DAOrayaki Reserach |Badger : Building Products to Bring Bitcoin to DeFi

DAOrayaki

31 min readJun 18, 2021

DAOrayaki DAO Research Grant：

Fund Address: 0xCd7da526f5C943126fa9E6f63b7774fA89E88d71

Voting Result：DAO Committee /7 Yes

Grant Amount：200 USDC

Category: (Bagder, Sett, Rebase, Ampl, Defi）

Contributor：黑白qb @Daorayaki

Chinese Version:https://daorayaki.org/ghost/#/editor/post/60c0229557761003de3626a6

Launch time: 15 Sep 2020

Badger DAO (BADGER)

Token：Badger (governance token, ERC20)

DIGG (rebase mechanism token, ERC20)

Market Value：$11,226,028.00

Coin Value：Badger: $15.1328, DIGG: $21,833.00

Mission and Vision:

Our goal with Badger DAO is to create the most developer-friendly environment possible where they can build the products they want, have the appropriate incentives to do so, and maintain shared ownership. All while focused on accelerating Bitcoin in DeFi.

Badger is a project to bring BTC to the ETH Defi ecosystem. BadgerDAO aims to be a community that brings together all the best developers to accelerate various products for BTC in Defi applications.

Badger Finance’s core product is the Sett Vault, which allows tokenized bitcoins to earn revenue automatically; Badger DAO, the decentralized organization focused on bringing bitcoin to Defi, has officially launched in December and has opened the distribution of airdrop governance tokens BADGER and liquidity mining activities.

Built on DAO solution provider Aragon’s Company Template, the Badger DAO token BADGER can be used to participate in the governance of financial and organizational decisions through proposals and votes. Specifically, BadgerDAO governs decisions in Snapshot, a governance aggregation platform, and once decisions are made, these governance decisions are then validated through the Aragon uplink.

DIGG’s goal, using the Rebase mechanism, is to anchor the price of a specific asset without the need for a third party to guarantee the collateralized asset’s value and arrive at the cost of the investment in a more decentralized way.

Scenario 1: If the time-weighted average price (TWAP) of $ Digg > Bitcoin, the amount of $Digg in circulation will be automatically increased in equal proportion to suppress the price increase by increasing the supply, which we call “positive base.”

Scenario 2: If the time-weighted average price of $Digg (TWAP) < Bitcoin, the amount of $Digg in circulation will automatically decrease in equal proportion, pushing up the price by reducing the supply, which we call “negative base.”

In addition to the Rebase mechanism, BadgerDAO also adjusts the liquidity mining reward according to whether $Digg is at a premium or a discount, thus inducing the market to converge the price of $Digg to the cost of Bitcoin.

There are currently three product lines.

1. Badger Dao: power tokens, the possession of which enables participation in basically everything in Badger Dao, and its participation in all Defi as an integrated plan.

2. Setts Dao: Setts functions as an automated Defi aggregator focusing on tokenized Bitcoin assets. The longer a user pledges in Setts, the greater the multiplier reward.

3. Digg: It is the elastic coin set according to the Ampl model, but the anchor target is the price of BTC. This point is good to lift the possibility that other flexible coins are easily manipulated by large investors; (Rebase every 24 hours, 40% of Digg will flow to Badger Dao’s vault).

In DIGG at startup, three new Setts will be introduced, of which 2 are DIGG LP and a single asset DIGG Pledge Sett, which we will collectively call DIGG Setts, while the pre-existing Badger Setts are non- DIGG Setts.

The system will adjust the percentage ratio of DIGG token rewards in “DIGG Setts” and “Non- DIGG Setts” based on the actual change of DIGG relative to the bitcoin price, thus stimulating the price of DIGG to be anchored to the bitcoin price again.

Founder Team

Chris Spadafora is the operations lead. He’s a serial entrepreneur who has founded a number of companies over the years. His latest project prior to Badger Dao was Alwayshodl.com. He is also a partner at Angelrock, a company that provides strategic consulting for long-term crypto holdings.

Ameer Rosic is also part of the operations team at Badger DAO. Another serial entrepreneur he is the founder of Blockgeeks.com. He is also an integral part of Dollarcake, a browser extension that can be used to monetize social media networks.

Albert Castellana is the co-founder and CEO at Stakehound.com and serves as the product advisor for Badger DAO.

Alberto Cevallos is the technical advisor for the project. He also advises Travala and is the founder of Metl, a company engaged in creating the infrastructure for the internet of money.

Introduction

For many of us it’s been a long 2.5 year bear market, especially for those new to the space. Those focused on building during this time are starting to see the fruits (no pun intended) of their labour. Many of the things that we all believed would take center stage are now what everyone is excited about and DeFi is at the top of that list.

The total value locked in DeFi protocols has increased from approximately $650M on January 1st 2020 to $8.5B today. Projects like Uniswap are now dominant players frequently eclipsing large centralized exchanges in daily volume. Aggregators like YFI have exploded onto the scene and other leading lending/borrowing protocols like Compound, Synthetix and Aave have built 2 year+ battle tested protocols managing billions of dollars. It’s safe to say DeFi is here to stay.

