Chris Spadafora: BadgerDAO – Bridging Bitcoin and DeFi #404

Transcript

this is epicenter episode 404 with guest chris betafora [Music] welcome to epicenter the podcast where we interview crypto founders builders and thought leaders i'm frederick ans and i'm here with sunny agrawal today we're speaking with chris butterford who is um the founder of badger dao batado brings bitcoin to d5 in all sorts of ways we will talk about this with chris in a little bit but first let um 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 uh and you also get lots 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 gnosis 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 work about thinking of whether you know do i go to one inch or do i go to a paris walk or go to matcha well cal swap is able to aggregate over multiple of these aggregators itself obviously uh and federica is here and

you know what is the co-op so so vinegar tell us what's new about uh 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 gnosis protocol so basically go to the gnosis forum if you want to partake in that there was a discord launch for cow swap um so um it's and i promise it's not just memes actually people talk about mev and stuff for real and um there are public um testing sessions of new features on discord and if you join you'll get a pope do i

get a pull-up for every trade i do or like do i get one per app work you only if you if you go if you join the public test and testing session on this group so you don't 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 just like so i can memorialize every single i i want an nft for every transaction i ever make on ethereum that's what i'd like to see i i think basically if if the token um goes through you will probably get a token so i think that that will be that not quite an nfd but you know that may be good enough cool so um let's go back to betterdow so chris tell us a bit about yourself

and uh what brought you to this space and what what moved you to actually start badger dao and you know try to bring bitcoin to d5 sure hey guys uh thanks for having me so my story you know i've been in this space quite a few years um almost year 2020 almost nine years actually um when i purchased my first bitcoin i was actually in new york at the time and um my office just so happened to be right below the bitcoin center and a friend from college um was like hey we gotta go you know check out this new thing bitcoin and and they were doing uh live auctions with the gentleman with a bow tie 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 wall street there was okay yeah i remember that long time ago and you know that 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 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 freedom that way and owning their freedom so that's what obviously attracted me to bitcoin

and then over the years i continued to you know invest and be part of bitcoin talk forum and things along those lines and then you know being from toronto when ethereum launched that was kind of when um a lot of light bulbs were going off in my mind and i started seeing the potential for what was gonna what was gonna come and that's where i decided um to stop doing what i was doing which was primarily in e-commerce and digital marketing and sales and things along those lines and um invest my time uh full-time in crypto and i started helping a few projects with those specific things right you know digital marketing and so forth um continued to invest in different projects and then you know as the years went on got involved in a variety of different

things helped doing um some crypto community events like you know helped do a san francisco blockchain week in 2018 um you know with uh with the norris crew and a few folks and and um and primarily just uh was uh consulting for different crypto projects until the um middle class close to end of 2019 and that's for that's where for me it was um 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 um and i wanted to be a builder right that's really you know what i wanted to do and i and i believed in um the power of

bitcoin and bitcoin being used in financial applications um and being accelerated by you know blockchains like ethereum obviously um and potentially a variety of others but um that that's where the journey started and you know 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 and the acceleration of um decentralized organizations in the in the beginning of 2020 and actually seeing real value and real you know assets um inside of these decentralized orgs

that's where you know this is called this the star started line in my head and decided to push forward with creating a decentralized organization that was really had one core focus and that was to build the infrastructure to bring bitcoin to uh decentralized finance so how did the team meet or was their core team and how did you how did you get more people pulled in to decentralize it it's pretty wild i still can't believe how some of this stuff came together but um it was me and two other folks one lead solidity developer and one lead front end and ux and i pretty much handled you know the business development the marketing

um 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 um and we wanted to launch with a product that people wanted to use so our you know we launched with our first product which are set vaults where people can deposit tokenize bitcoin and earn interest on it in a non-custodial way um 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 gonna work to everything and we just spewed it on this discord and all these different

