a decent job. We launched our bridge product in partnership with Wren VM that allows anyone to take Bitcoin and deposit it right into our vaults to earn interest. And we've had over $245 million worth of native Bitcoin that's gone through our bridge during that time. So I'm pretty proud of being able to accomplish that. But for the most part, Sunday right now, it's about, you know, let's call them PowerDefi users and, you know, wanting to get the best return on their Bitcoin and in the most trusted way because we know how notoriously untrustworthy, certain applications and new launches and things like that are happening at this point in the market. So, you know, having a place where they can trust and then, of course, get the best return.

but to speak to like where we want to go, which is this idea of anyone that is thinking about holding Bitcoin or holds native Bitcoin and wants to do more with it. And literally in a couple clicks in 10 seconds, they're able to earn on it. That's where we want to go. And we believe that, you know, this maxi crowd is just a small, small, small, you know, bucket in the entire pool. And, you know, the pool is not going to care as much about, oh, we're actually. bridging that Bitcoin to Ethereum, right? They're not going to care about that. The fact that they still have a total control around their assets and full transparency, I think is what they're going to want. And with us, some are the same as us. Some are different. But to then have a say in the

app that you use every day, it's like me going up to Robin Hood and being like, hey, your fees suck. I'm going to call 10 other friends on Robin Hood and we're going to put a proposal together to change the fees. He's like, that would never happen. So I think that is how the mass market's going to start, you know, consuming us and a variety of other protocols. But really with our push towards, you know, a product that we launched, I think about four months ago called or two months ago called interest bearing Bitcoin, we hope for that to be the quickest and easiest way for anyone to start earning interest on their Bitcoin simply but just by swapping Bitcoin for it. and then at any time they can redeem for more underlying Bitcoin net, you know, anywhere between 4 and 5% API.

And all done completely, you know, by smart contracts, not by any type of, you know, lending and borrowing and, you know, OTC desk or anything like that. So let's get into some of the products. Like, so, you know, the Badger Dow is this community that's building sort of a set of different products. before we start to deep dive into any specific one, let's just give a layout of what other products.

So so far, you know, I know there's like two, there's like the dig product and then there's the set product. And then you just mentioned the Bitcoin, the Badger Bridge. Are there any other main like product verticals? Or are those sort of the three main ones? Yeah, we actually have four. So, you know, the foundation of Badger is really,

what we call our set vaults. And this is smart contracts that optimize yield for users, often called yield aggregators, but focus exclusively on tokenized Bitcoin. We then have our Bitcoin Bridge, which enables anyone to bring Bitcoin and start earning on it immediately. We have interest-bearing Bitcoin, which is backed one-to-one by any interest-bearing vault positions in our set-valtz.

And then finally, we have Dig, which is the first rebasing Bitcoin. that was brought to market inspired by Ampleforth. So which one do you think we should start with? I think the set vaults make the most sense. Again, they're the nucleus, as I call them. They're by far, you know, our core product. Yeah.

Can you maybe just give us an overview of what the set does? We have a bunch of different vaults, about 15 different vaults, and users can choose which vault to deposit. into. Each vault has a different strategy for how it generates a yield. And in most instances, each vault has a different asset that's accepted in that vault. As an example, you might bring WBT to our WBTVTC vault that we built in partnership with YERN, and that has a set of strategies that it runs to optimize the yield that users get. You might bring TBTC by the Keep team and the curve LP token associated with that and deposit that into our vaults and earn, you know,

a specific return. I think it's, you know, it's 15 or 16 percent while at the same time running unique strategy different from the WBTC vault, for example. And then the list really, really goes on. There's a whole bunch. There's different LP positions like WBTC eat pairs. There's obviously Badger you can deposit, dig you can deposit, interest-baring Bitcoin, you can deposit, all the different flavors of Bitcoin.

SBT, P, BTC, OBTC, WBTC, WBTC, RMPTC, just a whole slew of different ways to earn on your Bitcoin. And really, what we've developed are smart contracts that take those assets and do things for you that tend to be resource-intensive, expensive from a gas perspective, and time-consuming. And instead of you doing it, I'll just give you an example, one of our vaults is the IBBT WBT sushi vault.