That doesn’t come without the “get rich quick” attempts popping up as well. New food coins with anonymous founders like pasta, noodle, hotdog, kimchi etc, are launching unaudited forked codes from popular DeFi protocols and garnering hundreds of millions of dollars in the span of hours. These projects for the most part have no intrinsic value or purpose and will inevitably fade into irrelevance.

There always is some good to come with the bad. Projects like Yearn.finance have sparked a shift from VC or investor-backed projects with centralized control to a “fair token launch” with the community owning control of the project from the onset.

Another major progression in the last year has been the demand for Bitcoin to be used as collateral on other blockchains, especially Ethereum.

Bitcoin is the soundest money ever invented. Many would argue the best collateral the world has seen. Today there are limited ways to use your BTC for decentralized finance, especially on the Bitcoin network. This is why an increasing amount of Bitcoin holders are wrapping their BTC on Ethereum to use finance protocols for earning interest, borrowing against their position etc.

The problem is the infrastructure, products and protocols for enabling BTC on other blockchains are very immature. Most BTC bridges have centralized parties we must trust to custody and mint the equivalent BTC on ETH. There are only a couple large liquidity pools for trading synthetic BTC. Although many of the lending/borrowing protocols have enabled these wrapped assets as collateral, there are only a few of these trusted protocols in the market right now.

With the maturity of smart contract infrastructure, the rise of DeFi, demand for fair launches, the potential of BTC in DeFi and the desire of community ownership of products, we decided to create the Badger DAO.

What is the Badger DAO

Badger is a decentralized autonomous organization (DAO) with a single purpose: build the products and infrastructure necessary to accelerate Bitcoin as collateral across other blockchains.

It’s meant to be an ecosystem DAO where projects and people from across DeFi can come together to collaborate and build the products our space needs. Shared ownership in the DAO will allow builders to have aligned incentives while decentralized governance can ensure those incentives remain fair to all parties. The idea is less competing and more collaborating.

That’s why it’s important that it starts as a community-led initiative from day one. Any decisions are made through a governed vote including what, how, and when Badger DAO products are created. Equally important is ensuring there is a fair distribution of $BADGER to give all participants the opportunity to get involved and benefit.

This forms the pillars of what ensures Badger always remains community first, fair and transparent.

Badger Builders
Community created products
Dedicated Badger operations team
Fairly initial distribution of $Badger Tokens for governance
All code open-sourced

Badger community members can propose new product ideas to the DAO, pitch the proposal to the greater community over video and finally take the proposal if it passes these stages to an official vote for approval. Once approved the Badger DAO ops team will collaborate with them to build it, fund it and market it. Of course the intention is that it’s not a singular community member proposing these but instead many contributors coming together to create the best products we can.

Badger builders are open and willing to collaborate with anyone wanting to build with together. It would be amazing to see leading developers and DeFi protocols participate in this program.

This structure is meant to give everyone an opportunity to build what’s needed regardless if they are an individual developer, blockchain company, dev shop or just a person with an idea. Anything launched by the Badger community should be inherently fair, transparent and rewarding all those involved in bringing the product to life. This includes shared fees, token rewards etc.

We believe that together the community can build the products that our industry needs more effectively, compared to single centralized entities building fragmented solutions.

How is Badger Token Going to Launch?

*DISCLAIMER: BADGER IS STRICTLY A TOKEN TO GOVERN THE DAO AND ITS ACTIVITIES. IT HAS NO MONETARY VALUE. *

Badger will follow in YFI’s footsteps with a fair liquidity mining launch. We are attempting to innovate how fair launches are actually conducted.

Zero individual or centralized control of smart contracts upon launch.
Fixed supply with mint function being burned at launch.
All smart contracts and systems audited pre-launch.
No surprise launch date and list of assets for staking. The entire community will know weeks in advance all these details.
No investors or capital raised.
Team is publicly known and involved in ongoing operations.
Time-locked founder rewards + whitelist functionality to enable performance based unlocking of rewards voted by the community.
No seeding of liquidity on exchanges by Badger.
Leaving control and decisions to the community of how to best distribute and utilize a significant portion of token supply.

Unlike the trend of products launching without audits and anonymous founders, the founding team has ensured a 3rd party firm (Zokyo)has audited any and all contracts for Badger and Digg before launch. We as founders are also not hiding and are going to be very public about our involvement. We aren’t here to launch and leave but instead intend to lead the operations team and stick around for the long haul.

Shortly we will release the audit report well before launch and over the next week we will share all the details of the stakeable assets.

Founder Rewards

We believe incentivization is critical for teams to ensure they’re committed to doing everything they can over the long term to make a project successful. With that, we’ve decided to have 10% of the total supply, (2,100,000 $BADGER) allocated for founder rewards. These tokens won’t be distributed all at once. Instead, as Badger is mined by the community, a percentage of each Badger will be sent to the founder rewards wallet (of which the address will be made public). The remaining 90% is for the community and no one else.