channels and uh people just started joining people started joining through word of mouth people started joining just through other protocols sharing that they're excited about our launch upcoming launch and um and then the early contributor program was that kind of incentive where people with align values wanted to help wanted to help figure some of these things out and and that's exactly what they did right months in advance i call it day zero type stuff um there was over 100 people that were rewarded as part of the early contributor program and and these people just not knowing that badger would be anything um you know just wanted to help from everything from design to development to economic you know economic decisions from the

token structure and liquidity mining program and a variety of things and um and then that just started snowballing um and from that point on every day we'd have new contributors that wanted to help and some people that helped a bit and then kind of left and then some people that helped a bid and then helped a lot and then stuck around and you know now there's almost 20 people that work full-time every day on the badger protocol and um a community of you know 15 000 people that are avidly excited about what's coming next and adding value and helping and um 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 yeah that really we've never done that we've never done a job posting we've never done anything like that this has all been um people from the community getting involved and just having again that that shared vision for what could be if we were able to actually accomplish this thing as someone who's been um in this ecosystem a long time and whose background is in business development and marketing and so on what i mean what we actually see is that there are these communities that are basically their grassroots and they kind of they emerge and they are self-sustaining and so on

um and then there are communities that never really take off right so basically they're communities where there's lot 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 and what what do you attribute that to i mean basically badger dog was super successful in in how it took off or off from from nothing and how dynamic and big the community is what do you think are the contributing factors well there are few i think the the main one is uh having shared values a shared value and belief system

like everyone in our community believes um that bitcoin is going to be and and when i use the term bitcoin i don't i don't necessarily just meet native bitcoin on the bitcoin network i mean tokenize bitcoin rap bitcoin really a representation of bitcoin is going to be a paramount um a critical asset to decentralized finance infrastructure and the future of decentralized finance really what we're all building and and that shared belief in bitcoin as that um leading horse is really what brings everyone together and and i think another key piece is how you identify the right people to even kick-start 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 you know aligned with our values so for example anyone that participated in um on-chain voting with yearn or sushi or even off-chain through snapshot urine sushi harvest uh one hive things along those lines or people that use tokenized bitcoin on ave or compound or provide liquidity on balancer or sushi or uniswap or whatever it may be um and and you know it was those types of actions

that really aligned the people that we believed would be the right community members to really take this and and lead it and um and and those 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 bunch of different groups kind of facilitated a certain startup no you're 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 you know the protocol ends up becoming and the value that it ends up um incurring so you know those were those are some of the critical things that um that we did early on that i think most aligned our community and made them really a strong force and and i think as well another big thing was you know when you look at those actions like another key action that we looked at was anyone that uh donated to get coin uh for the first seven rounds at the time

um and we were the first ones to you know airdrop to people that participated in bitcoin and work with the team to um help that uh help gather that information but also we carved off two percent of our supply to get coin right from like right from the beginning and this is something that was decided as part of the early contributors and again these are the types of things that those actions align certain types of individuals and um 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 i consider myself just another um contributor to the to the organization so you know you mentioned that like um sort of the guiding flag right now of a lot of the badger community is this uh you know bitcoin on d5 what is it about like bitcoin and d5 together that like excites you so much well you know bitcoin in my opinion i get some flak for but i feel like it's the best um money ever invented and it also and just from a pure um you know facts perspective right it represents 50 of the entire cryptocurrency market cap

um the highest number of wallet addresses in the world um and and obviously you know the 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 um 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 two other chains um i think now there's like 290 000 or a little more than one percent of the entire bitcoin supply

uh that's that's been bridged to other chains and tokenized or wrapped in 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 um defy depths 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 um and see exactly what's happening with your bitcoin almost to the second that it makes it that attractive and if you if you rewind and look at you know some of the use cases for bitcoin um which admittedly there hasn't been much um over the years you know one of the things that picked up quite a bit was uh centralized lenders i think you know

