Talking Crypto #60 - Chris Spadafora from BadgerDAO

Primer: Join Gabriel Haines as he interviews Chris Spadafora, the founder of BadgerDAO, as he looks back to see the changes that had happened over the past 6 months. Chris also shares his thoughts about NFTs in general and the exciting intersection between DeFi and NFTs.

Introduction to BadgerDAO

• 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.

• Chris Spadafora is the founder of BadgerDAO

  • Long term crypto enthusiast

  • Founder of Angelrock

  • Host of Crypto After Dark poker

Updates of BadgerDAO over the past 6 months

Community

• The community has gotten stronger

• There are people involved today that weren't involved 6 months ago, with a lot more community involvement in every step of the decision-making process

• Most of the Crypto Twitter space is price-oriented and so the noise is just talking about market cycles

• Price is not an indicator of the actual ability to deliver products. The real work here is to build a community so that they can move towards the bigger vision

"If someone had a gun to my head last year and ask where Badger is going to be this year, I wouldn't be able to tell you. That's how much things have progressed and people that are exponentially smarter than me are involved every day and doing things that I could have never dreamed of being able to accomplish myself nor with a team that I tried to pull together."

- Chris Spadafora

Improvements to workflow

• The big question in a DAO is how to build a community that is more inclusive

• Started this Request for feedback (RFF) Discord channel

  • Whenever there is any type of fundamental decisions, like tokenomics, governance 2.0 etc., the team may help to design a framework and bring some community members for an initial draft

  • RFF is designed to bring about a huge community conversation over multiple weeks, with dedicated events hosted to make sure everyone talks about it

  • All this is done before there is an improvement proposal set up

  • When the actual improvement proposal comes in, everyone will be on the same page and thus able to push the proposal through more effectively

• In the past, they will come up with an idea, bring it up with an improvement proposal and put it on the forum for voting within a tight timeframe, but everyone would have only seen it for the first time and they have to make a vote within a short 1-2 days window

• The feeling from the community in the past is that the team does not want to include their feedback

• With the RFF, it is a lot more aligned and people from the community feel that they have developed a relationship with different people in the team and also add value and have an impact

Overall thoughts and upcoming plans

• More clarity on what they are trying to achieve: To be the most trusted place to earn interest on Bitcoin in a fast and easy way while still letting people maintain custody of their assets and have control and influence around the product and business that people are using every day

• Bridges to the different chains are getting better and they are going to include more chains with a more seamless process

• Introducing new vaults and new yield strategies to have sustainable APY

• Very happy with the progress so far, now that they have a lot more community involvement and interest-bearing Bitcoin had grown in liquidity and utility

The Badger Ecosystem

• The mission is not changed - still focusing on bringing Bitcoin to DeFi, but the utility and the direction of the products have changed a bit from where they began

• Initially, they started with only vaults that people can deposit different flavours or already tokenised Bitcoin in to earn interest based on different smart contact-based strategies

• Then they introduced Digg, which is a synthetic rebasing Bitcoin to experiment on creating different synthetic assets around Bitcoin on different chains

• Added the Badger Bridge which allows users to bring Bitcoin to ETH and eventually to other chains. Had almost $300 million worth of Bitcoin go through that bridge in the last 4 months

• Finally, they've introduced interest-bearing Bitcoin - the most composable Bitcoin that you could use on every chain with the easiest on-ramp

• Before that, the products are relatively fragmented, but now everything works together as a system

  • Interest-bearing Bitcoin is backed by the vaults

  • Vaults are expanded to other chains and new yield strategies which increases the underlying APY on interest-bearing Bitcoin

  • All these make it a better synthetic Bitcoin

  • With the bridge on multiple chains, it allows people to go from Bitcoin to either their vaults or to interest-bearing Bitcoin

  • Instead of individual products, now all the products work inside the Badger ecosystem seamlessly

Difficulties in crossing chains

• They are looking exclusively at Ethereum Virtual Machine (EVM) compatible chains

• They went cross-chain with Binance Smart Chain (BSC) and it was much harder than thought previously

• Had to bring a lot of infrastructures across the chain and also maintain them

• Underestimated the amount of work to be done and realised that if they were to bring to another chain, they cannot do what they did for BSC

• They also wanted to bring in Badger Tree to BSC to optimise rewards for users. Badger Tree enables users to realise their gains from all liquidity mining programs in the Badger ecosystem in one place at a very low cost

• This is the core of the partner first strategy

• Badger Tree is supportive of the protocol they used for their vault because they don't farm the tokens and dump them. Instead, the farmed tokens are returned back to the users

• This is a more symbiotic relationship and they are doing with all the vaults, including Curve and Convex

• However, to do this, they will need the infrastructure to distribute the tokens back to the users, which is what a standard staking contract cannot do

• They have overcome this problem and are now ready to launch on any chain in a few days because they used the experience from BSC to streamline the entire process

• Launched on Polygon, subsequently will launch on Arbitrum and other chains

• This will enable users who want to earn interest on Bitcoin to take advantage of opportunities in different chains in one seamless experience

Deploying new vaults or launching a new chain

• Needs effort and time to bring their vaults to a new chain, so if the yield opportunities last for a short duration then it is not worth the effort

• With interest-bearing Bitcoin, they can simply bridge these tokens to other chains without launching their vaults

Interest-bearing Bitcoins are Bitcoins that earns interest in the Ethereum chain and are fully backed 1 to 1 by Bitcoins in the Badger vaults

• This is important because every dollar of interest-bearing Bitcoin is essentially a dollar in their vaults on Ethereum earning interest

• They will be bringing interest-bearing Bitcoin over to a new chain to see how the demand picks up