As mentioned above, we aren’t here to launch and leave. The founder rewards wallet will have a 1 year time lock on it with the ability to participate in voting. This wallet will release tokens weekly to the founders evenly across 12 months.

There will be a transparency report released shortly with all the reference code so the community can confirm authenticity of our claims, including time locks, private key ownership, token distribution, etc.

Introducing Badger DAO’s 1st Product, Sett

Firstly, why the name Sett? Badgers make their homes by digging tunnels and caves and use grass and leaves for bedding. A badger’s home is called a SETT.Setts are so strong and protective that they can be centuries old and are used by many generations of badgers. Exactly what we’re doing for crypto holders.

Badger is a DAO that creates Bitcoin focused products, and it’s important that when $Badger distribution occurs there is an actual product to govern. Beyond governing it, Sett will be the only way for people to earn $Badger.

Sett is an automated DeFi aggregator focused on tokenized BTC assets. Inspired by and based off the Yearn.Finance vaults, users deposit assets to earn a yield, our smart contracts then put those assets to work executing a variety of strategies across DeFi protocols. Through this, users optimize the yield they get out of their positions without having to do all the heavy lifting (multiple transactions, gas fees etc.).

To review our Sett code please go here

At launch for a limited number of weeks, anyone that deposits in our Setts will receive the appropriate yield + $Badger. The longer users stake in the Sett the increased multiplier of $Badger rewards they will receive (ie. 1x, 2x, 3x).

Users can withdraw their assets at anytime, upon withdrawal there is a 0.5% fee and an additional 4.5% fee from the profit generated to cover gas and transaction costs.

The 5 Setts at launch are;

Curve_sbtc_lp tokens: Compounding strategy
Curve_renbtc_lp tokens: Compounding strategy
Curve_tbtc_lp tokens: Compounding strategy
Badger <> wBTC Uniswap LP: Compounding Strategy
Badger: Stake Badger and earn Badger

This is just the beginning for Sett. As strategies develop and the community comes together we hope for additional innovative Setts to come to the market.

Native BTC deposits
Single asset vaults with multiple strategies
Additional compounding strategies
Aggregator to aggregator to help preserve value in their GOV token
Impermanent loss mitigators
BTC neutral strategies (deposit BTC and prevent against price swings)
Rebasing management and optimization

Introducing Badger DAO’s 2nd Product, Digg

It’s important to set precedence on how products should be developed and launched. With that, in conjunction with the $BADGER token, there will be the launch of its second community owned product, Digg.

Digg is a non-custodial synthetic Bitcoin on Ethereum. It’s an elastic supply cryptocurrency that’s pegged to the price of Bitcoin. Every day the supply is automatically adjusted across all wallets based on the USD value of $DIGG vs $BTC. If Digg’s price is higher than BTC, your wallet balance increases; if it’s lower than your balance decreases.

The goal of this product is to remove the need for centralized parties to custody our BTC and instead rely on the elastic parameters in the token smart contracts to maintain the peg. Every day at the same time the system calls a price oracle to provide the USD value of Bitcoin and if there is a need to increase the supply meaning (Digg is higher than BTC) it should drive sell pressure on the token since holders now have a higher quantity of the Digg in their wallet. The same works on the inverse in driving demand.

The parameters of Digg were created this way to encourage changes. We believe there is lots that can be done to the protocol to bring it closer to peg like rebasing every block or creating additional incentives to drive buy and sell pressure. After launch the community will control this protocol and we hope to see these changes put forward.

The Digg token will launch midway through the $BADGER distribution. Similar to Badger, it will have an independent liquidity launch where users will stake in our Setts and the Badger DAO token holders will have complete control of the protocol. The Badger DAO will also control the remaining 50% of the $DIGG supply not distributed during liquidity mining, further driving community ownership.

bBadger Tokens

When staking BADGER users receive bBADGER tokens which are a composable yield farming token. In addition, staking rewards are also delivered in bBADGER, making the rewards for staking auto-compounding. This should encourage even greater lockup for the token since no gas is required to stake, but is required to unstake. Indeed, BADGER is seeing a lockup rate in excess of 90% since the decision to make bBadger auto-compounding was passed by the DAO.

bBadger

bBadger is a composable DeFi asset. Image via Badger DAO blog.

Currently the Badger DAO team is working on adding utility to bBADGER tokens by integrating them as a collateral type for other DeFi protocols. This will allow users to mint stablecoins on UMA and earn additional yield. It’s also seen the token added to the CREAM platform, where it will allow users to borrow assets using bBADGER as collateral. This effectively allows speculators to long/short bBADGER with leverage.

There has also been a proposal to create liquidity pools for CLAWS on the Sushi platform, and create additional Sett Vaults for SLP tokens that will be created to use as collateral for stablecoins.

Basically all of the proposals being made in connection with bBADGER at this time are ways to add yield on top of yield. The intention is using the composability of bBADGER to create passive income money machines with a wide variety of income sources.

