Decentralized Resiliency: The Story of BadgerDAO w/ Spadaboom (BadgerDAO)

Transcript

[Music] hello and welcome back to the strange waterer podcast thank you for joining us for another episode while many Innovations in our industry elicit very passionate opinions perhaps no discussion is more hard to pin down than the one around decentralized autonomous organizations or as you probably call them Dows the history of dows is super interesting before there were Dows there was the da now the first da is an epic story that had wide ranging consequences

for ethereum and for cryptocurrency but it's a little off topic those interested can check out episode 19 of strange water but suffice to say that even from the day the first da was deployed on chain there were very strong opinions on all aspect of dows when I find the conversation has become more noise than signal I always find it useful to turn to the data and so as we turn towards today's guest we are looking for a doubt that can tell us the whole story from what it means to achieve greatness and to overcome

adversity and most importantly a DA that can bind a community together through the depths of a major hack and through a brutal be market and emerge still vibrant and shipping today I am pleased to announce spaboom the co-founder of badgerow badger was launched in 2020 with a simple Mission build the products and infrastructure necessary to accelerate Bitcoin as collateral across other blockchains put simply badgerow deploys Bitcoin into defi today we'll walk through the history of badger Dow with a specific

eye towards how the Dow impacted the growth of the protocol we cover the implication of decentralized contribution and and the mindset needed to build a strong Community or owned Enterprise and we talk through what it's like to experience a ninef figure hack and how to Shepherd a community Through The Darkness but don't worry we end on a high note just this week badgerow has launched its latest project and signaled a new age for the protocol ebtc will allow users to Mint a BTC derivative using their staked eth collateral Paving the way for a much

wider much more permissionless adoption of BTC in defi one more thing before we begin please do not take Financial advice from this or any podcast ethereum will change the world one day but you can easily lose all of your money between now and then all right let's go to spot boom spot boom welcome to the strange waterer podcast thank you for joining us thanks for having me man I'm excited of course so I'm super excited to talk about Badger uh mostly because of like the incredible stuff that's going on this

week but um I guess you know taking a step back uh first of all I'm a huge believer that the most important part of every conversation are the people in it and then especially with the context of badger and this new product I think that the most important part of this conversation is the story of how we got here so let's uh start this off a little bit by can you tell us a little bit about yourself and uh eventually how you found crypto and then made it to Badger and started a um you know BTC defi on ethereum protocol yeah for sure man um so you know I I was enthralled with Bitcoin I've always been you know kind of this believer that um I don't want to say anarchistic you know perspective

more libertarian for sure I just never believed in the confinements of societal norms and how we're supposed to live our life and and broke away from that early but it was those kind of societal Norms that brought me to bitcoin uh because I you know born and raised in Toronto and uh lived here the majority of my life and in the early 2010s I you know was in tech sales you know doing a lot of things around when Amazon web services came out and Azure and so forth and so on and I moved to New York and I was working there and it just so happened that my office was on top of the original Bitcoin Center which was on Wall Street if you remember that from uh

you know the documentaries and stuff so I used to go down there you know a good friend of mine from Toronto really got into Bitcoin and we used to go down there and like Excel spreadsheets on the wall and like live auctions and stuff and like some of the first you know miners were coming out there it was it was cool it was cool stuff but that's where I you know I started to realized that there was more but I didn't really take the full plunge kind of the classic story for many and um I still proudly own the Bitcoin that I bought then in 2013 so definitely you know a diamond hand there's no doubt about that but you know I didn't I didn't really go deep in um working full-time until 2016 I moved back to Toronto kind of had

like a a really good um experience like accelerating my career and then deciding to travel and spend time like you know um with my wife and just kind of you know get our heads in order and and just think about life differently and then when I came back to Toronto it was pretty quickly after you know ethereum accelerated it was shortly after eum came ethereum came to Market so you know the the city was on fire right with with eth and um started you know started kind of doing more Consulting I started just helping projects that were you know um looking at the time to do token launches and and stuff along those lines and then that's where I really started to get my wits about me and and got much more involved and of course you know then

