Category: Other / New Product
Scope: Launch the Badger Bridge with rewards to incentivize users to bring additional native Bitcoin onto Ethereum and our Setts
Obtain community approval to launch Badger Bridge under The Badger Cetedel Program. Bringing $500B of Bitcoin to DeFi | by Badger DAO 🦡 | Feb, 2021 | Medium. Also to incentivize Native Bitcoin minting to wBTC or renBTC via Badger Bridge by allocating up to 25,000 $BADGER and 100 $DIGG tokens and requiring users to deposit their newly minted tokens into vaults to be eligible for the rewards program. The program is proposed to last 3 months with an option for the core team to extend the program by duration.
Badger has amassed ~$2b in TVL over the course of 3 months. However, most of the TVL was achieved through BTC variants (wBTC and renBTC) that already existed on Ethereum. With the Badger Bridge, BadgerDAO will now be introducing a clean UX for minting and releasing BTC between Bitcoin’s blockchain and Ethereum’s blockchain.
The Badger Bridge integrates Ren Project’s RenVM, and we’re more than excited for the additional volume and revenue (details below) that this will bring. This is a monumental step forward in enabling BadgerDAO to be the one-stop shop for Bitcoiners on DeFi.
Badger Bridge Market Sizing
Based on on-chain and off-chain data analysis, there’s been ~$12b in wBTC and renBTC minted in the previous 6 months. Over that period, mint volume grew exponentially, so as an estimate, we’ll assume this volume grows by a multiple of 4 during the next 6 months, leading to an estimated $48b of total renBTC and wBTC volume. At one point, BadgerDAO held 30% of all renBTC on Ethereum, so as the go-to spot for Bitcoin on DeFi, we will conservatively aim to capture 10% of this future volume over the next 6 months. This results in a rough opportunity estimation of $4.8b in transacted volume over the next 6 months which roughly translates to ~$7.95m in revenue.
Badger Bridge Rewards Program
To incentivize the launch of our Badger Bridge, I propose we allocate up to 25,000 $BADGER and 100 $DIGG tokens from the treasury towards a rewards pool. Badgers that cross the BTC bridge (Removed text: with a transaction minimum of 0.1 BTC) within the first 3 months of launch will be eligible for an airdrop from this rewards pool. The rewards pool will be released by transaction volume milestones. If this program proves effective, the core team reserves the right to also extend this program’s duration.
Rewards Program Release Schedule
|Badger Incentive||DIGG Incentive|
|For each $500m transaction volume milestone, up to $5b||2,500 Badger||10 DIGG|
Users will receive this bonus paid in Badger and DIGG at the end of the Rewards Program. The goal is to incentivize users to bring additional Bitcoin onto Ethereum and to learn how to interact with our Badger Bridge. We believe that this incentivized education will also have ripple effects for user adoption rippling over months/years as well.
Badger Bridge Revenue/Fee Structure Breakdown:
|Minting Process*||Burning Process*|
|RenVM Fee (100% to Ren Project’s RenVM Darknodes)||0.25%||0.1%|
|Badger Fee (60% to DAO, 40% to Integration Team)||0.25%||0.4%|
|Bitcoin Fee (The fee required by Bitcoin Miners to move BTC)||0.001 BTC (~$50)||0.001 BTC (~$50)|
|Ethereum Gas Fee||variable||variable|
*For wBTC transactions, there is a marginal swap fee and slippage as the minting mechanism routes through Curve.fi. Ultimately, this routing is actually beneficial for BadgerDAO and Badgers as it further supports the revenue of Curve Liquidity Providers.
Based on Revenue Sharing in the Badger Developer Program. A program to fostering an environment… | by Badger DAO 🦡 | Medium article and with similar structure to how fees are shared with strategists for Sett vaults, revenue will be split 60/40 between BadgerDAO and the Integration Team. Although the developers had originally agreed to a 50/50 split at time of scoping/project planning, they’ve agreed to reduce this original arrangement to provide a greater revenue lift to Badger and to further increase the sustainability of the DAO. This compensation is for the design, development, test, deployment, continued maintenance, and future enhancements to the Badger Bridge product.
Badger Bridge Profit Forecasting
Over the course of the 3 months, we will determine the effectiveness of this program. Although we have no intention for doing so, we will reserve the right to adjust the framework (minimum reward, maximum reward, square roots, cube roots, or other mechanisms to ensure a fair distribution). We will only look to make these adjustments if we detect malicious behavior.
Given the sections above for opportunity assessment and rewards release schedule, for each $500m of volume we transact via the bridge, BadgerDAO will generate ~$795k in revenue. Accounting for the incentive program, this results in ~$270k in profit per $500m volume transacted. In total, $7.4m in profit over the course of just this program up to the $5b incentivized, not including future volume.
Badger Bridge Governance
As we evaluate the efficacy of the initial Badger Bridge economics, we will also look to adjust fees as necessary for the Badger Bridge. Similar to how the Ren team at Ren Project controls their fee model, we’d like to reserve fee change decisions to the core team in order to allow adequate time to measure price elasticity and to gauge the reaction to our incentivization model for the duration of this program. As we wrap up the Badger Bridge Rewards Program, we will then allow for fee adjustments to occur according to the governance process laid out via BIPs.
As a little added bonus: we’d like to express intent on rewarding a unique Badger Bridge NFT to 100 random addresses that mints >0.05 BTC (edited from original 0.1 BTC due to community feedback) during the period of this program. This NFT will be eligible for potential future benefits in the badger ecosystem.
If you are in support of this proposal vote “For”; if you don’t support this proposal vote “Against.”