CLAWS

While CLAWS has been described by some as a stablecoin, it is essentially a “yield dollar” rather than a stablecoin. Essentially, a yield dollar is a collateralized asset with an expiration date. Once the yield dollar expires, it can be redeemed on the UMA protocol for $1 worth of its collateral. Until expiration, the market determines the price of the asset — but generally it should approach $1 as expiration nears.

Yield dollars like CLAWS are collateralized assets. That is, they are minted when a user puts up some collateral at a set loan-to-value ratio. In the case of CLAWS, there are two collateral types of collateral that can be used to mint tokens — bBadger and wBTC/ETH SLP tokens. This will be the primary method for obtaining CLAWS tokens, although they can also be purchased on the open market. Speculators will need to take care if purchasing CLAWS on the open market however, bearing in mind that the token will approach $1 as it gets closer to expiration.

One of the wonders of DeFi composability is the ability to earn multiple forms of yield with the same base assets — maximizing your potential returns. This is the case with CLAWS. Once a user mints CLAWS tokens, they will be able to deposit their CLAWS into a Sushiswap Liquidity Pool and receive CLAWS-SLP tokens in return. These CLAWS-SLP tokens can then be staked in a dedicated Badger Sett vault to earn additional rewards (in the form of additional UMA, xSushi, bDIGG, and bBadger).

In total, CLAWS Sett vaults have nearly 10 sources of income — making it a diversified basket of passive incomes unto itself. Ultimately CLAWS Sett vaults are going to change the yield farming game by providing a stable asset with multiple yield streams.

Who is Behind Badger DAO

4 long term cryptocurrency investors and friends came together earlier this year with an idea to launch a truly community-owned ecosystem DAO that can push Bitcoin as collateral forward.

We’re strong believers in the future of DAOs for shared ownership and the value that can be created when an ecosystem collaborates to build vs compete.

With that, we partnered with dOrg, a DAO itself, that’s dedicated to working with crypto projects to launch products. Together we built the foundation of Badger and Digg. The token smart contracts, DAO, liquidity mining staking infrastructure, composeability between all parts and smart locks.

In building our goal, we leveraged battle tested code for the foundation while adding minor changes. However, they enabled us to define the specific parameters that made everything a cohesive architecture. That includes the parameters that guarantee and enforce fairness at a code level.

dOrg is a development collective that builds custom DAOs, DeFi products, and web3 tooling. They’ve worked with industry-leading projects like Balancer, The Graph, DeversiFi, and DAOstack.

Up until this point the founders funded, designed and developed everything. This includes 3rd party audits (with Zokyo). Moving forward Albert Castellana and Alberto Cevallos will be taking advisory roles within Badger while Chris Spadafora and Ameer Rosic will be a part of the operations team. Chris will act as the lead operator with the support of others on the team. dOrg will help support the technical infrastructure in the near term as the operations team expands its internal resources.

We intentionally set it up this way. For any DAO to be successful, it needs ongoing operational support. With Badger being community-driven we believe that community members should be the ones heavily involved in the operations with us.

This is a call to all those that would like to work with the Badger DAO on a full time or part time basis. There is an immediate need for developers, community leaders and content creators.

The DIGG release mechanism

It is essential to clarify the DIGG token reward mechanism, not only because the reward is directly related to the participants’ revenue, but more importantly, anchoring the bitcoin price on the ethereum blockchain is the core goal of the Badger DAO and the original purpose of building the community. This anchoring mechanism is based on the DIGG reward mechanism to maintain, that is, DIGG. That is to say; the DIGG reward mechanism is closely related to whether Badger DAO will eventually bring the value of stable coins mapping bitcoin for the ethereum ecology. Therefore, the success or failure of this mechanism will directly determine whether Badger DAO is a worthwhile project.

It is worth noting that while Badger DAO will have a dual token reward mechanism, only the new DIGG token reward will change dynamically based on the relative price changes of DIGG and Bitcoin. In contrast, the original Badger token reward will remain the same, i.e., regardless of the fluctuation of DIGG price, the reward token distributed to all Setts Badger will stay the same irrespective of the instability in DIGG price.

Badger DAO is currently live with the community reward proposal BIP 22 to solicit input from community members to vote and reach a consensus on the distribution of rewards for DIGG tokens. The mechanism attempts to attempt to allocate different percentages of DIGG token rewards to multiple Setts based on the actual anchoring of DIGG to the Bitcoin price to maintain the target price of DIGG anchored Bitcoin steadily.

At the launch of DIGG, three new Setts will be introduced, of which 2 are DIGG LPs and a single asset DIGG Pledge Sett, which we will collectively refer to as the pre-existing Badger Setts are non- DIGG Setts.

According to this proposal, the system will adjust the percentage ratio of DIGG token rewards in “DIGG Setts” and “Non- DIGG Setts” based on the actual change of DIGG relative to bitcoin price, thus stimulating the price of DIGG to be re-anchored to bitcoin price.

The following table details how DIGG rewards are dynamically allocated based on changes in the price of DIGG.

To summarize.

