Badger is rounding its second year in operation and it's safe to say the ecosystem from which it was born has gone through tremendous changes since the DAO was first launched in 2020. Many innovators have persevered, challenged the status quo and continue to forge new paths for the next generation of courageous builders to follow. Others have fallen from great heights, highlighting the need for more work to be done to harden the ecosystem, remove significant points of failure while remaining transparent, decentralized and censorship resistant.
Loss events such as the ones seen throughout 2022 are a double edged sword. On the one hand, you manage to expose bad actors. On the other hand, you do so at the expense of user funds and market stability which in turn creates a vacuum of negative sentiment that consumes even those with high integrity and good intentions. But as the dust begins to settle, the collective mission becomes even clearer: continue to build the tools necessary to promote an open, transparent and decentralized financial system, accessible to anyone in the world, built on the foundation of personal sovereignty.
For Badger, 2022 was a year of change, growth and preparation. Contributors understood the need to further decentralize the DAO while ensuring it was positioned to withstand years of difficult market conditions. Progress was made and Badger is prepared to keep building for years to come while pursuing the core mission of bringing Bitcoin to DeFi.
Many milestones were accomplished in 2022:
Restructured the organization across contributors, service providers and the treasury to minimize costs and ensure a healthy 2 year runway
Upgraded core smart contracts while developing new products and tools for both the DAO & users
Progressed the governance framework by introducing smaller governing bodies (councils) with clear mandates, approved policies and democratic processes to make more effective & efficient decisions
Re-evaluated existing products and their performance to define a clear path forward around better profitability and product market fit
Introduced new Badger token utility through protocol integrations and treasury support.
Developed deeper financial rigor with real time revenue, product, and expense analytics to better inform all decisions the DAO needs to make
Let's dig into the upgrades BadgerDAO made over the past year…
As markets continued to trend downward, it became clear that extending the operational runway was a top priority. In order to do so, it was imperative to conduct a comprehensive overview of operational finances, compile the data in an organized and transparent manner and prepare a thoughtful plan focused on longevity despite worsening market conditions. It was an important exercise to ensure the future goals of the DAO were aligned with its financial health. Fortunately this deep dive prompted the need to develop additional tools to aggregate financial data in real time which will soon be ready to share with the community.
Key outcomes of this exercise included:
Financial modeling that informed an operational upgrade and an extended runway
Treasury asset investments generating additional revenue
More predictable understanding of costs and revenue streams
Ability to monitor product financial performance in real time
At the beginning of Q3 2022 the DAO successfully reorganized its operating structure in order to extend the operational runway. The number of contractors was reduced to 9 from 23 and contributors shifted to active workstreams receiving grants paid in Badger. This has resulted in a ~60%+ reduction in stablecoin spend, reduced costs by over half ($2.6M) against forecast, and extended the DAOs runway by 2+ years.
Furthermore, the upgraded operating model now enables more focused outcomes by domain, can grow or shrink based on workload, and is significantly more cost efficient. Optimizations on building more focused outcomes and ongoing improvements to cost structure continue to be realized in Q4.
As of writing, BadgerDAO’s treasury currently has nearly $29m in assets with ~$18m in Native (Badger + DIGG) and ~$11m in Non-Native.
By establishing and implementing treasury management strategies based on the parameters outlined in BIP 89, Badger was able to leverage existing products to generate additional revenue streams. These have led to the DAO continuing to increase its holdings in yield influence assets as well as driving stablecoin yields to grow its operational runway. These positive gains in Q3 led to exceeding the original ~$3M annual revenue projection.
An additional ~$400k profit in stablecoins were brought in as a result of treasury farming efforts. This was nearly enough for the quarter to be breakeven after expenses, for the first time in 2022.
To date, Treasury Council decisions have resulted in $500,000 USDC in realized returns in Q3 and thus far in Q4 2022.
Read more on the decisions made: https://forum.badger.finance/c/treasury-council-decisions
Below is an overview of year to date revenue streams:
Since the treasury is a large holder of Badger tokens, it made sense to focus on creating additional utility for both the treasury and community to leverage across the ecosystem.
As a result, Badger token holders can now earn yield with Badger tokens in the following pools:
A lending market is also available on Euler Finance for depositing and borrowing Badger tokens.
