TCD#50 - Seeding eBTC in Uniswap v3 positions to support the launch of eBTC

Authors: @Steakhouse, @BA_Labs and Badger contributors


The launch of eBTC could catalyze a new stage of growth for the BADGER ecosystem. However, the protocol will not perform well for large WBTC users until there is enough liquidity to sustain moderate levels of WBTC/eBTC activity. This proposal aims to bootstrap an initial stage of growth and accelerate getting to the stage where eBTC can be a unit of account.



  • Request 800 Ether (~$2.6m) of the DAO treasury to be deployed in eBTC and in eBTC liquidity positions
  • Mint 20.9 eBTC over the next 8 weeks at 50% LTV
  • Pair with 20.9 WBTC from the treasury ($1.3m)

Following up from the initial eBTC Launch Planning post, the below proposal aims to formally request an initial contribution to the surplus of eBTC to launch the protocol and seed liquidity.

Initial Parameters

Continuing from the Launch Planning post:

  • Collateralize 800 stETH in eBTC at 50% LTV, paired with an equal amount of WBTC

We propose to review every week after launch to evaluate whether to increase the POL position. Incentives to grow TVL and the pool will come separately from this post, which focuses exclusively on seeding the capital of the protocol and the parameters for the first POL deployment.

Metrics of Success

How long will the investment thesis take to play out?

1 month from launch, up to 3 months if the TC decides to stretch out the deployment over a full quarter

Will the treasury recoup funds or does the investment represent an outlay?

The funds are not spent, merely allocated into POL that the TC will retain control over

What are the risks associated with each investment?

Source: Dialectic Risk Matrix
Category / Risk Null Moderate High Degen
Smart Contract 0 Live > 2 years without any incident 0.15 Live > 1 and < 2 years without any incident 0.3 Fork of a known protocol with extra additional code 0.6 Novel codebase, recently launched
Economic 0 No attack surface 0.2 Contained depeg risk (±1% price deviation), Capital lockup 0.3 Significant depeg risk 0.8 Potentially Vulnerable to price manipulation
Bridge 0 None 0.1 Native 0.4 Externally verified bridge yet reputable and financially stronger provider 0.6 Externally verified bridge
Oracle 0 None 0.1 Chainlink with Fallback 0.2 On-chain oracle 0.3 On-chain oracle with loose parameters
Governance 0 None 0.1 1+ day timelock. Multisig with collusion-resistance guarantees 0.3 Multisig with no timelock 0.8 EOA or multisig with anonymous signers
Audit 0 Extensively audited by multiple and reputable firms 0.2 Reputable firm 0.4 Moderate reputation firm 0.5 Firm with weak track record

As per the Dialectic Risk Matrix, from our research report:

One could imagine eBTC to be rates as follows (self-assessment):

Smart contract risk 0.3
Economic risk 0.25
Bridge 0
Oracle 0.1
Governance 0.2
Audit 0.1
Total 0.6598

The smart contract risk and economic risk can be expected to decline over time. This is objectively an investment with moderate risk on account of its novelty, and can be expected to decline over time.

The discount factor means if the benchmark equivalent riskless investment yields 10% return p.a. then the hurdle rate for this eBTC position should be 10%/(1-0.6598), or 29% (2.93x as high).

However, the mitigant is that choosing not to invest in supporting eBTC could also prove to be a detrimental long-term decision for the Treasury Council.


Badger stakehouse

There are several points to raise here about your proposal to allocate 800 Ether (~$2.6m) from the DAO treasury to support the launch and liquidity seeding of eBTC in Uniswap v3 positions.

Lack of Clarity on Returns: While the proposal outlines the investment parameters and metrics of success, there is limited clarity on the expected returns and timeline for recouping the funds. The vague assertion that the funds are merely allocated into positions controlled by the Treasury Council raises concerns about accountability and risk management.

Risk Assessment: The provided Dialectic Risk Matrix attempts to quantify the risks associated with the investment, but it lacks depth and specificity. Risk categories such as Smart Contract, Economic, Bridge, Oracle, Governance, and Audit are evaluated, but the methodology and sources for these assessments are not transparent. Additionally, the self-assessment of eBTC’s risk profile appears subjective and lacks external validation.

Lack of Alternative Analysis: The proposal fails to consider alternative uses for the DAO treasury funds and does not provide a comparative analysis of potential investments or strategies. Without exploring alternative opportunities, it’s challenging to assess whether investing in eBTC liquidity positions is the most effective use of resources to achieve the DAO’s objectives.

Uncertainty Surrounding Success Metrics: The proposed metrics of success, such as the timeline for the investment thesis to play out and the potential for the treasury to recoup funds, are vague and speculative. Without clear benchmarks and milestones, it’s difficult to evaluate the effectiveness of the investment strategy and hold the Council accountable for its outcomes.

While the proposal to support the launch of eBTC and seed liquidity in Uniswap v3 positions may have potential benefits for the Badger ecosystem, it lacks:

rigorous analysis.

A more comprehensive evaluation of risks, returns, and alternatives is needed (in my opinion) to ensure prudent decision-making and effective allocation of DAO resources