Lido and BadgerDAO Collaborate to Introduce Stablecoin Tied to Bitcoin
BadgerDAO, a prominent player in the decentralized finance (defi) sector of the Bitcoin (BTC) market, has announced a partnership with Lido, a leading provider of liquid staking solutions on the Ethereum network.
In a press release shared with crypto.news, BadgerDAO unveiled a new eBTC system that allows users to secure loans without encountering any interest, repayment, or initiation fees. Instead, the protocol utilizes Ethereum collateral by staking it with Lido to generate staking rewards, providing a potentially more cost-effective borrowing option.
The primary goal of the protocol is to enhance existing wrapped Bitcoin assets by leveraging staked ETH (stETH) from Lido. Additionally, it introduces a collateralization approach that eliminates the need for cross-chain bridges.
One of the key features of eBTC is its customizable collateralization ratios, which can be adjusted according to user preferences. Furthermore, the protocol implements mechanisms to liquidate positions if the collateral value falls below the required threshold, set at a minimum of 110%.
The partnership with Lido also includes an incentive program offered by Lido’s Liquidity Observation Lab (LOL). This program grants additional stETH rewards to early adopters of eBTC, aiming to encourage early engagement without any fees.
Lido dominates the staking scene on Ethereum as the largest liquid staking protocol, boasting a Total Value Locked (TVL) of $35.12 billion, according to DeFi Llama data. On the other hand, BadgerDAO leads the Bitcoin defi sector with $3.5 billion in BTC deposits.
Despite the innovative approach, users should be aware of the inherent challenges and risks associated with synthetic stablecoins and the broader defi ecosystem. Regulatory ambiguity, counterparty risk, and volatility remain critical considerations.
The defi market has faced vulnerabilities in the past, including smart contract exploits and market manipulations that have compromised the stability and security of protocols. For example, SushiSwap suffered a $3.3 million loss due to a smart contract incident in April of last year. In 2022, the defi sector experienced a total of $2.7 billion in losses from smart contract hacks.
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