came the Ico boom and all the craziness then instilled there but it was really the time after that that I think shaped what eventually became you know Badger because you know it was after that bull run in 17 um that was one of the first experiences I had in building business in the space where your business gets decimated with the market right like it's it's one thing to like lose a lot of money I think we've all gone through that a lot of times if you've been through a few Market Cycles it's another thing to invest an enormous amount of time and energy into business and have that business find you know some fit and acceleration just to be totally destroyed because the market was destroyed and you know it just wasn't the um you there was no demand for that business and that service anymore so it

was in 2018 through 2019 in 2020 where um I continued to you know provide more advisory and like Hands-On services to to different projects but it's there that I got the exposure to what was the kind of the early days of of CI and it was at that point that I realized that I needed to be more of a mover of change in creating uh transparency versus a participant and it was in kind of late 2019 that I decided that I wanted to build something and I wanted to build something that allowed myself and my friends and others to put their Bitcoin to work why don't you uh take us to this time when you're like sounds like 2019 2020 is when uh Badger is like first

coming together you're bringing the initial team like what is the the problem that you're trying to solve and then like what is the solution that you like first built in order to achieve that the problem you're trying to solve is to make it um to make it easy for people and to actually uh have things to do with their Bitcoin in apps on ethereum right that was like and and the first product that we thought could do that is a yield product so we built uh a variety of yield aggregation um vaults as we called them that back then if you remember is akin to what Ur kind of spearheaded and it was built on top of um you know Common uh liquidity mining

Frameworks like curve and then eventually convex and and a few others uh but it was really U deposit you know synthetic Bitcoin assets like at the time wbtc tbtc BC REM BTC versions of BTC and maximize your yield and um that eventually then became well let's get more Bitcoin over how do we have a real impact on driving Bitcoin into the ecosystem and we built a bridge and um and then there was a variety of other things but that that's pretty where we started with Rex yeah okay so in the beginning you the idea is essentially like we we understand all this crazy stuff is happening on ethereum with D5 and we see that there's this asset that

like isn't really part of the ecosystem and so step one is at first you weren't bringing any native BTC into ethereum ecosystem you were using like these other providers uh like wbtc rap or um REM BTC so that's correct right correct and and I guess like what was that moment where you realized that th this isn't viable just like collecting other people's uh BTC like tracking tokens like we need to create a bridge on our own yeah the the bridge inherently still used the underlying tracking tokens it was based on Ren VM which I think we know um you know has collapsed since so we it took us a while to learn that

lesson Rex I'd say we built a variety of products um and so it was like yield vaults bridge then we moved into an interest bearing Bitcoin we obviously had a rebasing Bitcoin in between there so taking swings at What synthetic Bitcoins could look like um and it really wasn't until you know we we we were faced with some difficult decisions because these things started to break and collapse that we realized that we needed to make a a change I guess uh maybe this is like the next part of the story or maybe we're really like addressing the the part that we really talked about but like talk to me about it sounds like you were just like iterating as fast as possible and like

dumping out new products um like really like the moment that you realize the last wasn't working do you uh you know with the the benefit of hindsight like what was the experience like of just like dumping out as many iteration as possible do you think that that was helpful in trying to find product Market fit do you think that ended up like creating more noise and like fracturing just like the enthusiasm of the community like talk to me through what it's like to build a DA that like just like delivered so much in such a short amount of time I'd say that you know for for us it was very different than a more traditional approach to you know web 2 development and bringing software

protocols to Market and MVPs and and these quick iterative Cycles because it was a dow and it was a dow from the beginning you know between uh December launch in 2020 and may of 2021 it went from 2 to 50 people that are working full-time and most of these people never met each other other before it was ready it was still covid time so everyone was remote and um everyone was just contributing because they believed in kind of the direction and and products and protocols kind of formed their own pods and there was different groups focused on these different things and bringing them to Market so it was much less of this you know calculated bring a protocol out if it works great run with

it if it doesn't work kill it move forward it was actually that would have been a lot easier uh significant easier but instead because of that kind of open Collective approach you were bringing things to Market and you didn't have kind of the wherewithal to really determine how much of a fit these things have been and also on top of that because of the lack of kind of native uh yield and abilities to create yield so much of from Bitcoin in particular so much of the products relied on kind of these unique incentives that could be brought to Market which I think is very beneficial in general in in token distribution terms and there's there's a