Through a partnership with Ribbon Finance, Badger was able to execute three rounds of call option sales. In each round 100k BADGER call options were sold. The premiums on these option sales was able to generate a realized return of $26,900 for the Badger treasury.
graviAURA is a semi-liquid locked AURA token designed to automate bribe collection and supports its own liquidity on Balancer. It leverages its vlAURA to vote for the pool it's in and uses the remaining votes for bribes which are sold for graviAURA and BADGER and emitted to holders. Since its launch in June of 2022, Badger has managed to leverage graviAURA to generate the following returns:
$1.3 mil in vault harvesting bribes at 77% APY
$500k in LPs earning 30-40% APY
As a result, the treasury owns vlAURA voting for:
~3.5mil in Badger/WBTC/rETH liquidity
These positions are projected to continue earning 15-30% APY.
Track the ongoing yield harvesting program: https://dune.com/petrovska/balancer-aura-tcl-bribes
A full accounting of finances, operational restructuring, and the execution of profitable treasury management strategies has allowed Badger to make significant strides toward ensuring one thing: the ability to keep building with purpose and conviction. 2022 provided a unique opportunity to innovate, develop products and tools to fortify existing tech and continue to work toward a more transparent and decentralized operating model ultimately preparing the DAO to prosper during the next Bull cycle.
Let's take a deeper look at what Badger has been building.
The latest innovation in vault technology came in the way of a trust minimized, yield farming system that enables real-time analytics and health checks.
Vaults 1.5 offers the same interface as SettV4, however it offers an improved experience by changing the return values as well as tracking of the following:
All types of fees: Performance, Withdrawal, Management
Real-time, by the block, tracking of Rewards and Harvest Efficiency
Historical onChain data to track lifetime performance
This new upgrade was first launched into production with graviAURA in June and will continue to power any new vaults released in the future.
Read the Code: https://github.com/Badger-Finance/badger-vaults-mix-v1.5
The release of Badger Registry v2 was the first step in establishing critical and usable on-chain infrastructure. The registry provides a consistent, cross chain source of truth for all Badger infrastructure and vault products.
Currently, the offerings managed by Badger include:
These surface both on chain and curated data, however, currently the API is centrally hosted and managed.
Take a deeper dive: https://gist.github.com/axejintao/a74f15af63ccf97d88e9881e934dbd60
Read the code: https://github.com/Badger-Finance/badger-registry
The RewardsManager is a fully trustless (no governance required), virtual staking contract, that is meant to be used by all new Badger Vaults, offering a scalable, gas optimized reward claiming experience. The first iteration of RewardsManager (V1) has been used internally and has been audited by Badger contributors. In order to deal with self-emitting vaults, a V2 is currently in the R&D phase and is intended to fully replace the BadgerTree in the near future.
Read the code: https://github.com/Badger-Finance/badger-rewards-manager
In developing graviAURA, Badger developed a onChain Pricer (now in it’s 4th iteration), which in conjunction with the BribesProcessor allows a Multisig to optimally sell bribes on Cowswap (MEV protected trades), while enforcing security rules such as ensuring that the bribes are swapped in addition to using a better than zero quote for pricing.
Read the code:
Vaults are complex and to understand the product performance you need behavioral analysis. Badger has done extensive work to ensure the most accurate, real time information is being displayed within the app while providing an additional layer of data for interested users to verify the numbers for themselves.
Badger Ninja provides users with in-depth analytics on every action a vault takes in order to better understand its fees, history, and performance. At present, Badger uses a 21 day moving APR to estimate performance for all 1.5 vaults.
Take a deeper dive on APY’s: https://badger.com/news/apys-explained
Check out Badger Ninja: https://badger-ninja.vercel.app/
Building towards a common goal while ensuring strong adherence to foundational principles relies on effective collaboration and clear process around how decisions are made. In addition to significant operational upgrades, Badger made strides towards improving work flows and promoting representative decision making by upgrading its governance model.
Multisig operations have gone public. Repositories with all addresses, issues, source code and transaction logs can be found here: https://github.com/Badger-Finance/badger-multisig
As of BIP 86, the Badger Council has more community appointed members than it does contributors
BIP 89 established both a formal Treasury Policy and supporting Council to make thoughtful investment decisions leveraging assets contained in the treasury. All decisions to date can be viewed on the forum using the following link: https://forum.badger.finance/c/treasury-council-decisions/17
Badger continues to upgrade its governance to enable a more efficient workflow for all community members who wish to participate and will be sharing some exciting updates soon.