genesis trading just came out with their q2 report um 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 um and not pointing at genesis for anyone but just in general you know you 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 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 uh it's gonna take much longer and i don't think it's ever gonna capture the type of market share that something like ethereum has been able to capture or will capture moving forward uh so that you know that's that's why i think bitcoin is going to be one of the biggest assets and most used assets in all of d5 obviously ethereum and obviously stable coins um are up in that up in that bucket as well yeah i mean i i mean i completely agree with you right

someone a couple weeks ago described me as the most bitcoin maxi coiner they know which is i'm like i'll take that as a compliment yeah i definitely agree with you that like you know i think i 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 but i bet i it'll be very hard to find anyone who's not like you know doesn't have bitcoin but is badger sort of who's the target audience right now is it these people who are already into defy and are like you know uh you know i already did d5 with my eth and usdc and

it's saying oh but i also have you know a third to half of my portfolio and bitcoin let me bring that and use on d5 as well or are you actually going to like you know this larger bitcoin community that's outside of d5 right now and trying to bring them uh into devi well it's it's the former right now right so right now um the majority of people that use our applications and products are those that are already comfortable or rap versions of bitcoin 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 uh into the into d5 essentially and i feel like we've done a decent job um we launched our bridge product in partnership with ren vm that allows anyone to take bitcoin and deposit it right into our vaults to earn interest and we've had over 245 million dollars worth of native bitcoin um that's gone through our bid during that time so i'm pretty proud of being able to accomplish that but for the most part sunny right now it's about uh super you know let's call them power defy users and you know wanting to get the best um return on their bitcoin and in the most trusted way because we know how uh

notoriously untrustworthy certain applications and new launches and things like that um are are happening at this point in the market so you know having a place where they can trust uh and 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 um 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 um you know bucket in 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 ability you know total control around their assets and and full transparency i think is what they're going to want and with us and you know some are the same as us some are different but then 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 gonna put a proposal together to change the fees like that would never happen um so i think that is how the mass market's gonna start you know consuming us and in a variety of other protocols

but really with our push towards you know a product that we launched i think about uh four months ago called or two months ago called interest bearing bitcoin uh we hope for that to be the quickest and easiest way for anyone to start earning interest on their bitcoin simply by just by swapping um bitcoin for it and then at any time they can redeem for more underlying bitcoin you know anywhere between four and five percent apy 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 uh get into some of the products like so you know the badger dao is this

community that's building sort of a set of different products uh before we start to deep dive into any specific one let's just like give a layout of what are the products so so far you know i know you there's like two there's like the dig product and then there's the set product and then i you just mentioned the bitcoin the badger bridge um are there any other main like product verticals or um are those are 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 you know smart contracts that optimize yields for users you know often called yield aggregators but focus exclusively on tokenized

bitcoin uh we then have our bitcoin bridge which enables anyone to bring bitcoin and start earning on it immediately we have interest ban bitcoin uh which is backed one to one by any interest bearing vault positions in our set vaults and then finally we have dig which is a the first rebasing bitcoin um that was uh that was brought to market inspired by ample fourth so which one do you think we should start with i think the set bolts make the most sense again they're the nucleus as i call them they're by far um you know our core products yeah can you maybe just give us an overview of uh what uh the 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 yield and in most instances each vault has a different asset that's accepted in that vault as an example you might bring wbtc to our wbtc vault that we built in partnership with yearn and that has you know a set of strategies that it runs to optimize the yield that users get you might bring tbtc um by the keep team and the curve lp token associated with that and deposit that into our vaults um and earn you know a specific return i think

it's you know it's 15 or 16 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 um obviously badger you can deposit dig you can deposit interest brand bitcoin you can deposit all the different flavors of bit bitcoin sbtcp btc obtc wbtc or nptc um just just a whole slew of uh different ways to earn on um earn on your bitcoin and really what we've developed are you know 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 as you know just give you an example one of our uh one of our vaults is the ib btc wbtc um sushi vault and when you deposit an lp on sushi you you earn a percentage of the trading fees in that pool if you 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 we built a smart contract that