And when you deposit an LP on sushi, you earn a percentage of the trading fees in that pool. If that pool is eligible for sushi rewards, you can then take that LP token that they gave you and stake it to earn sushi, which is great. But you need to claim that sushi periodically and then decide what to do with it. So we built a smart contract that automatically takes your LP position, stakes it for sushi, then takes that sushi and stakes it for X sushi, which is the protocol sharing stake position for sushi that yields anywhere between 10 and 20% APY. And then we distribute that X sushi to the users periodically. So we save them all that time and effort and optimize the amount of harvest and how frequently we do it

to get them the best auto-compounding API. And users like to use that, you know, that bolt in particular, especially if they want to accumulate more sushi as an example. Versus, you know, other types of strategies that might be something like a levered-up compound strategy. We take WBTC, we lend it out, we borrow, yeah, we lend it out, we take the borrowed assets, we, you know, re-inject it and do that loop four or five times and then manage the debt position. accordingly to generate, you know, a level of API, same thing on Ave and a variety of others.

So, you know, that's the beauty of defies. They're all legal pieces and they're really just smart contracts. And anybody at any time can just plug into those and create different types of strategies to provide some value to a user. And in the Set Vault's products, it's users that want to earn interest on their Bitcoin and, you know, really just sit back and let the smart contracts do the work. So who's in charge of devising the strategies? So the way that we built our, this is called our strategist bench, similar to how kind of

yearn started developing theirs, Wi-Fi. For us, it's like everything else, it's a community-oriented initiative. So anybody can become a Badger strategist, can build different strategies. And then as part of that, you know, our vaults have different fees. You know, we have a 20% performance fee. and then a 0.5% withdrawal fee on those vaults. The strategist that develops that strategy earns up to 50% of that performance fee, and this is all obviously cemented in the contracts.

So that's how we develop different strategies, as we crowdsource it from the community. You know, early on, you know, the internal developers developed many of the strategies in the beginning. And then, you know, every month we subsequently get more and more folks interested. in building with us. And that's how we develop different types of strategies. Are they audited for economic viability and smart contract risk?

Well, certainly, yeah. We've done that from the start. And one thing I'll just point out is like audits are audits, right? Like all of what it is. You know, just a few days ago, there was a protocol that was exploited for 21 million that had like three audits or something, right? Like, it's a must and they're a set of smart eyes. We obviously believe in it.

We audit everything we do. But we have a variety of other measures. So even before we launched, we ensure that our protocol was audited. And then as we started growing up, we started implementing a few other things. So we have a smart contract advisory board. And this board is a group of really, really high quality developers within the DFI ecosystem, many that are part of other protocols and that review early iterations of our code. and we bring anything that we do through the smart contract advisory board even before audit.

We then work with multiple auditing firms, but a primary auditing firm on a monthly basis that audits all of our contracts. We then have a level of peer review amongst a lot of the different protocols that we work with. And then finally, we try and protect users as much as possible by having guarded launches. So for guarded launches, what we do is we limit the amount per wallet that can, deposit in the new vaults, and we cap the total amount that that vault can take in. And then we also white list users based on different activities that they've done within the Badger ecosystem. We call it a Badger Score. And only certain folks can participate in certain

guarded launches based on their Badger score. It might be, hey, they provided liquidity, or they voted in governance, or they've been part of Badger for X amount of months, or whatever it may be. An accredited badger. Yeah, yeah. We have loyal badges, an accredited badger, a variety of things. But we have multiple weeks of a guarded launch and we kind of move it up. Like it starts very small. Then after a week, we move it up further and move it up further and move it up further.

And then we open it up to everyone once we feel comfortable with the results over that time frame. And so what is like the difference between like, you know, let's say I have WBT. Why would I put it in the Badger Vault instead of going to a YerN Vault? Like, is there any, is it literally just competing on strategies or is there some other big differentiator between, why go to a Bitcoin Focus Aggigator instead of a more generalized one like YERN? Well, we work closely with YERN and we partner a lot of things, including the WBTC Volt that you would deposit on YERN. So there's various, and you would deposit into Badger, it goes through the urine vault as well. But really, when you look at other aggregators, not necessarily urine in particular, but there's a, there's a variety of things.

