Lido and BadgerDAO collaborate to introduce stablecoin pegged to Bitcoin
BadgerDAO, a well-known player in the decentralized finance (defi) sector of Bitcoin (BTC), has announced a partnership with Lido, a leading provider of liquid staking solutions on the Ethereum network.
According to a press release shared with crypto.news, a new system called eBTC has been launched, allowing 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 more cost-effective borrowing option.
The protocol aims to enhance existing wrapped Bitcoin assets by leveraging staked ETH (stETH) from Lido and introducing a collateralization approach that eliminates the need for cross-chain bridges.
In addition to addressing risks associated with bridges, eBTC offers customizable collateralization ratios and implements mechanisms to liquidate positions if the collateral value falls below the required threshold, set at a minimum of 110%.
The partnership also includes an incentive program offered by Lido’s Liquidity Observation Lab (LOL), which grants additional stETH rewards to early adopters of eBTC. These rewards are designed to be distributed without fees, further incentivizing early engagement.
Lido dominates the staking scene on Ethereum as the largest liquid staking protocol, with a Total Value Locked (TVL) of $35.12 billion, according to DeFi Llama data. Meanwhile, BadgerDAO leads the Bitcoin defi sector with $3.5 billion in BTC deposits.
Despite the innovative approach, users still face challenges and risks within synthetic stablecoins and the wider defi ecosystem. Regulatory ambiguity, counterparty risk, and volatility are key considerations.
The defi market has experienced vulnerabilities such as smart contract exploits and market manipulations, which have jeopardized the stability and security of protocols. For example, SushiSwap incurred a $3.3 million loss due to a smart contract incident in April last year. In 2022, the defi sector suffered a total of $2.7 billion in losses from smart contract hacks.
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