When the DIGG price is at the average anchor level, i.e., when the DIGG price is equal to the BTC price, DIGG Setts and Badger Setts are allocated half of the total DIGG release reward.

If the DIGG price is 80% or less of the BTC price, all DIGG releases are allocated to the DIGG Setts.

If the price of DIGG is equal to or higher than 130% of the BTC price, then 70% of the DIGG releases are allocated to Badger Setts, and 30% are earmarked for DIGG Setts.

This mechanism is set up with the following assumptions.

1, when the price of DIGG is lower than the anchor price bitcoin price, all of the DIGG release volumes will be allocated to DIGG Setts, and these rewards will incentivize DIGG holders to provide liquidity to become LPs and use these LPs for pledging. The higher the APY of DIGG Setts, the higher the DIGG demand will be, thus keeping its price as anchored to the price of Bitcoin as possible.

2, This mechanism will also incentivize the inclusion of Badger Setts users, as DIGG allows these users to receive more rewards, and therefore they will support the price of DIGG.

3, When the price of DIGG is higher than the anchored bitcoin price, the system will release a more significant percentage of DIGG to Badger Setts; for example, if the price of DIGG is equal to or higher than 130% of the BTC price, 70% of the DIGG release will be allocated to Badger Setts and 30% to DIGG This will provide an incentive for DIGG LP and Staker to lower the price of DIGG to receive a more significant percentage of the DIGG reward.

BADGER Token Distribution Model

The total supply of BADGER tokens is in line with Bitcoin at 21 million. 55% of the tokens will be distributed to users participating in Defi or community governance through Honey Badger Hunt airdrops, liquidity mining events, Gitcoin funded airdrops, etc., 35% will be distributed DAO inventory, and another 10% will be allocated to the team.

BADGER Token Distribution Model

Honey Badger Hunt airdrop: The airdrop was a 10% (2.1 million) airdrop of the BADGER supply to 20 different communities, protocols, and projects at launch, including addresses that have funded Gitcoin, participated in SUSHI, YAM, YFI, and 1Hive governance The LAO, a member of the decentralized autonomous organization MetaCartel DAO, which has minted wBTC, renBTC and sBTC, and a member of the compliance DAO project The LAO, which has stored sBTC and renBTC on Curve.Fi’s sBTC and sBTC pools. renBTC pools, addresses that have provided liquidity on Balancer’s wBTC/ETH pool, etc. Unclaimed rewards will be migrated to a new pool for the community to decide on future airdrops. In addition, 5% of the BADGER supply will be distributed to community members who have provided feedback, advice, guidance, and operational support to Badger DAO before the project’s launch. 30% of these rewards will be distributed at the project’s launch, and the remaining 70% will be distributed every month over the next six months.

Liquidity Mining Campaign: Within eight weeks of the project launch, users who conduct a liquidity mining campaign by depositing in the Sett product will receive a total of 4.83 million BADGER tokens (23% of the total supply) and will be rewarded concerning the pledged funds and the length of the pledge.

Developer Mining Event: Developers who develop products and Sett Vault strategies will receive 3.15 million BADGER, about 15% of the total supply of tokens.

DAO treasury: 7.35 million BADGER are locked for 30 days after the liquidity mining program starts, after which the community will decide what to do with them.

Teams: 10% of the tokens (2.1 million) will be allocated to groups, which will be released linearly every month for one year.

DIGG Token Allocation Model

The total supply of DIGG is 6,250 tokens, 55% of which will be distributed to users through airdrops and liquidity mining, 40% will be allocated to the DAO inventory, and another 10% will be assigned to the team.

DIGG token distribution model

DAO Inventory: 2,500 DIGG will be available for the community to decide what to do with them but will be locked for 30 days after liquidity mining is initiated to prevent malicious operations.

Liquidity Mining: According to Badger DAO’s announcement in October, DIGG liquidity mining activity will occur two weeks after the launch of the BADGER distribution, which will also last eight weeks. In the case of a simultaneous BADGER and DIGG liquidity mining campaign, users can mine both BADGER and DIGG tokens in the Sett product.

Airdrop: 15% of the tokens (937.5 tokens) will be used for the airdrop.

Teams: 5% of the tokens (312.50) will be allocated to groups and released linearly every month for one year.

Appendix

Badger Finance

Badger Finance is a community DAO, focused on bringing Bitcoin to DeFi. The DAO’s debut products are Sett, a yield aggregator, and Digg, a BTC-pegged elastic supply currency.

Components

Badger DAO The governance of Badger Finance is managed via an Aragon DAO with a liquid governance token.

Sett The debut yield aggregator product of the DAO, focused on innovating on the best bitcoin-related yield strategies.

Digg A BTC-pegged elastic supply currency, based on the Ampleforth protocol.

Token Distribution The Badger governance token ($BADGER) and the Digg token ($DIGG) will be initially distributed via airdrops for users who have demonstrated an active interest in Bitcoin DeFi and community governance, early contributors to the DAO, and as staking rewards for participation in Sett.