First and foremost is just how the whole system works together. So, you know, we have a few different mechanics in place, but we believe that when people deposit in a variety of different vaults, they're potentially going to want liquidity out of those assets and they're going to want to continue to earn interest while being able to put those those deposits to work it's not you know it's not an ideal uh experience to just kind of deposit here and that's it so that's why we create an interest bearing bitcoin and it really allows anyone in all of you can be in 10 vaults and you can consolidate those vault positions into you know it's it's backed by a basket of those vaults but it's pretty much a meta token and then you can go and take that and bring it to cream and borrow against it or provide LP on

sushi to earn additional EPI or bridge it to Solana and earn over there or bridge it to Polygon and deposited into a variety of different protocols. So that's one of the things that we do that most others don't is having the liquidity in your position. I think as well, we've been relatively innovative around different type of mechanics to incentivize certain actions in the app or boost rewards. So we introduce something called Badger Boost. And what Badger Boost is, is if a user has Bitcoin deposited in the app, we look at what their stake ratio is.

Stake ratio is the Badger Balance, the US dollar representation of your Badger Balance plus the US dollar representation of your Dig Balance, another Badger asset, divided by the dollar value of your Bitcoin deposits. The higher the stake ratio, the higher the multiplier on additional rewards you get when depositing in our app. And why that's important is because it encourages the type of behavior that best benefits to Dow, which is people that are not just using Bitcoin to earn and then taking some of the additional rewards and then, you know, selling them off explicitly, but instead, people that are holding those rewards, but more importantly, participating and getting involved in what the app and the organization needs to move forward.

And so those are certain things that we do that others don't. And then I think another big, another big, you know, feather on our cap is just our laser focus from a security perspective. Like from day one, you know, that's been our absolute focus and it's going to continue to be our focus. And, you know, we move, some people think we move fast in our mind, we move a little slow just so we can make sure, like, as much as in the development team's control, we can mitigate risk in, you know, building some of these new tools that really haven't existed before. What's the amount of Bitcoin currently under management with Badger?

About $600 million. And then a few months ago, there was a peak of about $2.5 billion. that's when Bitcoin was much higher in price, but neither here nor there. In the earlier days, we had up to $2.5 billion in Bitcoin deposit in the app. Oh, wow. That's a big number. Lots of Bitcoin. One thing I wanted to talk about actually as well, though, is like, so what level of control does like the Badger token holders have over this?

Like, you know, because let's say the Badger, If I remember correctly, the current market cap is around 150 million or something. And so if the value of the Bitcoin is in the 600 million, how do you think about thinking about the security model around this? Yeah, so there's been a whole slew of, you know, we call them Badger Token V2 conversations amongst the community around, you know, having different models, security models and backstops. things similar to AVE and looking at different things like redemption pools and a variety of other

things. But for the most part today, the Badger token governs the parameters of all of our products. It governs the Treasury. And that's really, you know, and obviously it governs really any economic decision that the organization could make. And, you know, to be honest with you, Some people kind of say, hey, like, well, you're just governing, you know, this protocol. Like, what does that mean? Well, it's not, they're not small numbers. Like, you know, you know, in our treasury, we have like $50 million of Bitcoin and stable coin. And, you know, we have to put that to work.

We have to use that accordingly. There's a variety of decisions that go into how that capitals manage our total treasury. When you look at Badger that's in there too and dig, it's like over $150 million. So it's not by any means a small number, and there's a lot of critical decisions that need to go into how that Treasury is managed. And then more importantly, the app, right? We've had 66 different improvement proposals passed through governance. We've had 65 that have passed and one that has failed during that time frame. And we have arguably, you know, one of the most active voting communities, you know, based on, you know, different types of,

statistics from Deep Dow and a variety of other even snapshot themselves. But neither here or there, that's how, that's what the Badger token governs today. But moving forward, you know, the intention of the community and, you know, different people that are working on Badger every day is to really build a more robust, more robust use case for Badger around, you know,

securing the protocol, the applications, token holder value. And I think a delicate thing here is, you know, revenue share. And I know quite a few protocols have accelerated, even at launch, to have the ability for users to earn a percentage of whatever the protocol makes.

