When you deposit Bitcoin in one of the many Badger DeFi products, Badger uses complex strategies to spread it across additional DeFi protocols like Curve and Yearn to earn high yields.
Don't worry if that sounds complex — it is, and that's the point. Badger DeFi products present you with a simple UI that hides all the complicated DeFi workings in the background.
These are still early days for the Badger DAO project, so the app’s simplicity hasn’t quite achieved one-click Bitcoin deposits. However, the best DeFi yields often go to the fastest adopters, giving you ample reason to deposit BTC in Badger sooner rather than later.
Badger DAO is bringing Bitcoin to DeFi
Before Badger DAO, your options for earning interest on Bitcoin were low-yield. Compound, Aave, BlockFi, and Celsius all offer modest Annual Percentage Yield (APY) for BTC deposits but are lackluster compared with interest for other cryptocurrencies.
Like Yearn Finance, Badger uses a vault system called Sett Vaults (fun fact: a sett is a badger den). Sett vaults are smart contract lockers containing yield farming strategies deployed across DeFi protocols.
Running a Sett vault strategy is expensive — that’s why they require people pooling millions of dollars worth of crypto to turn big profits. Since Bitcoin is the world’s most popular and widely-held cryptocurrency, Badger BTC Setts shouldn’t have a problem getting funded.
A single-asset wBTC Sett will soon enable you to deposit BTC in the Badger app and start receiving interest in one click.
The importance of a single-asset wBTC Sett can't be overstated. Compound, Aave, and other lending protocols allow you to deposit wBTC — meaning you still have to wrap your Bitcoin first. Badger eliminates the middle-step by letting you deposit native BTC, then wrapping it for you in the background.
By enabling the masses to deposit BTC into a Sett easily, Badger takes a firm step forward in bringing widespread Bitcoin DeFi adoption closer.
Overview of Badger DAO DeFi products
There's a vast array of Bitcoin DeFi products built by the Badger team. Let's break them down one by one.
Badger Sett Vaults are Bitcoin DeFi strategies that earn staking interest on deposited assets. Like Yearn Vaults and Curve deposits, all you have to do is choose from one of the several Sett Vaults, deposit the required tokens, and start earning APY.
Right now, you can earn high yields on several widely used types of tokenized Bitcoin, including wBTC, renBTC, sBTC, tBTC, and crvRenBTC.
CLAWS is a stablecoin with value derived and stabilized by asset deposits in the Sett Vaults. Instead of backing CLAWS with vault-locked dollars (like USDT and USDC), the Sett-protected method keeps CLAWS supply elastic.
DIGG is a daily rebasing ERC-20 token pegged to BTC price. When the price of DIGG = more than BTC, DIGG supply increases; when DIGG = less than BTC, DIGG supply decreases.
ibBTC is an interest-bearing Bitcoin token that bundles the various Ethereum BTC versions out there, i.e., wBTC/renBTC/sBTC, into a single standard denomination.
BADGER is the governance token used in the Badger DAO protocol. The Badger DAO team didn't hold an ICO or funding of any kind — the distribution at launch was all to the community, hence the DAO part (Decentralized Autonomous Organization).
Users stake their BADGER to earn bBADGER — and perhaps future rights to the fees earned by the platform.
Difference between BADGER and bBADGER
When you deposit BADGER in the Sett Vault, you'll notice your wallet shows a new token balance for bBADGER.
bBADGER represents your BADGER tokens in the Sett Vault. When you're ready to withdraw your BADGER from staking, you'll first have to convert back from bBADGER to BADGER, then unstake from the vault.
You can use bBADGER as a collateral asset in other DeFi protocols like Cream Finance.
Badger one-click DeFi Bitcoin savings accounts are coming
Badger recently partnered with Ren Protocol, developers of the current tokenized Bitcoin standards wBTC and renBTC.
The integration brings with it an exciting future for simplifying Bitcoin DeFi using Badger. Soon, you can bring native unwrapped BTC to the Badger v2 app and zap it straight into a single asset vault in one click.
Using the integrated RenVM Bridge, Badger will wrap your deposited BTC to the appropriate tokenized version in the background and enter it into the vault — all within a tidy transaction that's easier on the wallet.
Badger DAO is leading traditional institutional finance to DeFi
Every day, Bitcoin is being adopted and held by traditional financial giants like Goldman Sachs, JP Morgan, Fidelity Investments, and mega-companies like Tesla.
Given the size of corporate holdings (i.e., Tesla’s $1 billion+ worth of BTC), it makes perfect sense for large BTC wallets to take advantage of the outsized yields found in DeFi protocols.
Recently, Badger announced a strategic partnership with Fireblocks, a DeFi portal for institutional investors that recently closed a $133 million funding round backed by the likes of BNY Mellon. The terms of the partnership outline Fireblocks' intention to use Badger products as a landing pad for its more than 200 institutional clients and $400 billion AUM.
Currently, Badger DAO has notched just over $1 billion in total value locked. The Fireblocks partnership gives Badger the potential to see billions of dollars worth of BTC move onto its platform.
Other DeFi protocols let you bring Bitcoin onboard, but none of them are focused strictly on being DeFi for BTC. In this sense, Badger has its work cut out and doesn’t face any natural competition.
Of course, centralized DeFi platforms like Celsius, Nexo, and BlockFi are straightforward to use. If Badger wants to compete with these platforms and bring genuine DeFi usability to Bitcoin, it needs to implement more one-click solutions quickly.
According to the Badger 2021 roadmap, the team is on target to achieve most milestones. The Fireblocks partnership let slip a massive clue about how successful their quest to create mainstream BTC DeFi options is and bodes well for their becoming the standard Bitcoin DeFi platform.
About The Author:
Marko is a crypto enthusiast who has been involved in the blockchain industry since 2018. When not charting, tweeting on CT, or researching Solana NFTs, he likes to read about psychology, InfoSec, and geopolitics.