Badger Launches 0% Interest Bitcoin Lending Protocol eBTC

Badger leverages stETH as collateral to generate staking yield for both the eBTC protocol and borrowers.

By: Samuel Haig Loading...

Badger Launches 0% Interest Bitcoin Lending Protocol eBTC

Badger Finance, a Bitcoin-focused DeFi collective, has launched a 0% interest Bitcoin lending protocol leveraging Lido’s liquid staking token, stETH.

Badger deployed its eBTC protocol and token on March 26, allowing users to borrow a yield-bearing “synthetic Bitcoin-pegged stablecoin” using Ether as collateral.

Despite charging 0% interest to borrowers, Badger will generate revenue by staking collateral assets via Lido’s stETH liquid staking token and taking a 50% cut of the rewards. Borrowers will earn the remaining 50% of rewards, rendering eBTC a yield-bearing asset.

“Unlike conventional DeFi lending protocols that rely on various types of fees to generate revenue, users can deposit Ethereum in various forms as collateral to borrow eBTC at a 0% interest rate — with no repayment or initiation fees,” Badger said. “We look forward to enabling and encouraging anyone to build on top of this one-of-a-kind protocol.”

The eBTC protocol requires a minimum collateralization of 110%, below which borrowers will be liquidated.

Lido’s Liquidity Observation lab will provide 15 stETH as additional incentives that will be distributed to early eBTC adopters over a one-month period. The rewards will be airdropped users.

"The eBTC protocol introduces an exceptional new use case for Lido Staked ETH, leveraging the power of staking rewards to provide a more capital-efficient borrowing option for Bitcoin on Ethereum,” said DeFiYaco, a business development lead at LidoDAO. “Lido contributors are happy to support the growing utility for stETH across the DeFi and are looking forward to seeing what eBTC can achieve."

Lido is both the leading liquid staking provider and DeFi protocol, currently commanding a TVL of $35.5 billion, according to DeFi Llama. Data from Dune Analytics shows Lido controlling 30.3% of Ether’s supply.

Badger’s fall from prominence

Badger was once a leading DeFi protocol, pioneering DeFi use cases on Ethereum and topping out at a total value locked (TVL) of $2.32 billion in February 2021, according to DeFi Llama.

However, Badger has since fallen into decline amid growing competition from other protocols and fallout from a front-end attack that resulted in a $120 million loss on Dec. 2, 2021. Badger’s TVL slumped 98% from $1.2 billion at the time of the attack to just $23.3 million today.

Badger said it prioritized security leading up to the launch of eBTC by engaging five different security partners in the past month. The new protocol has undergone multiple smart contract audits, an economic risk assessment, and offered a pre-launch bug bounty.