I'm not saying I'm against that because I'm not, but it's definitely something, you know, we were very conscious to not do, trying to be as delicate from a regulatory perspective as possible. But I know it's something that a lot of people are looking at potentially implementing or that want to implement because, you know, it is, again, it's pretty substantial numbers, you know, over $25 million in revenue in seven months. That's quite a bit of quite a bit of money that could go back to token holders potentially. Can you talk about how governance has changed from the get-go?

So I remember a couple of years ago, I quipped that most DAOs are just three white guys with a multi-sig. And basically, obviously, that has changed in the ecosystem quite a bit. But very few DAO's have actually achieved full decentralization. I mean, where's Badger Dow on that scale? Well, Badger Dow is closer to the beginning of that scale with a past. towards decentralization. It's been a really interesting journey. You know, I'll just speak for myself in trying,

in the delicate balance that comes with trying to decentralize while still trying to remain agile and protect users and users' funds when you're putting, you know, smart contracts to the market that touch hundreds of millions of dollars in days, right? Like, in this environment, it's very different from what it was. years ago where you deploy a smart contract, you open it up and it gets like, you know, 500 grand in like a few months. I think we've launched products that have gotten 500 million in two days, new contracts. Like, you know, naturally you want smart contracts to be

battle tested with a lot of time in market before you start removing certain functionality like upgradeability or, you know, proxy control or things along those lines. You know, so for us, where we sit today is we sit closer to the beginning where we have multi-sid governance that's dictated by the token holders. Our contracts are upgradable. They are behind a 40, you know, all our major contracts are behind a 48-hour time lock, which gives additional security to users to ensure that, you know, different rogue developers couldn't put a change forward.

Users would always have 48 hours before that change gets implemented. But our goal, 100% is to try and decentralize as much as humanly possible while taking it a little slower for the purpose of ensuring that our contracts are ready and the user funds and the ability to respond in case of an emergency. That speed is still there and adequate. So, you know, there's been quite a few discussions, what we call roadmap to decentralizations, proposed and being worked on within the community. You know, and over the course of the next six to 12 months, I hope we make, you know, the intentions to make quite a bit of progress towards that. So then back to the product. So you mentioned the interest-bearing Bitcoin as a separate product. If I understand it correctly, though, would interest-bearing Bitcoin, would it be as simple as thinking of it as, is it just your tokenized?

position in the set vaults or is it actually more something more complicated than that? Yeah, it's it's more complicated because it's a basket of your tokenized positions in the vaults and it averages out the underlying interest earned through your tokenized positions in this basket. Would it be fair to call it an aggregator over the badger set vaults? Well, certainly, but it's not just, it's not, it's not. just for Badger Set Vaults. It is today, but something like AWBTC from AVE or CWBTC from compound can easily be included.

Now, inherently, they have lower interest rates, so that would be something that the community would want to vote in, and it potentially bring the overall underlying down. But, you know, neither here nor there. You know, interest-bearing Bitcoin is backed with tokenized vault positions, which in turn are essentially just smart contracts, taking optimal. deal positions on Bitcoin. And I know also this other thing called Clause as well. Is that related or is that something different?

Yeah, Clause was an initial product that we started working on near the beginning of our journey. And the idea of that was a Bitcoin collateralized stablecoin. And, you know, over time, you know, with certain limitations around how we would bring that to market and the market conditions. you know, some of the developers decided to and put that on the back burner for now. So really, yeah, the focus then became really around interest bearing Bitcoin and how do you bring that to market.

But more importantly, like, we look at it as a product that is the most, you know, the most liquid Bitcoin on every chain, right? Like today you go, you know, to Salana. There's, you know, wormhole WBT and Wren WBTC. And then you go to Polygon or BSC. and it's BTCB and, you know, a variety of different things. But if there's one Bitcoin consistent that you can bring to any chain and it's inherently earning interest, you know, we think there's a space for that to really accelerate in the market.