automatically takes your lp position stakes it for sushi then takes that sushi and sticks it for x sushi which is the protocol sharing steak 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 apy and um and users like to use that you know that vault in particular especially if they 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 uh compound strategy we

take wbtc we lend it out we borrow yeah we lend it out we take the borrowed assets we you know reinject it and do that loop four or five times and then mana manage the debt positions accordingly um to generate you know a level of apy same thing on ave and a variety of others so you know that's that's the beauty of d5s they're all lego 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 vaults 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 um we built uh our this is called our strategist bench um similar to how kind of urine started developing theirs wi-fi for us it's like everything else it's a community oriented initiative so um anybody can become a badger strategist can build different strategies and then um 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 um obviously cemented in the in the in the car

in the contracts so we you know that's that's how we develop um different strategies as we crowdsource it from the community you know early on you know our 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 uh and that's how we develop different types of strategies are they audited for economic viability and smart contract risk most certainly yeah we've done that from the start and and one thing i'll just point out is like audits or audits right like call of what it is um 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 it's a must and they're they're a set of smart eyes we obviously believe in it we audit everything we do um but we have a variety of other measures so even before we launch 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 um really really high high quality developers within the defy ecosystem many that are part of other protocols and that you know 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 on auditing

multiple auditing firms but you know 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 bulk can take in and then we also white list users um based on you know different activities that they've done within the badger ecosystem we call it a badger score and you know only certain folks can be certain um can participate in certain guarded

launches based on their uh badger score 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 loyal badgers accredited badger a variety of things but um we have 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 move it up further move it up further and then we open it up to everyone once we feel comfortable um with the results you know over that time frame and so what is like the difference between like you know let's say i have wbdc why would i put it in the badger badger

vault instead of going to a urine vault like is there any um is it literally just competing on strategies or is there some other big differentiator between w why go to a bitcoin focus aggregator instead of a more generalized one like urine well we work closely with yearn um um and we're and we partner a lot of things including the wbtc vault that you would deposit on your so there's various uh and you would deposit into badger it goes through the urine vault as well um but really when you look at other aggregators not necessarily urine in particular but there's a there's a variety of things um 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 um 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 created 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 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 deposit it into a variety of different protocols so that's one of the things that we do that that most others don't is you know having the liquidity in your position i think as well um 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 a 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 um best benefits the dao 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 um and getting involved in what what the

the app and and the organization needs to move forward and so you know those are certain things that that we do um that others don't and then i think another big uh another big you know feather on our cap is just our laser focus from a security perspective like from day one you know that 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 as much as in in the development team's control we can mitigate risk um in you know building some of these new tools that really haven't existed before what's the amount of bitcoin currently under management um with badger

about 600 million dollars and then a few months ago it there was a peak of about 2.5 billion that's when bitcoin was was much higher uh in price but uh neither here nor there um those in the in the earlier days we had up to 2.5 billion in um in bitcoin deposit in the app oh wow that's uh that's a big number that's a good point one thing i want to talk about actually as well though it's like so what level of um control does like the badger token holders have over this like you know because let's say the badger um i remember correctly the current market cap is around 150 million or something and

so if the big value of the bitcoin is in in the 600 million like how do you think about like dealing thinking about the security model around this yeah so there's been there's been a whole slew of um yeah we call them badger token v2 conversations amongst the community around um 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 um the parameters of all of our products it governs the treasury um and and and that's really you know