Assistants Traditional backend services to provide necessary updates to the system. These include oracles, keepers, and system monitors.

1 Sett

Badger Sett is a yield aggregator product that leverages automated strategies to generate yield for user deposits of various underlying assets. They are non-custodial, transparent, and users can withdraw their assets at any time.

The bulk of existing Setts are based on the Yearn Vaults V1 architecture, expanding it with new strategies, a new fee structure, and modifications to the governance of the system.

Yearns’ documentation captures the premise best:

Capital pools that automatically generate yield based on opportunities present in the market. Vaults benefit users by socializing gas costs, automating the yield generation and rebalancing process, and automatically shifting capital as opportunities arise. End users also do not need to have a proficient knowledge of the underlying protocols involved or DeFi, thus the Vaults represent a passive-investing strategy.

Moving forward, we will be developing a large portion of Setts & Strategies with a Yearn V2 based architecture. Most notably, this will support multiple active strategies per Sett.

Access Control Notes

The active Governance module (currently the Dev Multisig) can elect trusted parties to hold various permissions such as the right to run keeper operations or enter emergency withdrawal mode.

Contract upgradability rights exist for all Setts unless explicitly burned.

Live Setts

There are two Sett systems, one for core Badger strategies, and one for partner strategies.

Native Setts

In-house Setts to generate organic yield on BTC-related assets and support the Badger token ecosystem.

Bitcoin Variants

renbtcCRV Curve LP
sbtcCRV Curve LP
tbtcCRV Curve LP

Badger Assets

Badger
Digg

Badger LP

Liquidity for Badger assets on Uniswap and Sushiswap is incentivized.

Uni LP Badger<>wBTC
Uni LP Digg<>wBTC
Sushi LP Badger<>wBTC
Sushi LP Digg<>wBTC

Other LP

Sushi LP wBTC<>ETH

Partner Setts

These vaults deposit into the vault systems of our partners, leveraging their strategies for organic yield while adding Badger/Digg incentive rewards on top.

Harvest : renbtcCRV Curve LP
Yearn: wBTC

2 Strategies

Single Asset

Digg Sett

When you deposit $DIGG in our $DIGG only vault, you will receive a token called bDIGG, which is a representation of your share in the pool. This token does NOT rebase and can be used like any other standard erc20 token. Holders of this token will be continuously receiving DIGG rewards to their position via our liquidity mining program while enabling them to use it across DeFi.

Unlike other vaults your DON’T need to stake DIGG. You simply deposit and you’ll be receiving auto compounding DIGG rewards.

Badger Sett

Summary

Deposit Badger-related Uni LP tokens to receive Badger from a special StakingRewards contract, similar to StrategyBadgerRewards. Recycle 50% of Badger gained back into underlying LP position, and distribute the rest via BadgerTree.

Additional Variables

Fees

No fees, as this Sett Strategy is focused on providing a service to the Badger ecosystem.

Deposit

Deposit underlying LP tokens into the StakingRewards contract

Harvest

Harvest earned badger and convert it into more underlying. Deposit this into StakingRewards.

Withdraw

Withdraw the required number of tokens from StakingRewards.

WithdrawAll (Migrate)

Exit the StakingRewards contract, sending all underlying to controller. All harvested Badger is sent to RewardsEscrow for distribution.

3 Fees

Standard Sett Fees:

These fees apply on all Setts on all chains except if noted in the exceptions.

0.5% Withdrawal Fee

This fee is taken from the total amount withdrawn upon withdraw.

20% Performance Fee (50% to strategists)

These fees are taken during harvest and already accounted for in stated ROIs.

Exceptions:

The BADGER, DIGG and Uniswap LP setts holding BADGER or DIGG on the Etheruem chain have no fees. All BSC setts charge all standard fees.
The Sushiswap LP setts all charge 20% of the harvested and staked SUSHI as a performance fee. Those containing BADGER or DIGG tokens have no withdraw fees. WBTC/ETH has the standard 0.5% withdraw fee.
In the Harvest.finance Super Sett: Harvest charges a 30% performance fee in exchange for emitted FARM tokens. Badger harvests these for you, and takes 20% of the FARM as a performance fee. Note that badger does not have control over Harvest performance fees and FARM APYs, these are subject to change. Withdraw fees apply.

Fee Collected

Here is a view of the address where all Sett fees are sent. Note that this may not represent all fees ever collected as the DAO could decide to transferred funds out to support operations or reinvest.

4 Governance

The Badger DAO is based on the Aragon company template.

The BADGER token is the native governance token for the DAO, granting voting rights over the future direction and use of the treasury.

Configuration#configuration

APPs

Badger Finance DAO uses the following Aragon Apps:

Voting: Used to create and participate in votes. Votes can be linked to an action, such as minting BADGER or transferring funds, or be purely informative.

Tokens: Manages the supply and distribution of BADGER.

Finance: Manages the organization’s financial assets, including ETH and ERC20s.

Agent: Enables the organization to interact directly with any other smart contract on Ethereum. For example, adding liquidity to a Uniswap or Balancer pool.

