Lido collaborates with BadgerDAO to introduce stablecoin pegged to Bitcoin
BadgerDAO, a prominent participant in the decentralized finance (defi) sector for Bitcoin (BTC), 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 revealed the launch of a new system called eBTC, which allows users to secure loans without incurring any interest, repayment, or initiation fees. Instead of traditional borrowing methods, the protocol utilizes Ethereum collateral by staking it with Lido to generate staking rewards. This innovative approach potentially offers a more cost-effective borrowing option.
The primary objective of the protocol is to enhance existing wrapped Bitcoin assets by leveraging staked ETH (stETH) from Lido. Additionally, it aims to eliminate the need for cross-chain bridges by introducing a new collateralization method.
eBTC addresses the risks associated with bridges and provides customizable collateralization ratios. It also implements mechanisms to liquidate positions when the collateral value falls below the required threshold, which is set at a minimum of 110%.
As part of the partnership, Lido’s Liquidity Observation Lab (LOL) offers an incentive program that grants additional stETH rewards to early adopters of eBTC. These rewards are distributed without fees, incentivizing users to engage early with the platform.
Lido is a dominant player in the Ethereum staking scene, serving as the largest liquid staking protocol with 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 nature of eBTC, users must still consider inherent challenges and risks within synthetic stablecoins and the broader defi ecosystem. Key considerations include regulatory ambiguity, counterparty risk, and volatility.
The defi market has faced vulnerabilities in the past, including smart contract exploits and market manipulations, which 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 last year. In 2022 alone, the defi sector experienced $2.7 billion in losses from smart contract hacks.
In light of these challenges, users are advised to exercise caution and conduct thorough due diligence before participating in the defi space.