and obviously it governs really any economic decision that um the organization could make and and you know to be honest with you some people kind of say hey like well you you're just governing you know this protocol like what does that mean well it's it's not it's they're not small numbers like you know you know in our treasury we have like 50 million dollars 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 capital is managed our total treasury when you look at badger that's in there too and dig it's like over 150 million dollars 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 60 66 different uh improvement proposals passed through governance we've had 65 that have passed in 60 and one that if one has failed during that time frame um and we have arguably you know one of the most active voting communities um you know based on you know different types of uh um statistics from deep dow and a variety of other even even you know snapshot themselves but neither here or there that's how that's what the badger token governs uh 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 um more robust use case for badger around you know securing the protocol the applications token holder value and and i think a delicate thing here is you know revenue revenue share and i know you 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 that 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 they want to implement because you know it is again it's pretty substantial numbers you know over 25 million in revenue in seven months um that's that's quite a bit of uh 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 i remember like a couple of years ago um i equipped that most hours are just three white guys with a multisig and basically obviously that has changed in the ecosystem quite a bit but very few dollars have actually achieved full decentralization i mean

where's where's badger on that scale well badger dao was closer to the beginning of that scale um with a path towards the centralization 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 and protect um 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 a few years ago where you know you put a smart card 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 upgradability or you know proxy control or things along those lines um you know so for us where we sit today is we sit closer to the beginning where we have multi-sig governance that's dictated by the token holders our contracts are upgradable they are behind a 40

every you know all our major con all of our contracts are behind a 48 hour time lock um 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 you know but our goal our 100 percent is to try and decentralize as much as humanly possible while taking it a little slower for the purpose of ensuring that you know our contracts are ready and um and the user and the user funds and the ability to respond in case of an emergency uh that speed is still there and adequate so you know there's been quite a few

discussions what we call road map 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 uh product so you mentioned the uh interest bearing bitcoin as a separate product if i understand it correctly though what would inter with the interest bearing bitcoin would it be as simple as thinking of it as is it just your tokenized position in the set bolts 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 well certainly but it's not just and it's not just for badger set vaults it is today um 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 want to vote in um and potentially bring the under the overall underlying down um but you know neither here nor there you know interest bearing bitcoin is backed with um tokenized vault positions

which in turn are essentially just smart contracts taking optimized yield positions on bitcoin um and i know so also this other thing called clause as well is that related or is that something different yeah claus was an initial product that we started working on um near the beginning of our journey and the idea of that was a bitcoin collateralized stable coin 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 the back burner for now so really yeah the focus then became um 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 um is the most you know the most liquid bitcoin on every chain right like you today you go you know to solano there's you know wormhole wbtc and ran wbtc and then you go to um polygon or bsc and it's btcb and you know a variety of different things um 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 you know and it really bleeds back into our vault product because essentially any any ibbtc that's minted it's almost like

locked bitcoin inside of our vaults uh which is really important since you know the the app earns revenue based on um 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 um if they have an app or whatever it may

be to just integrating interest bearing 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 where um how the bitcoins being put to work so we we see that as you know the the future of really how the narrative of bringing bitcoin to d5 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 uh the dig side of things so the set protocol is or and all the associated products around it you know they have this like you know they're all intertwined you see how the

interest being bitcoins 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 about what that is and then how it maybe does relate to the rest of the badger universe yeah most certainly so you you're spot on like the bridge and the vaults and idbtc are constantly working together you can bring bitcoin native bitcoin through the bridge right into the vaults you can then mint ib btc and then use it wherever you want to use it dig was actually our second product after the vaults um that we launched before the bridge in ibbtc and um 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 create resemble bitcoin and do it in a non-custodial way and and we were inspired by the rebasing mechanics um from ample fourth 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 you know a 10 a 10 day rolling average so for example if it's 10 higher than the price of

bitcoin today there will be one percent 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 five percent 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 um on the lower price if it's a negative rebate or 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 rebasing to accomplish that why rebasic so you know i've actually spent a lot of time thinking about rebasing systems you know 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 it's really honestly this like sort of weird asset class that i don't think