And it really bleeds back into our vault product because essentially any IBBT that's minted, it's almost like locked Bitcoin inside of our vaults, which is really important since, you know, the app earns revenue based on the performance fees on those specific vote positions. And then, you know, that eventually we hope it to become, you know, that the easiest place to earn on your Bitcoin because any, you know, centralized platform, anyone that's looking to offer yield to their users, they can go out like most have done to date where they've built like a lending and borrowing desk and they need to have people and contracts and quantify lending and borrowing Bitcoin

to be able to offer a yield on BTC to their retail users, if they have an app or whatever it may be, to just integrating interest-baring Bitcoin, and users can easily swap from native BTC right into it and be earning on that and redeem for it at any time and see exactly how the Bitcoin is being put to work. So we see that as the future of really how the narrative of bringing Bitcoin to defy is going to land with the mass market.

and we think, you know, through different integrators, that's going to be one of the ways we're able to do that. I guess then the, you know, let's go on to the dig side of things. So the set protocol is or and all the associated products around it seem, you know, they have this like, you know, they all intertwined. You see how the interest bank of the coins are kind of dependent on the set and all that. But then this is like separate universe of this like dig product. So, you know, can you maybe just talk to us a little bit about, tell us a little bit of

about what that is and then how it maybe does relate to the rest of the Badger universe. Yeah, most certainly. So you're spot on like the bridge and the vaults and IBBT are constantly working together. You can bring Bitcoin, native Bitcoin through the bridge or into the vaults. You can then mint IBBC and then use it wherever you want to use it. Dig was actually our second product after the vaults that we launched before the bridge and IBBTC. And, you know, it really falls into this like bucket that we'll call like synthetics, synthetic Bitcoin alternatives. And we felt that there was room for at a protocol level,

being able to resemble Bitcoin and do it in a non-custodial way. And we were inspired by the rebasing mechanics from Ampleforth, if you're familiar, which essentially means baked into the token contract, if the price on a given day, if the price of that asset, in this case, dig is above the price of Bitcoin, then more dig would be in your wallet than the day before based on a 10 day roll in average. So for example, if it's 10% higher than the price of Bitcoin today, there will be 1% more dig in your wallet. Why?

because they then, the protocol then wants you to sell that dig because now you have more of it, and that naturally should bring the price closer to the equilibrium zone, which is in, you know, 5% of the price of the underlying asset that you're rebasing against. And then vice versa on the on the buy side, or excuse me, on the lower price. If it's a negative rebase or it's lower than the price of Bitcoin, you actually have less dig in your wallet. which encourages people to buy to bring them back to the position. And some people look at it as an opportunity to hedge against, you know, Bitcoin over a couple week period and a variety of things.

But at the core of it, you know, we felt and we continue to feel there's room in the market for non-custodial synthetic bitcoins and these bitcoins that use different types of mechanics like Rebasin to accomplish that. Why Rebasic? So, you know, I've actually spent a lot of time thinking about rebasing systems. I have this like, I'm trying to put together this like taxonomy of synthetic designs. And in my taxonomy, I call rebasing the poor band synthetics. Because it's like, it's like, you know, it's kind of a synthetic, but it's, it's really,

honestly, this like sort of weird asset class that I don't think has like has a good analogy outside of like crypto already. What are people using this dig thing for? Because like, yes, I understand the price of dig will always keep rebasing. But like the value in someone's wallet is is not really tracking the price of Bitcoin because, you know, just because if things are revasing, you know, what I care about is how much is the value in my wallet going up and down. And so are people holding this as a way of getting exposure to Bitcoin or are they using it in some other way? It's the latter right now. You know, with these types of mechanics, which, you know, I would argue, are very experimental.

And we've seen that firsthand from massive positive rebases that extended for months to, you know, triple the supply to going the other way and reducing the supply, you know, 80, 90%. So people today use it really for opportunities to increase, you know, value in their portfolio. how do they increase value, they look at the market cap, right? So if you're looking at the price that in many instances, people would suggest that's a wrong way of looking at a rebasing asset, because if the underlying value of the asset that's rebasing against, like in ample fourth cases that you is $1, for example, it ideally should never be $5, $10, $20, $30, right?

