Badger DAO are doing a synthetic $BTC. It's not your Bitcoin, it's a #liquidstaked $ETH backed token, called $eBTC, which tracks the value of Bitcoin.

Linked below are the two updates in the Badger forums about it so far.

Announcement: https://forum.badger.finance/t/introducing-ebtc-a-decentralized-bitcoin-powered-by-ethereum-staking/5952/9

First update: https://forum.badger.finance/t/ebtc-builder-update-1/5975

The thesis, as I read it, is:

• current #EVM chain compatible bitcoin products (namely $wBTC) are centralised & permissioned thus essentially like a bank holding your #bitcoin.

• bridging to and from #bitcointechnology is hard and risky

• liquid staked #ETH is flexible, #yield bearing and mostly decentralised so can be setup to be a permission-less way of minting and maintaining a peg to the #BTC price via tracking the $BTC/$ETH with #chainlink and Tellor oracles.

• people love #stablecoins that track the price of USD, people also love Bitcoin, so why not have a coin that tracks the price of $BTC?

From the forum posts:

Liquity’s LUSD architecture stood out as an exception, excelling in providing censorship-resistant borrowing with a stable floor peg. Designed with a focus on censorship resistance and #decentralization with only ETH as collateral, it was similar to our vision for eBTC. We decided to borrow from Liquity’s design as the foundation for eBTC’s architecture on the grounds of their stable performance, quality of research, and commitment to #immutability.

Luckily the first thing that springs to mind was raised in the comments on the announcement post.

Q: But, one of the problems will be, there will be more bitcoins in the market and the MAX supply of Bitcoin will be more than 21mm?

A: eBTC is a collateralized crypto asset soft pegged to the price of Bitcoin and built on the Ethereum network. It is backed exclusively by Liquid Staked ETH (LSD) and powered by immutable smart contracts with no counterparty reliance. It’s designed to be the most decentralized synthetic BTC in DeFi and offers the ability for anyone in the world to borrow BTC at no cost.

Maybe this is how actual Bitcoin dies. Not through some hack or people losing faith in it, but by it being made technologically obsolete by derivatives.

Two huge assumptions particularly stand out to me about Badger's thesis:

A1. Bitcoin is regarded by people as a similar reserve asset to USD
A2. You can reliably algorithmically maintain a token value peg with two volatile assets.

A1. The USD is an inflationary currency which maintains its stability through its integration with the multi trillion dollar US economy and as the reserve currency for much of the global economy.
Bitcoin, in contrast, has always paid it's miners almost entirely in block rewards (which are slowly halving themselves into non-existence) because there's so few transactions fees generated on chain.

A2. It's not unusual for BTC to move 10-30% month on month. ETH too.

If you want to use Bitcoin to it's full potential in #defi then you need bridge it to a #smartcontract #blockchain. wBTC might not be the greatest solution but at least it's actual bitcoin backing that asset.

A better solution is a permission-less and decentralised bridge to and from the bitcoin chain.

That's why I'm so optimistic for what Threshold Network are building with $tBTC

And what Stacks are building with $sBTC

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