is 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 rebating 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 rebasing you know i what i care about is did 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 um 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 i'm going the other way and reducing the supply you know 80 90 percent so people today use it really for opportunities to increase um 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 this wrong way of looking at a rebasing asset because if it if the underlying value of the asset that's rebasing against like an ample fourth case is that you is

is one dollar for example it it ideally should never be five ten twenty thirty dollars right it should really never be that but if it's in a few points you know ten percent of of one dollars one dollar and ten cents and whatever it may be the market capitalization of it's gonna keep growing because there's gonna be more and more in circulation so if something's a dollar but it's had a hundred positive rebases at one percent 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 um it's very

volatile extremely volatile it's very experimental today and we've seen that through what we've been building but our 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 a variety of different things you know that over time especially in this early early market of d5 and like the primitives that are being built now there's something to be said around you know when something's been around a long time and has a bunch of places

that you can use it um and you know obviously has some of the other mechanics that people might be interested in so we've we've tried hard to find additional we call like third party anchors for dig because we we've um we've seen how 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 gonna 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 um 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 um 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 rebates after five you incrementally get more rewards um as part of that so that additional anchor or factor just just further nudges users to do you know what the the underlying token mechanics needed to do to grow market cap essentially i mean and following you know uh apple

for there was like you know a series of you know rebase 2.0 projects that came out you know we got yam but then you know i think maybe the biggest one was esd uh and you know they had something interesting going on where they actually like took what i would consider a somewhat silly mechanism of rebasing and actually kind of try to apply it in a more useful productive way 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 how does 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 apy when depositing bitcoin in the app so that's its main utility today um but we've 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 sells at certain certain times um and if we could have a a larger percentage of that circulating supply deposited in that vault that fault 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 um a wbtc 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 um 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 that now that's again this is what we've been trying um you know you know admittedly it's not it's not easy like this you know tackling rebasing is very very

difficult um we like many have had challenges with it but we of course continue to stay committed to try and make it as successful as we can i'm excited from it and 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 or so you know maybe usd is the most demanded synthetic off in in in d5 but i i'm willing to bet that maybe a bitcoin synthetic might be the second most like demanding synthetic and so 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 you know how ding is kind of trying to be like a no collateralized like uh synthetic bitcoin and so like you know you look at something like you know i'm a big fan of a 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 them some sort of partially collateralized bitcoin or something like that so there's there's no doubt that's gonna it's not about if it's a when right like a hundred percent that's gonna happen i think a lot of these you know

stablecoin oriented mechanics are working themselves out like you talked about a few of them esd dsd you know and and some and and that you know rise and and and burn and at the time when we were launching dig actually we were getting a lot of scrutiny being like all 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 the nature of the beast is 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 um many of the interesting designs for for stable coins are it's going to bleed into other assets for sure and you know we've already started to see some of those things

um already but yeah like you know i think i'm not i'm not um that familiar with olympus for example ohm um but i think they just recently turned in on bonding for ether as an asset and like 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 what are your thoughts on d5 on bitcoin so things like rootstock for instance do you think that'll take off would you

say oh stacks yeah i i think um takeoff is very relative right you know every day we decide what to build on um and every day makes it more and more clear that building on ethereum is where we want to build and and we we build on other chains but primarily they're evm compatible chains just because it's we can just take what we've already built and port it over um and then you know we're actively you know preparing to launch on optimism and arbitrary as well and different layer two solutions um so you know for us at least i'm not saying it's out of the picture um defy on bitcoin i think is a uh very immature

market um just because if you're actively looking at the most effective way to um to build it's not on bitcoin no matter how you slice it even from like interoperability of tools um and the the developer audience the every everything you can imagine um it's 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 um you know a white hat 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 these are the types of things that are going to continue to come to the surface so when you have something being built there uh 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 on trying their best at least to be uh acted at a level of high integrity and a level of high integrity in many instances when it's when everything you're building is open source is you know building where there's the least risk of um of uh of screwing up 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 um you know there could be a place for badger in particular to to build products there and provide value to users but yeah i think um i think it's quite a ways away yeah and if you look at what percentage of bitcoin is currently um wrapped and used as collateral in d5 that's on the order of one percent um how do you see that increasing over the

