Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Can the BadgerDAO Make Money from Bitcoin Interest?

The builders of the BadgerDAO (BADGER) hope to turn Bitcoin (BTC) into a decentralized finance (DeFi) tool. They hope to make it easy to connect Bitcoin to other blockchains.

Interestingly, the BadgerDAO builders hope to make Bitcoin (BTC) interest bearing through their tools. BadgerDAO is a decentralized autonomous organization (DAO) that builds DeFi solutions for Bitcoin.

Interest Bearing Bitcoin (ibBTC)

For example, BadgerDAO’s Interest Bearing Bitcoin (ibBTC) is a collateralized token that represents Bitcoin on the Ethereum, Binance Smart Chain, and Polygon blockchains. To elaborate, Interest Bearing Bitcoin is a Bitcoin-backed asset that accrues interest.  

The Interest Bearing Bitcoin provides liquidity to Sushiswap through WBTC/ibTC SLP. It provides liquidity for Swapr ETH/iBTC pools through ETH/ibBTC Swapr LP (Liquidity Protocol). The Sushiswap Farm (Polygon) provides liquidity in the Polygon Sushiswap iBTC/wBTC pool to earn Polygon (MATIC) and SUSI rewards.

They describe the ibBTC as an index of the top Bitcoin-pegged DeFi assets. Those assets include wBTC, renBTC, sBTC, and tBTC. Users can mint iBTC by providing tokens through Sett Vaults.

Sett Vaults is an app that allows users to deposit over 20 Bitcoin-linked crypto assets into smart contracts. The contracts execute strategies that generate risk-based rewards and interest. Sett Vaults contracts securely lend assets that earn interest and provide liquidity to traders. Sett also farms tokens including xSUSHI.

Badger Bridge

Badger Bridge a core product of the BadgerDAO is a bridgechain that links the Bitcoin and Ethereum blockchains. Badger Bridge users can receive either renBTC or wBTC tokens as rewards for using the app. renBTC and wBTC are collateralized representations of Bitcoin (BTC) on the Ethereum blockchain.

Badger Bridge has three principal functions. Those functions are Mint, which takes BTC from the Bitcoin blockchain and outputs it as renBTC or wBTC on the Ethereum blockchain. Mint & Earn brings BTC from the Bitcoin blockchain and deposits it in a yield earning Sett Vault.

Release converts Sett Vault positions in renBTC or wBTC on Ethereum to BTC on the Bitcoin Blockchain. Badger Bridge makes money by charging an 0.04% Mint & Earn fee. It also charges a 0.001 BTC fee.

Badger Boost

The Badger Boost app adjusts the amount of BADGER rewards a user receives. They base the Badger Rewards amount on a user’s Stake Ratio.

The Stake Ratio is the ratio of the native bBADGER or DIGG LP balance to funds in a BTC Setts. The higher the native BADGER native balance the more BADGER token rewards the user receives.

The Badger Boost Optimizer calculates the amount of native Badger assets needed to increase a Badger Boost. The Optimizer can tell users the exact ratio of non-native to native assets needed to take the boost to the next level.

A Stablecoin for Bitcoin?

They call DIGG a centralized, elastic supply crypto asset they peg to the price of Bitcoin. The BadgerDAO governs DIGG. I think DIGG sounds like a Bitcoin (BTC) stablecoin.

To explain, a stablecoin such as Tether (USDT) is a cryptocurrency that contains a smart contract. The smart contract releases US Dollars from a bank account when you spend Tether. Hence, they peg Tether to US dollars and DIGG to Bitcoin (BTC).

The BadgerDAO rebases DIGG every day. Rebasing BadgerDAO increases the DIGG supply if the DIGG’s price is over 1.05 BTC they buy more Bitcoin to match the DIGG price to BTC. If the price of of DIGG is under 0.95 BTC they sell DIGG in order to raise its price to match Bitcoin’s.

The hope is that holding DIGG in a wallet or stake DIGG as bDIGG will increase annual percentage yield in vaults in the Badger Boost Ecosystem. Toe elaborate, bDIGG is an interest-bearing receipt token users receive when they deposit DIGG in a Sett Vault. Hence, you can consider bDIGG a Bitcoin (BTC) bond.

BadgerDAO stakes DIGGs in vaults for bDIGG receipt tokens and rewards. BadgerDAO will provide DIGG-WBTC liquidity in Sushisawapp for several types of charitable rewards.

What Value Does BadgerDAO Have?

The BadgerDAO claims to have some value. BadgerDAO (BADGER) claimed to have $930,533 million in Total Locked Value, 29,843 users, 40 vaults, and over $240 million in Treasury holdings on 17 January 2022.

Mr. Market thinks BadgerDAO (BADGER) has some value. For instance, CoinMarketCap listed BadgerDAO as its 314th largest cryptocurrency, with a Coin Price of $13.45 on 18 January 2022.

In detail, CoinMarketCap gave BadgerDAO a Market Capitalization of $168.531 million, a Fully Diluted Market Cap of $284.954 million and a 24-Hour Market Volume of $14.754 million on 18 January 2022. They base those numbers on a Circulating Supply of 12.529 million BADGER, a Total Supply of 21 million BADGER and a Maximum Supply of 21 million BADGER.

In contrast, Coinbase gave BadgerDAO a Coin Price of $13.52, a $169.9 million Market Cap, and a $14.7 million 24-Hour Market Volume on 18 January 2022. They base those numbers on a Circulating Supply of 12.5 million BADGER.

I consider the BadgerDAO an interesting DeFi investment because of its efforts to add interest to Bitcoin (BTC). BadgerDAO is a fascinating cryptocurrency, but I recommend speculators avoid it until they show BadgerDAO can make money by adding interest to Bitcoin.

I predict BadgerDAO could make enormous amounts of money if the DeFi tools, its team is developing work. However, BadgerDAO will lose money if those tools do not work.