• If the demand is good, then they will bring their vaults over to the new chain

Importance of community

• Always look at whether the community have members that share the same values because if you can't attract these types of people, you'll get into trouble

• It's important from a marketing perspective to understand that users not only want a trusted place to earn a high return, they also want to be around other people that they like

• So have a high level of integrity and stick to what you say you'll do, and over time people who are interested will continue to support you

NFT

Collision of DeFi and NFT

• Had been saying back in Dec 2020 that NFT and DeFi are going to collide

• There will be more utility to NFT and having such NFTs will give you perks across the entire Web3 ecosystem

• Imagine earning more interest in DeFi projects just by holding an NFT

• This will encourage DeFi users towards NFT space and people in NFT space to go towards DeFi

• The craziest NFT-DeFi integration is to have something like a DeFi passport with really cool, aesthetic NFT, where the DeFi actions you've taken will enable you to have perks to incentivise you to continue using those DApps

• This is similar to those reward cards where you accumulate points from grocery shopping and you can use the points to offset the cost of gas paid at the gas station

The current distribution of NFTs is not ideal

• There is a lot of issues with the current way to distribute NFTs currently and there's space to innovate in the distribution of NFT

• NFTs can be used to reward people for doing actions in the past that aligns with what Badger is trying to accomplish

• The way they launched the Badger token should be the standard for any future launches because it avoids the problem with gas fees and also enables you to build a community of people that shares the same values

• Identifying people and incentivising them based on the actions done will increase the likelihood of them being an active community member

Example:

• Did a Jersey Launch where anyone who purchased the limited edition Jersey will get both the physical item and also one of 200 Badger NFTs.

• However, only accounts that fulfil certain criteria, like governance participant or doing Badger staking and LPing before their DIGG launch, will qualify to purchase the Jersey

• Fractional should be included in all NFT launches as a way to distribute NFTs to the masses

  • Interestingly, Andy from Fractional helped design the original smart contract for the Badger airdrop

  • Rather than giving people an NFT, why not fractionalize a bunch of 1/1 and distribute them to the people in order to engage them in your ecosystem and have skin in the game?

  • This gives utility and also drives monetary value, so it will capture people's attention

Utility of NFT

• They are having an improvement proposal in their forums on how they can use NFTs to increase the APY from the Bitcoin deposits in Badger

• They are also coming up with more NFT launches with partners that everyone has heard of

• Honey badgers are small but relentless and fearless - they want to give people the ability to visually represent that they are part of the Badger community through NFTs

• Profile pic NFT looks cool but it needs to have real utility unless it is more art-oriented. Otherwise, it will be hard to sustain the level of attention to hold the NFTs for an extended period of time

Is the NFT space overshadowing DeFi space?

• Most of this is just Crypto Twitter talk

• NFT will be the reason for people to enter crypto and use it for the first time, but DeFi is on a bigger mission of creating an entirely new financial system - one that is borderless and peer to peer

• DeFi projects have a lot of fundamentals in them, with real revenue, sustainable users and profit models. This will be the future of finance

A community built around 1 NFT or a community built around a collection of NFTs?

• Good to have both and they will eventually converge into one big community

• NFTs have a variety of different rarities and a rarity scale, e.g. you have 1/20 and 1/100. Parallel did a good job at breaking down the different editions and bringing in the idea of creating sets

• If you have a mix of NFTs with different rarities, you just need to fractionalize the rarer ones to distribute them further

• The rarer ones will inherently have a higher market cap, so it makes sense to fractionalize them. Doing so will create a community around 1 NFT

  • Utility can be built around the fractionalized NFTs

  • E.g. if you own 20% of the fractions, you can unlock certain perks

• A community can be built around the non-fractionalized NFT that are of lower rarity

• Eventually, the two communities can converge together

Milestone for Badger

"This is kind of the beauty of DeFi right? It is composability not only with tokens but within the communities. By virtue of being in the Badger community, now all of a sudden you're in the curve community and the convex community and the MTA community vice versa, right? So it just makes everyone stronger in the long term."

- Gabriel Haines

• Creating a flywheel effect

  • The most important thing is to generate yield in the vaults for interest-bearing Bitcoin

  • The Bitcoin deposited with Badger will be channelled to Convex and they will earn Convex and Curve tokens

  • Instead of selling Convex and Curve tokens, Badger will lock them up to support the Curve and Convex protocol

  • Convex is the largest holder of Curve, so locking the tokens up will give Badger the ability to have the influence to vote for their Bitcoin pools to get higher and more sustainable APY

  • This creates a higher yield for the vault which will attract more people to deposit their Bitcoin with them, and also boost the Badger token tremendously

• They will do the same thing on Fantom, Polygon, Avalanche, and Arbitrum

• They are getting ready to launch a mstable vault

  • mstable DAO loans BadgerDAO a bunch of MTA rewards so that Badger can get the maximum boost for the yields they get for their vaults

  • They are doing this because they know that Badger's partner first strategy is going to benefit them

  • Badger ends up having a competitive advantage in getting the best yield on Bitcoin across the industry because of their influence with their partners and what they do with the rewards

Actions to take

• Join the Badger community and hang out on their Discord server

• Give any ideas and contribute. It need not be technical at all

• Have a community member in the Discord that can build a custom badger profile picture on request, which may or may not be an alpha leak for their upcoming NFT collection

All information presented above is for educational purposes only and should not be taken as investment advice. Summaries are prepared by The Reading Ape. While reasonable efforts are made to provide accurate content, any errors in interpreting and summarizing the source material are ours alone. We disclaim any liability associated with the use of our content.