It should really never be that. But if it's in a few points, you know, 10%, of $1, $1.10. And whatever it may be, the market capitalization of it's going to keep growing because there's going to be more and more in circulation. So if something's a dollar, but it's had 100 positive rebases at 1% each, it technically now should have double the market cap of what it had before. And even at the same price, you know, that speculative investor would have now doubled the

capital that he invested in the beginning. And that's how people use this asset. For us, it's very volatile, extremely volatile. It's very experimental today, and we've seen that through what we've been building. But our vision was always, you know, one being first, but also ensuring utility. Because a lot of rebasing assets don't have utility, and if you can find a way to drive relative stability on that asset, but more importantly, you have a bunch of different use cases for it, which inherently bring more stability to it since people be depositing it to borrow against

and a variety of different things, you know, that over time, especially in this early, early market of defy and like the primitives that are being built now, there's something to be set around,

you know, when something's been around a long time and has a bunch of places that you can use it. And, you know, obviously it has some of the other mechanics that people might be interested in. So we've tried hard to find additional,

we call like third party anchors for dig because we've, we've seen how the buyer, the buy side is not nearly as effective as the sell side, like from a token mechanic perspective. We're on the sell side. Everyone's going to, a lot of people sell when it goes above. But when it's below, people get scared and sell instead of buy and get back in their position. So we've introduced a variety of things.

One of the things that's worked really well in the last couple months at least is our KPI options in partnership with UMA, where we, instead of saying, hey, deposit dig into our vaults to earn, you know, certain rewards, we say those rewards are only paid out if certain actions are met. For example, at a minimum five rebates, positive rebases in a 30-day time frame, for every additional positive rebase after five, you incrementally get more rewards as part of that. So that additional anchor or factor just further nudges users to do what the underlying token mechanics needed to do to grow market cap essentially. I mean, and following, you know, ample for, there was like, you know, a series of, you know, rebase 2.0 projects that came out. You know, you got jam, but then, you know, I think maybe the biggest one was ESD.

And, you know, they had something interesting going on where they actually, like, took what I was. would consider a somewhat silly mechanism of rebasing and I actually kind of try to apply it in a more useful productive way have you have you guys been working thinking about any of sort of these kind of things how we how to make you know take this dig and maybe I guess part of it is how do so how does it connect back to that rest of the badger ecosystem does it feed back into badger value or in any way yeah so so right now um dig is used as part of Badger Boost. So the dollar value of dig that you hold or stake will increase your underlying API

when depositing Bitcoin in the app. So that's its main utility today. But we've worked with the stabilized team to create what we call a stability vault. So this is really how it ties back into our existing products. And this vault, essentially what it does is based on parameters automatically buys and cells at certain times. And if we could have a larger percentage of that circulating supply deposited in that vault, that vault is really going to help prevent dig from getting below a certain price and also going above a certain price. But what's happening there is you're inherently

building a WBT reserve. So you're almost having it being backed partially by WBTC, but doing it in a way where instead of just taking, you know, WBTC and, you know, just putting it against it, instead, you know, we use, you know, these automated strategies to create that reserve and then help drive those, help drive those parameters as necessary to keep it in a certain range. So, you know, that's, again, this is what we've been trying, you know, admittedly, it's not, it's not easy. Like, you know, tackling, rebasing is very, very difficult. We, like many, have had challenges with it,

but we, of course, continue to stay committed to try and make it as successful as you can. I'm excited from the perspective of that, like, I think what we've seen in the last, like, one year is so many new stable coin designs, right? Really, I treat stable coins as a very specialized type of synthetic. They're a USD synthetic. And a lot of these designs, so, you know, maybe USDA is the most demanded synthetic in D-Fi. But I'm willing to bet

that maybe a Bitcoin synthetic might be the second most like demanded synthetic. Or an interest-bearing Bitcoin synthetic. But what I'm saying is that's still backed by like wrapped Bitcoin. But I'm talking about like a

you know, some sort of, you know, how dig is kind of trying to be like a no collateralized like synthetic Bitcoin. And so like, you know, you look at something like, you know,

I'm a big fan of Fade protocol. Right. And so that's like a protocol that like, it's a new stable coin design that's like partially collateralized. And so I wonder if there's a ways to take like the idea behind the phase stable coin and turn it into take that same mechanism design and create some sort of partially collateralized Bitcoin or something like that.

