How do bitcoin holders make money in defi? Brief analysis of the operating mechanism of badger Dao

Disclaimer: This article is intended to convey more market information and does not constitute any investment advice. The article only represents the author’s point of view, not the official position of Mars finance and economics. Editor: remember to pay attention to it The title of the original text: “hot spot: BTC meets defi” written by Kevin Yang, Cara Cao, Arvin Wang, Damen Shen, from the encounter of idegbtc and defi. Decentralized Finance (defi), as the name suggests, is decentralized finance. As the most popular sector in the digital asset market this year, defi has been highly concerned by the industry capital. According to the latest data of debank, the total TVL of defi has exceeded US $22 billion, compared with us $752 million at the beginning of the year, an increase of more than 2800% so far this year. At present, the defi market is still in a high growth stage, and more innovative applications are coming out. Figure 1 the growth of TVL in the defi market. Data source: Although the current growth momentum of the defi market is rapid, compared with the total market value of $740 billion in the digital asset market, the amount of capital carried by the defi ecology only accounts for 3%. At present, most of the defi projects are built on the Ethereum public chain, and the market value of Ethereum is only 28 billion US dollars. Bitcoin, the core asset accounting for nearly 70% of the total market value of the industry, seems to be the elephant in the room of defi. Native bitcoin cannot directly participate in the defi ecosystem because bitcoin networks are not compatible with Ethereum networks. However, bitcoin holders can mortgage BTC on one side of the bitcoin blockchain through cross chain non-destructive acceptance, and exchange bitcoin assets in the form of ERC 20, such as wbtc, renbtc, SBTC, etc., on the Ethereum chain at a 1:1 exchange rate, so as to enable bitcoin holders to participate in the defi market. Since May this year, the lock up of bitcoin assets on Ethereum chain has grown rapidly, with more than 150000 bitcoin entering the defi market. Figure 2 TVL growth of bitcoin assets on Ethereum chain, data source: dune analytics, as of December 25, 2020, the total lock up volume of wbtc has reached US $2.65 billion, accounting for 80% of the total cross chain bitcoin assets. At present, TVL of bitcoin assets on Ethereum chain accounts for 16% of the total TVL in the defi market. Compared with the core position of bitcoin in the whole industry, the current TVL value is seriously low, and there is still a lot of room for increment. Figure 3 proportion of TVL of bitcoin assets on Ethereum chain, data source: IDEG, from the perspective of asset volume and capital profit pursuit, will surely have a place for bitcoin in the future. In this paper, through the analysis of badger Dao, a pioneer project in this field, it further introduces how bitcoin can gain revenue in defi. The basic information of badger Dao was officially launched on December 4 this year and launched the liquidity mining function. The project has been in operation for less than a month, but TVL has rapidly exceeded $400 million, ranking 13th in the defi list. Figure 4 the lock up of badger Dao, data source: according to the information on its official website, debank mainly consists of the following three parts: Dao — decentralized autonomous community set — income aggregator Digg — flexible supply asset linked to bitcoin price (to be launched) Dao As a public community platform, it is the cornerstone of the long-term development of the whole project. The purpose of its establishment is to continuously develop more and more BIFI products related to bitcoin. In order to let the community members have the common ownership and the sense of identity, the community uses the token reward and other ways to motivate the members for a long time. Users can also vote on the proposal by holding token, so as to realize the governance of the project by token holder. Another more important purpose of Dao is to reward members who contribute to the community, such as those who develop new products or optimize existing products and strategies, and promote project innovation through token rewards. The specific usage of token can be decided by community discussion and voting. Set, as a revenue aggregator, maximizes asset returns by executing different revenue strategies. At present, badger Dao has two types of sets, namely native sets and super sets. Among them, native sets has five core machine gun pools, including badger / wbtcuniswap LP, badger pool, SBTC curve pool LP, renbtc curve pool LP and TBTC curve pool LP. Super sets is a strategy pool for partners. At present, there is only one harvest.finance/renbtclp. Digg is a bitcoin linked flexible supply asset to be issued by ledger Dao. Smart contract will make supply adjustment every 24 hours to ensure Digg price anchoring bitcoin price. Digg is built on the same mechanism as Ampleforth. Since the supply adjustment of Digg occurs at a fixed time every day, there must be a short-term arbitrage opportunity to earn the price difference between Digg and bitcoin. The development prospect of bitcoin in the field of defi. In the face of the low standard return of cefi currency, BTC holders have strong cross chain profit seeking demands. It can be said that all BTC holders have demand for defi. Projects represented by badger Dao have promoted BTC’s entry into Ethereum ecology and defi world. The meeting of BTC and defi may become the singularity moment of digital asset market. When the assets with the highest market value and the largest consensus are integrated with the most active and innovative ecology, this field is full of imagination. In the past decade, BTC has achieved a qualitative leap and has been recognized by traditional capital. In the next decade, decentralized finance is expected to further promote innovation and exponential development of the industry.

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