- Badger DAO has the smallest TVL to market cap ratio in the Top 10 DeFi protocols by TVL.
- The protocol is composed of two products for using Bitcoin over the Ethereum blockchain.
At the bottom of the top 10 Ethereum DeFi protocols by Total Value Locked (TVL) is one with the premise of bringing decentralized finance to Bitcoin. Its name is Badger DAO, and unlike the other protocols higher in the ranking, Badger DAO only has a total value of $883 million (TVL), which could make it one of the next DeFi stars.
One reason for this assumption is that Badger DAO has the smallest TVL to market cap ratio in the Top 10 and could there offer a huge upside. While Synthetix has a market cap/TVL ratio of 1.85 ($3.23 billion vs. $1.75 billion TVL), Balancer of 2.4 and RenVM 0.89, BadgerDAO ratio only accounts for 0.54.
In brief: What is Badger DAO?
Badger DAO was created as a bridge between decentralized finance and Bitcoin to meet user demand for using this cryptocurrency as collateral in the DeFi sector. In addition, Badger DAO aims to enable developers to agree on common incentives to create community-initiated startup projects. The Badger DAO team states:
The Badger DAO isn’t “DAO for DAO’s sake.” It’s focused on creating an environment for builders to collaborate vs compete with a shared mission, bring BTC to DeFi. There isn’t a legal company, it’s a community.
Badger DAO facilitates the use of Bitcoin as a synthetic product on Ethereum’s blockchain, as Wrapped Bitcoin. To achieve this goal, Badger DAO’s products have a similar model to Yearn Finance’s vaults. Users are therefore able to optimize their Bitcoin earnings without worrying about gas fees, number of transactions, and other complexities that need to be managed to operate other DeFi protocols.
How to earn rewards with Bitcoin in the DeFi sector?
At the moment, the protocol is composed of two products: Sett and Digger. The first of these is an automated aggregator for decentralized finance focused on synthetic Bitcoin assets. The team defines this product as an “extension of the Yearn Finance v1 vaults”.
At launch, users could deposit funds into Setts vaults to liquidity mined and obtain the token Badger. Sett vaults allow users to earn rewards the longer they have funds staked. Sett offers 1x, 2x, 3x reward multipliers. Another advantage of this Badger DAO product is that users can withdraw their funds and rewards at any time. At the time of withdrawal, they only have to pay a 0.5% fee and an additional 4.5% for gas fees generated in the vaults.
Initially Sett had 5 vaults with compounding, staking, and Badger token earning strategies. Since then, at least 6 additional vaults have been added with returns on investment reaching up to 600%.
The second Badger DAO product is Digg, a synthetic Bitcoin non-custodial token with elastic supply, similar to the Ampleforth protocol. The price of DIGG is pegged to the price of Bitcoin. The supply of this token is adjusted each day by calculating the price of DIGG against the price of Bitcoin. If it is higher, Digg holders receive an increase in their wallet balance, if it is lower the balance is reduced.
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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.
The product operates with an oracle service that provides the value of Bitcoin against the dollar (USD). It aims to increase and incentivize “exchanges” made by the community. This product was launched 5 days ago and as the Badger DAO team had announced, the community has full control over the decisions and changes that are implemented.
