Badger DAO also known as BADGER is an open-source, decentralized autonomous organization (DAO) that enables bitcoin to be used as collateral across decentralized finance (DeFi) applications. ^[1][2]

History

The Badger DAO project was launched in September 2020 by its founder, Chris Spadafora^[17], and his team of developers; Ameer Rosic^[14], Albert Castellana^[15], and Alberto Cevallos^[16]. The community that runs the project is focused on equity and decentralization of token distribution. Badger DAO was designed to use tokenized Bitcoin (WBTC or renBTC) as collateral within the DeFi ecosystem of Ethereum. Users can use the platform to request loans or access various DeFi strategies to improve their positions. ^[2]

Token distribution on Badger DAO was completed through retroactive airdrops from users who had interacted with governance on DeFi protocols. These users created tokenized BTC variables and donated them to Gitcoin. ^[3]

Technology

Badger is a decentralized finance system (DeFi) built on top of the Ethereum network and has been ported to networks such as BSC, Polygon, and Arbitrum. It is a DAO where holders of its governance token, BADGER, are able to vote on proposals put forward by community members. Voting power is determined by the amount of BADGER owned, and proposals that receive enough votes are implemented on the platform. ^[1][4]

Badger DAO has a liquidity mining program, similar to that of many other DeFi protocols, which incentivizes users to contribute liquidity to smart contracts in exchange for BADGER, the platform's governance token, and DIGG, a token linked to Bitcoin. ^[3]

The DAO has implemented a liquidity program to incentivize developers, wherein rewards in the form of tokens are given out for project development. Furthermore, users who contribute to the promotion and development of open-source software are rewarded with Gitcoin donations. The program and issuance fee is managed by the DAO. ^[3]

Products

SETTs

SETTs, commonly referred to as Sett Vaults, are pools of tokens where users can lock up their tokenized bitcoin and enable smart contracts to manage their holdings in order to generate a yield. In other words, SETTs are Badger's version of an automated DeFi aggregator. ^[1][13]

Users can deposit tokens into a SETT and receive bTokens in return. For example, depositing BADGER into a Sett Vault will result in obtaining bBADGER. These bTokens are interest-bearing tokens that represent the user’s share of the assets in the SETT and can be used as collateral in various DeFi applications. Depositors will receive yield in the relevant token, along with BADGER tokens, based on the parameters of the SETT. BTokens can then be exchanged for the original asset and earnings, minus a fee. ^[1][10]

DIGG

DIGG is a decentralized “elastic-supply” cryptocurrency, pegged to the price of bitcoin. Digg’s software programmatically adjusts the supply of its DIGG cryptocurrency through smart contracts that expand or contract the circulating DIGG supply in response to fluctuations in the price of bitcoin. ^[1][12]

The Digg protocol adjusts the supply of DIGG tokens automatically to ensure that their price remains in line with the market price of one BTC. This process, known as "rebasing," applies to all wallets containing DIGG tokens. The supply of DIGG is constantly changing in an "elastic" fashion, with a token holder's proportion of the total supply remaining stable. ^[1][11][12]

DIGG tokens can be used in DeFi protocols and deposited into SETTs to generate a yield for holders.^[1][11]

ibBTC

IbBTC, a cryptocurrency pegged to the Bitcoin price through a partnership with DeFi Dollar, is not tied to DIGG, but to a basket of DeFi primitives. The token is interest-bearing, allowing holders to earn interest by farming CRV and Badger, with other blockchains in the process of being added. ^[5]

Badger Token

The BADGER token is BadgerDAO's native token. It is an ERC-20 token with a total supply of 21 million coins, which is the same as Bitcoin. However, its nature is inflationary as coins are released gradually, even though there is a limit. ^[3]

The Badger DAO team maintains that the currency does not have a monetary value and the value is determined by the free market, with the majority of its supply held and used by the DAO according to governance decisions. ^[3]

The launch of the Badger token did not include an Initial Coin Offering (ICO) or liquidity from the Badger DAO team. The Badger governance token provides investors with voting rights to the DAO, as well as receiving cash flows from protocol fees. ^[3][2]

BadgerDAO Hack

On December 1st, 2021, an attacker drained funds from the wallets of dozens of users of the Badger DAO yield vault protocol using malicious contract permissions. Blockchain data and security analytics company, PeckShield concluded that the total loss amounted to about 2,100 BTC and 151 ETH. ^[7]

Users first reported possible problems in the protocol’s channel on the Discord messaging app at 9 p.m. ET, 1st of December, 2021. Speculation in online channels was that the hack was the result of an exploit in the Badger.com user interface, and not in the core protocol contracts. Many affected users report that while claiming yield farming rewards and interacting with Badger vaults, they noticed their wallet providers prompting spurious requests for additional permissions. ^[7]

Once Badger became aware of the unauthorized transfers, it paused all smart contracts, essentially freezing its platform, and advised users to decline all transactions to the attacker’s addresses. ^[8]

“It looks like a bunch of users had approvals set for the exploit address allowing [the address] to operate on their vault funds and that was exploited,” - Badger core contributor Tritium wrote on Discord.

“Once we noticed, we froze all the vaults so nothing can move and are trying to figure out where the approvals came from, how many people have them, and what next steps are,” he added. ^[7]

The Badger team later explained that the hacker ultimately stole $130 million in funds, but approximately $9 million of that was recoverable since those funds were transferred by the hacker. Badger hired cybersecurity firm Mandiant and blockchain analysis firm Chainalysis to investigate the exploit, and worked with both companies, as well as authorities in the U.S. and Canada, to recover any funds possible. ^[9]