reason there's 35,000 token holders and and all that type of stuff and I think that's very beneficial at the same time it's um it's a big challenge so we found ourselves as as a as a dow as a whole you know spending an enormous amount of capital A lot of products that didn't have product Market fit and were using kind of extra extraordinary extraordinary incentives to kind of keep them afloat and the lack of motivation to really scrutinize you know the viability of these protocols products and then doing that all in like while literally trying to create how a dow should operate right like we didn't have any Frameworks none

of this stuff was there at the time it's and and that involves a lot of like energy and effort and like that's almost an entire project in its own right like how to you know appropriately or effectively operationalize 50 to 100 strangers online in building software that has very high risk of security vulnerabilities and you know a lot of capital that flows in instantly and all this type of stuff stuff so it was a a very very difficult Challenge and and we can get to kind of what it looks like on the other side because pretty much like pulled back the curtain in 2022 and 2023 and like ripped everything to the studs to be able to even survive the bare

Market uh but regardless like to answer your question it was it was different than this iterative approach and it was in hindsight very very uh painful and I wish we could have done it quite a bit differently I wish there could have been a lot more focus on one thing at a time and getting things and and like giving more swings at and time and attention on how you evolve that thing versus versus trying to now support this next thing and then trying to support that next and now you're supporting four things and then you have Tech that and like it all that stuff so yeah I mean that's super interesting and quite frankly like you're one of few people that I've heard

reflect on like the most their most Dow time as something that that brought like a lot of challenges and maybe like LED you in a direction that um like was a lot more painful than it needed to be and I guess like I would love to hear looking back I mean if you could do it all over again um knowing what you know now do you think that like the da the da is like an appropriate structure for this type of like high stakes uh high-risk software development like do you think that really the problem you had was more about like organization and like with a little more structure it would have worked out great like what what are the big takeaways and the lessons you learn from this experience

well I don't think if there was more structure that would have worked out differently I think there one of the biggest things that misled us and a lot of the contributors is that we thought there was a lot of appetite to use Bitcoin but when you peel back the onion um to put in perspective like there was two entities that are now defunct that were responsible for minting more than the entire wbtc Supply that sits on mainnet today and that's still a 10 or5 billion or 10 or 12 billion you know asset in a top 20 cryptocurrency in the world and that was only minable through a permissioned kyc bridge so there

wasn't like tens of thousands of people like saying oh my God I got to go to ethereum to use my Bitcoin that was never the case ever but on paper it was like we're starting and wbtc is 50 million and then by middle of 2021 it's 20 billion you assume and like more than 1% of the Bitcoin Supply is now tokenized you would just assume that the time has come and I think that was one of the biggest um learning curves for us because the waterfall effect of you know the fact that there really wasn't that many users and there really wasn't the ability to sustain any type of like yield environment or utility environment like if you look at where it's gone today you know Bitcoin on ethereum like

75 to 80% of all wbtc which is a largest market um share of tokenized Bitcoin sits in money markets borrowing dollars on a the like almost all of it just uses collateral that's really the extent of it Endor settlement and trading you know on different pairs and things along those lines so it that's where it ended up being after all these groups and all this capital and all this time and all this investment went into trying to build an ecosystem for Bitcoin utility on the most prominent infrastructure for defi in the world and you know 60% of the wbtc supply is down from where it

was at its peak and we're kind of left with it being used almost exclusively as a collateral asset to borrow dollars so I think that was one of the biggest lessons um on the operational side I think it's hard to say you know we could have done variety of things different because it was such a green space right like it was so early in those days and Badgers of evolved so much since then and I think if we would have been able to have a framework that that we have today then that would have been enough to kind of stunt some of the inefficiencies that that can come with Dow so the you know this is Badgers move more to a representative democracy where

there's different councils and these councils are more specialized and token holders kind of uh over have an overview of the decisions that are being made and veto rights but it is really more specialized groups that are make making um focused decisions in given areas with Much More Much More um information to make those decisions and um and then there's also like the underlying financial reporting infrastructure that exists now that before you you couldn't even determine like a profit and loss right or anything along those lines so I feel like you know there was a move to complete openness I think very fast and if it was a bit

slower I think that would have maybe helped us get to the place that we are today and there's still a lot of inefficiencies in representative democracies as well and like one to one token voting and and all that stuff but in terms of like how that has an impact on protocol and product development in such an emerging space I feel like they were both gigantic challenges that even if it wasn't a dow you would have still faced an enormous amount of Challenge on you know this very immature new um like very almost no protocols found product Market fit like there's literally like two or three like it's like liquid staking dexes stable coins and money markets are probably the only thing that