So there's no doubt that's going to happen. It's not about if it's a when, right? Like 100% that's going to happen. I think a lot of these stable coin oriented mechanics are working themselves out. Like you talked about a few of them, ESD, DSD, you know, and some and that, and that, you know, rise and burn. And at the time when we were launching dig, actually, we were getting a lot of scrutiny being like,

oh, you're using, you know, old mechanics and, you know, these coupon and bond models are way more effective. And look at this, look at that. And, you know, the nature of the beast is, it's like these are all experiments that, you know, we're trying to figure out. And I, but I do agree with you, Sonny, like over time, many of the interesting designs for stable coins are,

it's going to bleed into other. assets for sure. And we've already started to see some of those things already. But, yeah, like, you know, I think I'm not, I'm not that familiar with Olympus, for example, HM. But I think they just recently turned it on bonding for ETH as an asset. And I think, you know, there's just, there's a variety of protocols. And I'm certain that, you know, all the top assets are going to have, you know, some type of representation this way. Well, unfortunately, we're getting to the end. So I have a couple of questions about the future for you.

So you already kind of hinted at this. But what are your thoughts on defy on Bitcoin? So things like rootstock, for instance. Do you think that'll take off? Would you say oh, stacks? Yeah, I think takeoff is very relative. Right. You know, every day we decide what to build on.

And every day it makes it more and more clear that building on Ethereum is where we want to build. And we build on other chains, but primarily they're EVM compatible chains, just because we can just take what we've already built and port it over. And then, you know, we're actively, you know, preparing to launch on optimism and arbitram as well and different layer two solutions. So, you know, for us, at least I'm not saying it's out of the picture. Defy on Bitcoin, I think is a very, very,

immature market just because if you're actively looking at the most effective way to build, it's not on Bitcoin, no matter how you slice it, even from like interoperability of tools, and the developer audience, everything you can imagine, it's really behind the ball. And it may make a lot of progress there. But like a lot of these things are super experimental anyways. Like look at some of the standards in Ethereum that have been around so long. and even how some of them continue. Like, I think, you know, a white hat hacker found, like, you know, a critical vulnerability

in a contract from like four years ago or something like that, right? Like, these are the types of things that are going to continue to come to the surface. So when you have something being built there, it's going to be that much more vulnerable to potential risks and exploits. And I think it's important for the builders that are trying to build a new financial. system to really double down on trying their best at least to be acted at a level of high integrity and a level of high integrity in many instances when it's when everything your building is open source is you know building where there's the least risk of um of of uh

screwing up and and you know putting people's funds or whatever it may be at risk so i do think i don't think it's a closed door um i don't think necessarily you'll ever be as big as um building on Ethereum, but I do think there are going to be some interesting projects that come out of it. As that space matures and grows and the bridges are further developed, you know, there could be a place for Badger in particular to build products there and provide value to users. But yeah, I think it's quite a ways away. Yeah. And if you look at what percentage of Bitcoin is currently wrapped and used as collateral

in defy, that's on the order of 1%. How do you see that increasing over the coming year or two? I think it's just going to grow exponentially. I see it as, you know, eventually 30, 40%, 40% of all Bitcoin will be wrapped and tokenized on other chains. In the next year, in the next two years, I'd say we'd probably hit 5% if we continue growing at this pace, which I think we will.

And really, we haven't even, this is what's crazy. We haven't even seen, you know, big institutional money participating in defy applications. And institutional money to me is not like Morgan Stanley and crap like that. You know, even some of the largest crypto-native funds in the world that have been around four or five years that manage billions of dollars of LP money are not participating in a big way in DFI apps, and they're not participating in big way in DFI. And that wave is just going to be crazy. And I think, I tend to believe, of course, if these funds and, you know,

crypto-native institutional players have had been around a while, there's probably a couple assets that they hold the most in, and those are mostly Bitcoin and Ethereum. then obviously stable coins, they're definitely not, you know, looking to lend out chip coin number 4-4-1 or whatever the hell it is, right? So that's where I think a lot of the institutional and just overall acceleration in rap Bitcoin, like you can already see writing on the wall with Galaxy Digital acquiring Bickel, which is the custodian creator of WBTC. So some of these things are just going to start accelerating much quicker than we anticipated and all of a sudden

we see corporate treasuries, you know, earning two or three percent on their Bitcoin and a variety of things happening. And that number, to your point, is just going to grow like crazy. So do you think Bitcoin is going to end up as a limited supply ERC 20? I don't think so. I think, you know, that would be suggesting that, you know, a lot, a lot, like 80, 90%, of Bitcoin is tokenized and represented off of the Bitcoin network. I don't think that would ever happen.