Notes on configuration

#notes-on-configuration

The initial circumstances of the DAO are noteworthy in that there is a large initial supply of governance tokens minted, which are locked & distributed over time. In Aragon DAOs, the ‘canonical’ way of distributing governance is to mint new tokens for participants entering the system as they join.

The effect of this initial minting is that during the first days of the DAO it will not be possible to pass actions via the governance process, as a vast majority of the governance weight will be locked. At least Minimum Approval % of tokens must be distributed and used to vote in order for proposals to pass within the system with a relative majority. Proposals will not be able to immediately pass until the Support threshold is able to be used within voting, and is used. This means that every proposal in the initial days of the system must pass via relative majority, and be subject to a 7 day waiting period before the action occurs.

In order to alleviate the duration of this effect, the Minimum Approval threshold has been reduced to 10% (from 20% default)

In the first thirty days, before the remaining 50% of tokens is released from the timelock, it will effectively take 20% of token holders to reach the minimum approval, and 100% to instantly pass a proposal.

5 FAQ

What is DIGG

An elastic supply token pegged to the price of Bitcoin and governed by the Badger DAO.

What is Elastic Supply?

For most assets as supply and demand change the price is driven by normal market forces. The supply is a fixed input (that can be changed for different reasons) but is generally held steady and increases or decreases in demand manifests in a decrease or increase in price. Elastic supply tokens (AMPL, YAM, BASED, ESD) are an experiment in changing this relationship and dynamically adjusting the supply as the price changes relative to a target.

What is rebasing?

Rebasing is the mechanism that adjusts the supply of an elastic supply asset to promote price stability

There are generally the same parameters

Target price (this is taken from an oracle, badger has a custom oracle, looking into other solutions)
Current price (also taken from an oracle, likely referencing the most liquid dex pools)
Rebase Delay (minimum amount of time that has to have passed for a rebase to be called)
Rebase multiplier (What % of current supply should be minted/burned relative to different in current and target price. Hoe many cycles is it targeting to take to reach the intended price?)

DIGG is currently pegged to 1 BTC, and uses a custom oracle to determine the necessary change in supply. Other oracle solutions are currently being investigated as viable alternatives. If DIGG price is above 1.05 BTC, DIGG supply increases. This is known as a positive rebase. If DIGG price is below 0.95 BTC, DIGG supply decreases. This is known as a negative rebase. If DIGG price is between 0.95 and 1.05 BTC, DIGG does not rebase. Every DIGG holder gets the same increase or decrease in supply every rebase. However, this increase or decrease is offset by the subsequent increase or decrease in price.

What is the math behind each rebase?

DIGG does not try to target 1 BTC all at once, instead attempting to do it over 10 rebase periods (while the buffer is set to 10%). To calculate change in supply we need to determine how far from the peg the current price is. This formula is:

Deviation from peg = (Current Price — Target Price) / Target Price

Rebase Amount = Current Supply * (Deviation From Peg/Rebase Multiplier)

New Supply = Current supply + Rebase Amount

Does this mean I gain or lose money every rebase?

No. All approved liquidity pools are in sync with every rebase. Be careful to not add liquidity to pools not explicitly supported by badger as they may not be treated the same. Since all approved pools are automated market makers the price is a function of the relative balances in the pools. As soon as supply of one asset in a pool changes and the other does not the price the pool can sell or buy the assets relative to each other has changed. This means that if supply is increased by 20% in a rebase, price will drop 20% to offset it. Imagine the following scenario. DIGG is at $20,000 (1 BTC) and you hold .1 DIGG. This means your DIGG holdings are $2000. A rebase comes and it’s a positive 20% rebase. You now have .12 DIGG but the price will go $16,667 so your DIGG holdings are still worth $20,000!

Core

The Digg Core is based on the Ampleforth system. At a smart contract level, it is composed of an Orchestrator, uFragmentsPolicy, and uFragments.

Orchestrator: the entry point of the rebase actions, can forward notifications of the rebase to other contracts.
uFragmentsPolicy (i.e. SupplyPolicy): Consumes data from the Oracles, to determine the market value of Digg token. Has unique permission to inform the Digg token about this.
uFragments: Core Digg token. Maintains balances / approval data as per ERC20, and modulates it’s displayed supply as per Ampleforth mechanics.

6 Oracle

The purpose of oracles in the Digg system is to track the market price of Digg relative to Bitcoin, and adjusts the Digg supply to maintain it’s peg.

The market median oracle is the ultimately ‘source of truth’ for this data.

The median oracle is named as such because it can take in multiple sources for the same data, and will report the median of the values as the official value.

The implmentation used is the Ampleforth median oracle

Data Sources

Initially, A centralized oracle, represented on-chain by a Gnosis safe, provides data to the marketMedianOracle. The trusted operators of this centralized oracle will calculate the price of Digg relative to BTC off-chain and submit this data.

New data sources, beyond the centralized oracle, are intended to be added to the market median oracle over time. A Chainlink integration is a possible next step.