coming year or two i i think it's just gonna grow exponentially i see it as you know 30 eventually 30 40 of all bitcoin will be wrapped and tokenized on other chains um in the next year in the next two years i'd say we'd probably hit five percent if we continue growing at this pace which i think which i think we will and um and and really we haven't even this is what's crazy we haven't even seen you know big institutional money participating in d5 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 defy apps and they're not participating in big way in d5 and um that wave is just going to be crazy and and and i think um i tend to believe of course if these funds and you know crypto native institutional players have had uh been around a while there's probably a couple assets that they hold the most in um and those are mostly bitcoin and ethereum and then obviously stable coins

they're definitely not you know looking to lend out coin number 441 or whatever the hell it is right so that that that's where i think a lot of the um institutional and just overall acceleration in rap bitcoin like you can already see writing on the wall with galaxy digital acquiring bitco which is uh the the custodian creator of wbtc um 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 and a variety of things happening and that and that number to your point is just gonna it's just gonna grow like crazy so do you think bitcoin is going to end up as a limited supply

erc20 um i don't think so i i think you know that would be suggesting that you know a lot a lot like 80 90 of bitcoin um is tokenized and and represented off of the bitcoin network i don't think that would ever happen um but getting close to 50 i wouldn't be surprised it's really going to come down to how um how bitcoin how the bitcoin network can evolve and they've always been slow rightfully so um you know from a security perspective that's always been their mandate slow to make changes to the underlying protocol and um just you know building on the network in general

but you know if if they continue to be that slow i think it's going to be um 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 questions you know 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 is there a sense to which the brand is the product here and like you know it's makes it 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 dao is this idea that like hey i want to use bitcoin and defy

that's not going to be my one-stop shop to go uh go to the badger dao 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 wbtc uh vault in set is primarily you know it's mostly uh kind of interacting heavily with the uh yearn wbtc vaults and so is there like do you think that the the 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 d5 protocols that's really tailored towards bitcoin users yeah yeah from a product

perspective sunny like i feel like that's where we we started our journey right the one stop shop like your your ultimate dashboard to everything bitcoin and d5 that's that's changed a bit um 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 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 um and that's integrated with a variety of different protocols there's tronching there's there's all these different things you can do with synthetic assets and pick your pick which chain you want to you know go on and

use the boost mechanics and all these different types of things um but yeah i most certainly think that you know even when we look to partner with different protocols they always say you know in partnering with badger you know we're bringing the bitcoin crowd to whatever we're working on and and i think that's the nature of it like it's really our community that's the strongest and that you know has a 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 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 um something that you know was was totally going against all odds and that's 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 um ever created being bitcoin so it's a mix of a mix of a few things sunday and we have a direct product division on that one click in seconds to earn um for

the masses and 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 with the honey badger cool thank you chris so where can people find out more about uh badger dao and um 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.finance i'd say the best place to start is our wiki badger.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 um more importantly the community lives and breathes so joining our discord there's a link on our twitter which is just badger dao and you can go there and join our discord and you know there's quite a few badgers that will welcome you with with open hands and answer any questions that you have and really just including myself and just be there to um 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 we release new episodes every week you can find and subscribe to

the show on itunes spotify youtube soundcloud or wherever you listen to podcasts and if you have a google home or alexa device you can tell it to listen to the latest episode of the epicenter podcast go to epicenter.tv subscribe for a full list of places where you can watch and listen and while you're there be sure to sign up for the newsletter so you get new episodes in your inbox as they're released if you want to interact with us guests or other podcast listeners you can follow us on twitter and please leave us a review on itunes it helps people find the show and we're always happy to read them so thanks so much and we look forward to being back next week [Music] [Music]

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