It all started when we were wondering why there isn’t a widely used interest-bearing tokenized Bitcoin for DeFi. Liquidity of tokenized BTC on Ethereum is spread across different flavors namely wBTC, renBTC, tBTC & sBTC.
The vision we have is to bundle them together and build a yUSD equivalent for BTC that would become the default BTC denominated asset on Ethereum while enabling users to stack more sats, the DeFi way!
Who better to build it with other than Badger Finance? Badger is a community DAO and is focused on bringing Bitcoin to DeFi. Badger has aggregated much of the tokenized Bitcoin liquidity on Ethereum via its SETTs. A SETT, is a vault akin to yearn vaults and deploys strategies for maximizing BTC yields. BTC denominated assets from Badger Vaults (Sett) or Tokenized BTC (wBTC, renBTC, tBTC & sBTC) can be deposited to DefiDollar to mint ibBTC.
Badger Setts are the first liquidity pools that are being leveraged to mint ibBTC. We can add other pools in the future (referred to as peaks).
The user journey is as follows:
User Deposits Tokenized BTC into any of the following Curve Pools — renBTC, sBTC, tBTC
The Curve LP tokens are deposited to the Badger Setts for Bitcoin yield
The Badger Sett LP tokens are deposited to DefiDollar to obtain ibBTC
LP’s of the Badger Setts can proceed directly to Step 3 whereas others will need to follow the above mentioned steps.
In due course and with sufficient liquidity, ibBTC which exists as an ERC20 will allow users to access an interest-bearing BTC asset by purchasing it directly on exchanges instead of the gas-intensive steps that require one to first deposit to Curve and then to Badger.
Interest accrual for ibBTC will be from the underlying SETT & Curve pool yields :
Curve pool trading fee
Badger Vaults harvests the Curve trading fees and CRV periodically in its Setts. The trading fees from Curve along with the farmed Badger and CRV are being transformed back into the underlying.
As an example: 100 ibBTC minted using 100 bcrvRenBTC where 1 bcrvRenBTC = 1.03 underlying BTC Therefore 100ibBTC = 100 bcrvRenBTC = 103 BTC
After a while, after interest starts to accrue and 100 bcrvRenBTC = 1.06 BTCThen the 100ibBTC will be worth 106 BTC
Please note that initially ibBTC will be collateralized with any of bcrvRenBTC, bcrvRenWBTC, b-tbtc/sbtcCrv.
ibBTC is expected to incentivize more liquidity to flow to Badger Setts as it trades at a premium and represents diversified ownership of a variety of tokenized BTC. It will appeal to users wanting to earn more BTC while owning a simple ERC20.
The goal is to ensure ibBTC is integrated into other DeFi applications and protocols. To begin an additional Badger Sett vault for sushi ibBTC/wBTC LP will be incentivized that earns a combo of Badger, DIGG, and DFD.
ibBTC will be a native asset on widely used side chains. At launch, we will simultaneously launch Setts on BSC and Polygon. These will be Pancakeswap and Quickswap pools with 100% auto compounding rewards — maximizing your potential yield!