Over the past few years, the DeFi ecosystem and its new innovative technology has undergone significant stress testing in the form of exploits. While it is impossible to rid the world of bad actors, and while the intention is to avoid any type of exploit from ever happening, in the rare case that one is possible, it is necessary to learn from these events, immediately work to strengthen security and establish policy that benefits users while ensuring the health of the DAO. Following the front end exploit that took place in early December 2021, Badger contributors put this thinking into action.
The main objectives were immediately clear:
Contact the appropriate authorities and cooperate with the investigation to attempt to recover user funds
Enlist top firms to conduct a full review, harden security and prevent the potential for future attacks
Engage the community to develop a thoughtful plan to provide restitution for those affected
After notifying the appropriate authorities of the illegal activity that had taken place, Badger engaged legal counsel and cyber security firms Chainalysis and Mandiant to manage risk, support the investigation, harden security efforts and assist the DAO in its attempt to recover funds. During this time, all recoverable funds were sent back to affected users as approved through governance procedures. This resulted in nearly 40% of victims receiving 100% of their funds back within 30 days of the exploit. Following the return of recoverable funds, the community began conversations around additional restitution.
Following weeks of detailed discussions focused on the best way forward for both the DAO and affected users, the community voted on an innovative way to restore lost funds over a period time and the first of its kind, remBADGER was born. The token allowed holders to earn a compounding and linear yield paid in $BADGER tokens with a total of 2 million $BADGER tokens to be emitted over two years. The only requirement for holders was to remain in the vault as long as they wished to receive restitution funds. An early withdrawal from the vault would forfeit all future emissions and instead transfer those emissions to the remaining participants.
All proposals surrounding the exploit and subsequent recovery and restitution efforts can be viewed below.
BIP 91: Reinstate rembadger Position
BIP 84: DIGG Boost Restoration
BIP 80 Restitution of non-recoverable assets via remBadger Sett
BIP 80: Parameter FeedBack - Seed Funds For Restitution Program of Non-Recoverable Assets
BIP 79: Restore Governance Tokens
BIP 78: Return Recoverable Tokens
BIP 77: Reactivate Smart Contracts and Recover Funds
BIP 76. Upgrade Smart Contracts
A total of 83 initial affected recipients participated in the remBadger program and as of today, only 78 holders remain. Badger has paid back ~13% of the USD value lost or ~33% of the total Bitcoin lost based on current market prices. To date, more than 1 million $BADGER have been emitted to the restitution victims via the remBADGER vault and the community continues to meet quarterly to discuss potential updates to the plan. Badger also publishes a quarterly report on the state of the program and DAO overall.
The current repayment program can be tracked below:
A detailed accounting of security upgrades made based on the recommendation from top cybersecurity firms can be reviewed below:
With the proactive steps taken to ensure Badgers can keep building for years to come, it's critical those efforts are focused and grow from the lessons learned over the last two years.
One of the biggest learnings has been to ensure anything Badger builds is done while adhering to two core principles, decentralization and censorship resistance.
With the state of the industry, there isn't an option to “eventually decentralize the tech” while creating things that can be censored. Censorship resistant tech is a must at this point and Badger contributors are committed to building it.
Moving forward, Badger is going to double down on one singular focus, Bitcoin. Although we’ve explored new opportunities in 2022, the opportunity now is bigger than ever. In the past, we focused on the yield layers for Bitcoin in DeFi. Through that experience we’ve realized the need to focus on the foundation. A decentralized and trustless Bitcoin on Ethereum. Something Badger and other protocols can feel confident in building on top of for years to come.
Badger is also going to continue evolving the DAO’s governance, operational framework, Badger token utility, reliance on data driven decisions, and having relentless financial rigor around runway and treasury management.
Together as a community of Badgers we’ll continue pursuing our mission and ensuring the longevity of the DAO as our industry evolves to what we all believe it can become.
Be Relentless. Be Badgers
Learn Badger: https://docs.badger.com
Use Badger: https://app.badger.com
Follow Badger: https://twitter.com/BadgerDAO
Watch Badger: https://www.youtube.com/c/BadgerDAO
Join Badger: https://discord.gg/badgerdao