you can kind of speak to and there's like a a dominant player in each of those so like of all these hundreds and thousands of Builders and and companies um most of them didn't find product Market fit and a lot of the the excitement and and um momentum around Define whatever I think it was more for like the existing killer app in crypto which is like speculative trading on you know new assets and stuff so I do think that um even if it wasn't a dow there would have been challenges and even if you could find product Market fit the Dow challenges uh would have still been there and it and it would have just been you know a very uh challenging thing to navigate and almost create from the ground up well let me ask you the direct

question and sorry the first half your answer was about like the demand side and we'll get back to that when we talk about like um e ebtc and like the amazing things that are happening today but just on this like Dow question and on this like with the benefit of hindsight if you could go back and do it again would you run it as a dow or would you run it as a company I would 100% run it as a dow and why is that because what I'm hearing from you is that like just introduced so many challenges and like non Focus like inability to focus and just uh like chaos so I would love to hear like the the benefits of The Da the benefits of The Da are the benefits of crowdsourcing information on the internet right it's the power of as much

as it's a bunch of strangers that don't know each other come together if you're driven around a specific vision and Mission that could be exceptionally powerful at crowdsourcing information and um you know overall participation from participants with so many different perspectives that probably would have never came together and push towards um you know something right real and again I think that Dows are amazing right onchain collectives of humans um working are are really really amazing and doing it completely on chain with absolute transparent parency is um a big innovation really in its own

right compared to you know what we what we see but in general it's like anything right it's just it's just not easy but I think that especially if you're building if you're if you're committed to building open source software it it also is very important that you have um the transparency on the the actual Tech and the transparency on the kind of operational side and if the Tech's not transparent then are you supposed to get hundreds if not thousands of people to kind of rally around actually supporting and building this Tech and on the flip side if the tech is um transparent but it's run by a company then you kind of lose the ability for thousands of people from around the world to kind of

collectively come together and arguably that's what made Bitcoin Bitcoin as an example that's what's made ethereum ethereum and I think there's a lot of other examples of Open Source software that is accelerated for that reason so I think it's less of a question of like are Dows good and it's it's more of a question of you know what's the power of open-source software and open communities supporting that uh software in a transparent way I guess I mean we we had open source software long before we had Dows and like we have amazing centralized companies that give us perfectly um transparent like software for example Unis swap right and so like

I hear what you're saying but I don't think that that is like the one way to do things in open- Source crypto world and um but yeah you're totally right that that is like the core ethos of like Bitcoin and ethereum and like the pro the the ethos that brings us together so definitely hear you on that and I guess like final question before we move on from this topic is like do you have any advice to new Dows or people about to start Dows on how to achieve that like Channel of the crowd into concrete goals and into like specific things as opposed to chaos like what are the the things you should do on day one to make sure that this is this is a good like value added thing as

opposed to just like creating a ton of like bureaucracy and confusion and like politics I think um I think it's really around um being very conscious on what you want the community to have uh immediate influence around like if you can chop up the pie there's probably a hundred things that people need to make decisions on and I think limiting the decisions to things that matter to those folks and then expanding that decision framework as you really start to accelerate both in product and in organization is probably the the number one thing that I would recommend right like find um those areas that that

specific Community cares the most about and and give and Empower those those community members to have um a say and influence on those given things and a lot of the times folks don't care as much around you know the underpinnings of the business assuming that it needs to be transparent still like that's that's the other side right you can have complete transparency of a business especially if it's all on chain like Badger has always been on chain there's never been a b a bank account for Badger ever to put in perspective so if you have complete trans parency but you have smaller groups making decisions that impact that but that can be verified and disputed by the greater ecosystem that's

very different from here's a transparency and then everyone also decides on how to impact that right whatever that given kind of sliver of of a decision that needs to be made or or kind of workstream so yeah that would be the number one thing is like really try and figure out what what do they care about what does the community care about the most that they want to have influence around and then expand that influence over time as it makes sense and as um you know the organization starts to to grow yeah yeah it makes a lot of sense so uh just paying attention to the clock here I want to make sure that we hit the the two like main topics of this and the next one is um I want to just spend a little bit of time talking