CPI Oracle

In addition to the marketMedianOracle, the cpiMedianOracle plays a role in understanding the market value of Digg. This oracle is used in the Ampleforth system to track the consumer price index in order to understand the relative purchasing power of a USD over time. In Digg, as BTC is the peg rather than a 2019 USD, the CPI Oracle is effectively unused. Rather than modify the audited Ampleforth code, it was considered perferable to ‘disable’ this functionality by having the CPI oracle always return “1”.

A trustless ConstantOracle is deployed and used as a data provider to provide this static information to the cpiMedianOracle.

System Overview

MarketMedianOracle: On-chain source of truth for DIGG/BTC price.

CpiMedianOracle: Unused in the Digg system, always returning one.

Centralized Oracle: External,trusted service that publishes market data to the MarketMedianOracle via a Gnosis safe.

ConstantOracle: Trustless Oracle that always returns 1 to the CpiMedianOracle.

Centralized Market Oracle Details

The centralized oracle is a Gnosis safe.

The multisig is 1 of N, with keys belonging to trusted participants.

The oracle server has one of the keys, calculates BTC/BADGER Price, and calls pushReport() on the MedianOracle by proposing it through the Gnosis safe. (It is instantly executed because it’s 1 of N).

The remaining N-1 keys are used for backup purposes, and to fix incorrect data pushes from the server.

7 Token distribution

Airdrops

A significant portion of BADGER will be distributed to users who have demonstrated through their actions an enthusiasm for Bitcoin in DeFi or community governance through DAO participation.

Honey Badger Hunt — 10% of the Badger Total Supply (2,100,000)

All users who are eligible for the airdrop can claim their BADGER in the badger hunt.

There is a 24 hour grace period where the full amount can be claimed.

Once this period is up, every day 20% less of the reward is claimable.

The unclaimed rewards are migrated to a new pool which can be used in future airdrops as decided by the community.

After 5 additional days, all the rewards have been migrated.

DIGG Airdrop

With the passing of governance matter BIP 14 in the forums and snapshot voting, the 15% airdrop portion (less about 0.5% for the special MEME NFT airdrop) will be distributed under the following parameters:

Total Badger Rewards Earned (55%)
Badger Earned / Badger Staked Ratio (35%)
Badger Staked Tokens Over Time (10%)

Liquidity Mining & Sett Rewards

Participants in Sett can stake their wrapped tokens for additional BADGER as an incentive for early participation in the yield aggregation service.

Badger Geysers

Every participant in a Sett can stake their wrapped tokens into a Badger Geyser for additional BADGER rewards. The amount of rewards they receive will increase according to a multiplier based on the length the assets are staked. Digg rewards will also be distributed

Linear increase in rewards proportion for up to 8 weeks staked (1x to 3x)

Liquidity Mining

Liquidity provision rewards will be provided to wbtc<>badger Uni LP token holders through the same Sett Rewards program. Add your LP tokens to the appropriate Sett, and receive BADGER rewards. This strategy will auto-stake tokens into the Badger Meta-Sett to automatically compound Badger rewards and distribute a portion back top your LP position.

8 Badger Tree

Badger Tree is a central rewards management contract that uses the magic of Merkle trees to distribute rewards from across the system to users. This allows users to realize their gains from all liquidity mining programs, special Sett rewards, and any other rewards programs in the Badger ecosystem in one place at very low cost.

The claimable values are updated on a schedule decided upon by the DAO. The default is every 4 hours. The DAO elects one or more “RootUpdater” accounts that are the permission to update the Merkle root.

How it works

Each Merkle tree uploaded specifies a mapping of each user to their total accumulated rewards, across every token for which rewards are distributed. The reward amounts are generated by tracking on-chain conditions and events via an open source script (Such that any user can independently verify it).

An appointed Guardian account must sign off on any new Root before it is made official.

The BadgerTree contract tracks the cumulative amount of rewards claimed by the user, allowing them to claim their full unclaimed reward balance from across the system at once.

The full data of each Merkle tree, along with UI-friendly metadata, is uploaded to IFPS by the RootUpdater. The IPFS content hash and corresponding Merkle root are published to the contract on update.

Permissions

The Admin has the rights to add or remote RootUpdaters

RootUpdaters can propose new Merkle roots with corresponding IPFS content hashes

The Guardian (also elected by the DAO) can approve proposed merkle roots, and pause the contract in an emergency situation.

The Guardian is expected to be running scripts independently to confirm every root.

Other Safeguards

The contract is aware of the total amount of each given token should be available for claiming at any given time.

Funds to be distributed via the BadgerTree are held in the RewardsEscrow to prevent malicious roots from allowing more tokens to be claimed than expected.

New roots do not become active until the guardian has ‘signed off’ on the root via an approval transaction.

Contract Information:

Official website: https://badger.finance/

Github: https://github.com/Badger-Finance

Discord:https://discord.com/invite/xSPFHHS

Twitter: https://twitter.com/badgerdao

Telegram: https://t.me/badger_dao

Whitepaper Link: https://badgerdao.medium.com

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