This is the first in a new series where I'll look for exciting smaller cap projects by analyzing recent developer activity.
I'm looking for the projects that have a higher chance of coming out of this bear market thriving.
We'll be utilizing Stack's developer data, pulled from GitHub. Plus some good old-fashioned human analysis and common sense.
I'll be hunting for innovation, an exciting roadmap, plus a plausible use case. No copycats and forks.
A part human, part machine effort. Kind of like Iron Man, just not quite as cool.
Let's get to it.
BadgerDAO - Bringing Bitcoin to DeFi
Stats
Market cap: $29M
1 Year return: -68%
Active devs past year: 377
Tokens: BADGER, DIGG, ibBTC
Stack rank: 5/100
What is it?
BadgerDAO's mission is to make it easy to put your Bitcoin to work in DeFi.
If any cryptocurrency is here to stay, it's Bitcoin. If any crypto use case is here to stay, it's DeFi. Badger is attempting to marry the two.
Important disclaimer: I'm not reviewing or endorsing any of Badger DAO's products here. This is also not a security analysis. DeFi protocols are complex and this is just an analysis focused on general developer activity and use case. This is for informational purposes only.
Products
Badger DAO have a range of products, varying in complexity.
On the more complex end, there are SETT vaults (named after Badger's dens). Confusingly, not all of these actually involve any Bitcoin related products at all.
On the simple end of the spectrum, there is Interest-Bearing Bitcoin (ibBTC), that you can simply buy and earn a much lower (it's currently near 0%) yield. See more below on this.
Then there is the BADGER token, that is used for governance. And DIGG, a decentralized, elastic supply crypto asset pegged to the price of Bitcoin.
You can learn more about Badger’s products here.
Developer activity
Over the past year, 382 developers have contributed to Badger's code.
Much of the core protocol work was completed back in early 2021. Badger is likely to be one of the more established projects we'll look at in this series, but it's hardly old even by crypto standards.
Here's Stack's aggregated view of all Badger DAO code repositories:
Recently, work has been focused on:
Badger UI V2
Badger API
Badger SDK
Aura Yield Strategy
In a nutshell, it appears the team is currently focused on improving access to Badger products, both through the web UI and API for other developers. This should help broaden adoption.
Low bitcoin yield
Currently, Badger is somewhat failing at its core objective of providing a yield on your bitcoin.
Keep in mind, though, we’re currently witnessing nothing short of a complete meltdown of centralized crypto lending providers (e.g., Celsius). A low yield is preferable to having your funds frozen entirely, with little likelihood of return.
Here's the latest from Badger contributor Mr_PO on why yields are currently low:
The state of the Curve + Convex yield influence market, together with the structure of the LPs, currently doesn’t allow us to have BTC-heavy pools with sustainable yields. This is due to our inability to cost-efficiently incentivize enough CVX voting for the AUM that seeks yield in a single-sided BTC pool.
We need to do a bit more work to figure out how to make graviAURA work well with stableswap pairs, but once we do, there will be opportunities to create pools that are mostly BTC and have relatively little IL against graviAURA that should yield and scale quite well.
Source: Badger forums
So on the yield strategy side of things, there is work underway to bring returns back to ibBTC, which again should broaden adoption. A key part of this is the graviAURA SETT.
Audits & Security
The project is well audited; however, there was a serious hack in December 2nd 2021.
$120M of user funds were stolen, though $9 million of that was recoverable.
The Badger team appear to have dealt with it well, writing a full postmortem and engaging a security firm to investigate the issue.
While they bear responsibility for ultimately allowing hackers to gain access to a cloud API key, the hackers took advantage of a Metamask visual design issue, so they are not entirely to blame.
These type of hacks are fairly common, and perhaps to be expected as DeFi is so young. There is an excellent write-up of the hack on Zengo.
Summary
While the general level of activity has declined over the past few months, the project appears to be relatively active and could be well positioned to see through the bear market.
Badger currently has around $33 million value locked in its protocols. Ranking it 42 on DeFi Pulse.
The team appears to be active, and while the yield on the most user-friendly product, ibBTC is currently low, there is work underway to address the low yields. With centralized providers like Celsius and BlockFi are teetering on the edge, perhaps decentralized options to get a yield on your bitcoin will come out looking good.
How to invest
Buy the Ethereum BADGER token to invest in the DAO. Contract address at: https://badger.com/products/badger
Centralized: Binance, Coinbase
Decentralized: Uniswap
Disclosure
At the time of writing I don’t currently hold any BADGER, DIGG or ibBTC. Mainly as I think all altcoins are caught in a macro downtrend. BADGER is on the Stack watch list, though, and I’m likely going to start dollar cost averaging in soon.
Links
Website: https://badger.com/
Thoughts or feedback? Just drop a comment on Substack.
Thanks for reading,
James