But getting close to 50%, I wouldn't be surprised, and it's really going to come down to how the Bitcoin network can evolve. And they've always been slow, rightfully so, you know, from a security perspective that's always been their mandate, slow to make changes to the underlying protocol and just, you know, building on the network in general. But, you know, if they continue to be that slow, I think it's going to be, I think it's going to be eventually get to the point where there's more Bitcoin off of the Bitcoin network than on the Bitcoin network. More question for me about Badger specifically.

How important do you think like the culture and the vibes and aesthetic is to like Badger? Like you, is there a sense to which the brand is the product here? and like, you know, it's big such that it's like, you know, the product, you know, you guys are iterating on a number of different products, but the real product of the Badger Dow is this idea that like, hey, I want to use Bitcoin and Defi. That's like going to be my one-stop shop to go, go to the Badger Dow and look, you know, it'll be my dashboard. It'll be my, even in a world where let's say you removed, you know, like you mentioned, like, you know, the WBT Vault. in set is primarily, you know, it's mostly kind of interacting heavily with the

urn WBTC vaults. And so is there like, do you think that the value really will come from being you can treat it almost like a custom skin or custom user experience that's that like wraps around

all these other D-Fi protocols that's really tailored towards Bitcoin users? Yeah, from a product perspective, Sunny, I feel like that's where we we started our journey, right? The one-stop shop, like your ultimate dashboard to everything Bitcoin and Defi. That's changed a bit. You know, where we eventually want to get to is just be the most trusted place to earn on your Bitcoin. And we believe with, you know, an interest-bearing Bitcoin-type product, that will kind of be our retail focus.

And then all, like, the super users will come to, like, the Badger Pro app, which is more similar to what you see today. and that's integrated with a variety of different protocols. There's tronching. There's all these different things you can do with synthetic assets and pick which chain you want to go on and use the boost mechanics and all these different types of things. But yeah, I most certainly think that even when we look to partner with different protocols, they always say, you know, in partnering with Badger,

we're bringing the Bitcoin crowd to whatever we're working on. And I think that's the nature of it. Like, it's really our community that's the strongest and that, you know, has this shared, you know, this shared belief system. But, you know, even, and this is really why I chose the name Badger, it's because, you know, a Honey Badger has certain characteristics, right? They're relentless. They're fierce. They're small. They can take a bite from a rattlesnake.

They can fight a tiger. That's why Bitcoin was always, that was the big, that is the Bitcoin mascot, right? because it was always the little engine that could and something that, you know, was totally going against all odds. And that's how we look at it. And that's how all the community members that are fighting the same fight that we're fighting here and building a new financial system, rewriting the playbook on how organizations can grow and scale but maintain a level of decentralization and transparency.

And most important bring utility to what we believe to be the best asset ever created, being Bitcoin. So it's a mix of a mix of a few things on end. We have a direct product vision on that one click in seconds to earn for the masses and being integrated in, you know, every major platform that wants to offer that service to their users. And then on the flip side, you know, our ethos and our belief system aligns very closely with the Honey Badger. Cool. Thank you, Chris. So where can people find out more about Badgerdao and how can they partake in the experience? Well, you can come to our website,

badger.finance. There's a link to our app there, which is app.badger. com. I'd say the best place to start is our wiki, badger dot wiki, all the resources you would need around Badger, all of our products, how it all works, everything is there. And then

of course our Discord. Our Discord is where the company and the organization, more importantly, the community lives and breathes. So joining our Discord, there's a link in our Twitter, which is just Badger Dow, and you can go there and join our Discord. And there's quite a few badgers that will welcome you with open hands and answer any questions that you have and really just including myself and just be there to support you

on your journey to become a badger. Great. It's been a pleasure to have you here. Same. Thank you so much, guys. It was a great conversation. I appreciate it. Thank you for joining us on this week's episode.

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