In an effort to encourage positive rebases of BadgerDAO’s DIGG token, BagerDAO has launched “Rebase Mining” using UMA’s KPI Options. In order to best explain how this works and what it means for both communities, I have asked Jon Tompkins from the BadgerDAO team to answer some questions.
To see if you are one of the 3,740 qualifying addresses, check here.
What is the purpose of the DIGG token?
[Jon] — In keeping with the mission of bringing BTC to DeFi, BadgerDAO set out to create a first-of-its-kind elastic-supply token pegged against a volatile asset — BTC. Its purpose is to act as a non-custodial synthetic version of BTC designed to be leveraged within the DeFi ecosystem. It utilizes a non-dilutive and continuous rebase mechanism which means that if you own 1% of supply, you will always own 1% regardless of rebasing outcomes and this will never change unless you actively exit your position.
As an elastic rebasing token, one can actually think of their holdings as a percentage of the overall market cap vs shares of supply. If the market cap increases, so do your holdings relative to the percentage of ownership. Elastic supply tokens are still very much in the experimental phase, with most of them pegged to USD. We are attempting to learn from other projects while trying some of our own strategies for improving the stability of DIGG.
What needed to be improved?
[Jon] — Elastic supply tokens cannot be successful without additional stability mechanics outside of rebasing. Badger is attempting to use pure market mechanics to bring stability to DIGG through the implementation of a stability vault which will programmatically buy and sell DIGG to support its stability. For it to be effective though it needs DIGG to be above the peg price. This is where the rebase options come in to play.
Notice in this chart above, it appears that the announcement of this KPI Options program brought the DIGG price back to par, especially as people could qualify for the airdrop based on criteria in the future — Namely, to be holding DIGG on May 12th.
Will a series of positive rebases over this time period have positive effects into the future?
[Jon] — If the majority of rebases over the life cycle of the options are positive, the stability vault will be able to store away larger amounts of WBTC in preparation to buy DIGG if it were to fall under peg during or after the options mature. Securing a period of positive rebases for DIGG once the stability vault has been deployed is critical to its success and will have lasting effects.
The KPI Option tokens are created using UMA Protocol. They are a new mechanism to pay out conditional incentives, and thus can be used to motivate group behavior. There are a long list of teams exploring how they might be used to structure incentives, including SushiSwap, Index Coop, BasketDAO, Aragon, StakeDAO, Indexed Finance, Pool Together, and Harvest.
In BadgerDAO’s case, the DIGG Rebase Options will be redeemable for certain amount of DIGG at the end of the program. Just how many DIGG each is worth will depend on the KPI.
Why did BagerDAO decide to use UMA’s KPI Options? Shill UMA a little!
[Jon] — Badger is focused on bringing bitcoin to DeFi and to do so we need the DeFi community and ecosystem to be as vibrant and collaborative as possible. While Badger could have manually handled its own rebase mining program, we believe users in DeFi want to have promises instantiated in code. By collaborating with UMA to repurpose their innovative new options program for DIGG, we can create nuanced incentive mechanics without having to introduce new layers of trust with our users while laying the groundwork for future collaborations.
What steps did it take to build them?
[Jon] — The majority of our work was focused around devising and then appropriately describing the pricing model in a way that fit the model UMA had been using for custom price feeds. Once that was established, our collaborative efforts made it easy to bring this project to the finish line!
The UMA Team, the SuperUmans, and BadgerDAO are all excited to coordinate on this KPI Options application. You can see the claim and stats dashboard at digg.finance. It is very promising that we already saw positive rebases just at the announcement of the program, which is a positive indicator that it will pay out for BadgerDAO and for DIGG holders.
If you’d like to join the team that pioneered KPI Options, come join us on our journey to making financial markets universally fair and accessible.
Below are our currently open roles with UMA:
Talent Acquisition Specialist: Growing our talented team
Senior Software Engineer: An engineer to work on our entire Ethereum-based web 3 stack
Smart Contract Engineer: An engineer who’s expert in solidity and smart contracts
Launch Engineer: An engineer who can take internal and external products from ideation to mainnet (supporting external engineering teams to interact with our contracts and technology).