about the hack and like I think that you know we can talk about what happened and we can talk about like just learning about um like the specifics of like software and whatever but I think like the the really interesting thing to pick apart is like how to handle a hack uh as a business leader or as a dow leader um and like can you just talk us through a little bit about what it was like going through that from your perspective like maybe we'll start with the story of like how did you find out this is happening what were your first thoughts your immediate First Steps like I guess like can you us through a day in the life of uh you know an owner that's getting hacked yeah yeah yeah so I I think you know it's something that you don't wish

on upon anybody that's involved in any type of product that's committed to developing software and that software you know although open has a bunch of capital that comes into it and and all those types of things so it's it's arguably the most challenging Time of My Life um I would definitely say and um you know really when you think about you know our hack in particular you know we were one of the you know the first groups to really start participating in what now has emerged to be a very vibrant security researcher Community right this is before there was Cod Arena or Sherlock contest and before there was bug

bounties and before you know re-entrancy attacks were you know the easiest thing to kind of quote unquote block and and all this type of stuff right so um we invested an enormous amount amount of time and focus from Day Zero into security right more so than many others and I think that's part of the reason why the contrib like it kind of set that uh standard amongst the community and amongst you know anyone that wanted to build with Badger like we're always going to kind of shoot to um you know develop software at that standard and much of it you know because of the risks was focused around smart contract security and obviously you know don't neglect the other types of security

that's that's never what should happen nor what happened with Badger but it was a very unique uh exploit because it was you know a zero day on a very prominent um web 2 service provider and um it was exceptionally calculated over the course of months and months and um done in a in a very professional way let's just kind of call it that compared to some other things you know that we've that we've seen in the past so when the hack actually happened um it was obviously like anything all hands on deck and the number one the number one Focus was how and and it continued to be and it

continues to be like how do we you know have an influence on getting this Capital back like how can we do everything in our power to get this Capital back and do it um you know in a way that that allows for um you know the right parties to be involved like so for us in particular we started um by working with you know some of the security um analysis and you know those types of companies um the mandiant of the world the chain analysis of the world to really uh help us with the sleo thing to figure out like what happened like number one it's like what happened

and how do you and how do you um understand enough about on what happens so it can inform you know the recovery process but also how do you get to a place where you can share this publicly with a high level of confidence to help others right so you're immediately in this mode of like what happened to us and then what's happening and then who else is at risk and let's reach out to them so so we can just help protect them from you know unfortunate situation and then you're in this you know recovery mode of like how are you actively trying to engage with the hackers and try and get the capital back and um and then from that point you're shifting into

what does restitution look like right once you start to have a better understanding of the situation and the right parties are involved and all those types of things you know you there needs to be this shift towards like restitution and one of the things you know one of the biggest pieces of advice that I'd give to people going through a hack are one you don't throw out the principles of the protocol and Community um because you think you kind of have to to just make some Swift decisions right we just talked a lot about like Dow decisions you don't go from you know a year and a half of making you know decisions amongst thousands of people to five

people in a room saying this is how this is going to work and like okay this is now a Big Boy's job no that's not how it works so I'm very proud to say that you know our restitution effort was done completely um community-driven publicly the way that the entire process for any decision was made it was voted on by token holders it was instituted by token holders and it was something that really showed the power to my earlier point of you know crowdsourced intelligence and the power of that intelligence like you're talking about hundreds of if not thousands of people coming together to build a restitution program implement the restitution

program for $100 million in Lost capital and like again some of the the the most structured um well experienced companies and centralized companies in the world couldn't get through something like that never mind you know thousands of randoms together online doing something like that again so it shows the power um but it was really about getting into restitution mode and also um Act activating you know the reopening the doors let's call it for the products and protocols and there was still a billion dollars plus uh in the smart contracts at the time and and things along those lines so that was um that's a bit about you know kind of how it all

happened but some of the first things that you know folks go through and then again it's an ongoing you know we're two two years plus and you know there's still active you know investigation around the capital the funds haven't been recovered um the restitution program there was actually you know a revision to the restitution program after the first one ended that concluded a month or two ago that the community voted on within Badger so yeah that's um that's a bit about it cool yeah man I really appreciate you like talking through this extremely difficult time and I I would be Remis if I didn't ask about your personal experience in that moment because in that moment when you're

getting hacked like you're getting screwed on every single side right like not only are you like a I won't use the word owner again because I understand the connotations of that but like you're a representative of this protocol and you're a participant in this protocol and you're a builder of this protocol and like you're the one responsible for like shepherding the community Through um and so I just like that moment is like one of the most stressful like situations that a um web 3 builder can be in is like well I at the same time that you are trying to save like your protocol against a hacker your community is like you're you're making sure they're not turning against you as well

and making sure that everyone stays all the victims stay together as opposed to turn on each other and I guess just like in that moment for you um like how was that time like getting through did you find that there was a lot of like conflicting uh stakeholders that you had to manage did you find that Community was really behind you and you felt like you you know had the power of these thousand randos like can you just talk a little bit about like what it's like to be a Founder in that moment yeah it's it's um it's something I don't wish on anybody to be totally Frank it it's it's unbelievably challenging you know I can it's almost hard for me to imagine and it probably will happen but it's hard

for me to imagine you know something more difficult that I'll go through in my professional career to be totally honest like that's how like you talked about some of the facets like it's just all encompassing right like you also have the personal side of your life like I have a family I've you know like things like that like there's all that other side and um it's again it's it's it's just so it's just so challenging and it's so chaotic like if I were to try and reflect on like how I got through it I think it would most like like I think the number one answer for me would be like I just stuck to my core principles right I didn't try and I I refused to let the

circumstance in front of me have an impact on changing how I would react to a certain circumstance right which is then a product of like you know what are your value and beliefs what are your principles and and like anything in life you know how you react to life is your decision so I I really leaned on you know the the principles that I had and and it's and or I have and it's those principles and those values that allowed me to kind of just push forward and do what I was kind of always doing in the roles that I played within um the community and and the the organization as a whole and I again I just didn't steer away from them and I just tackled

the same way I'll tackle like a product build and ideation on a new product I tackled you know this Challenge and did tried to deal with the highest level of Integrity the highest level of transparency um not close cling any doors to any types of you know influence of folks that could have good or bad ideas and um again like didn't shy away from what was what worked already within the community right nothing kind of changed in terms of the community involvement and the decision-making process on something like let's buy the badger.com domain to how do we handle $100 million hack a lot of the same

participants a lot of the same channels a lot of the same forums and and Forum style all that stuff didn't change and I you know I stepped into what I needed to step in step into with this you know unwavering belief that we'd get through it and honey badgers are tough as hell and we have a community of honey badgers and we're going to get through this and if you um move if if you set the example of moving away from those principles that's where chaos can ensue so let's let me try my best to set an example that then further you know um uh further kind of uh vibrates throughout all the

other participants and um and I think that's you know what always been the case for folks that have been in you know in a Founder Builder kind of mode is you know your actions and your words speak very loudly um in some instances much louder than you know your token votes and whatever the heck else however else you want to have influence and the more you can lean on that and that can result in a positive outcome and it not always does right like there's a lot of things that I've um that I've been The Shepherd of that you know in hindsight weren't the best ideas but that's also part of the learning curve so yeah that that that would be you know in a reflection what I

would what I would share yeah man I I just want to pull out one thing that you said which I think is incredible which is you speak loudest with your actions and like regardless of like your words or your Dow votes or like your tokens like it's your actions that like set the example and I think that that's like objectively true um and and I love that you said that and I I just want to say like thank you again for for helping us understand um like how like what what is tough about being a Founder in crypto is that you like have all of the risks and the stress and like everything as a any other founder but on top of that is your users are like

inherently financially trusting you and inherently like putting not only their time and like their accounts or whatever but there's money involved and so I think like the question everyone needs to ask themselves is if they're ready to be a Founder is in that moment when $100 million is missing and the entire Community turns to you are you ready to stand on your principles or are you like going to freak out and just figure out what needs to get done um and like the second one sounds good man but that's just like always what causes failure and like it's not about what needs to get done it's about like core values and why even we here in the first place yeah and I'd say um most folks would run away

right um that's just the nature like look look at all the the Builders from the defi summer how many of them those Founders are around most of them are gone um they most of them are gone and most of them didn't face the challenges that we faced our community and in 99% of 99% of the time they would most likely kind of run away or or turn their back or who knows right um again that's what actions are all about and by facing those things head on and doing things things as you've always done them regardless of the type of circumstance that you're faced with or the challenge that you're faced with I think that's

what then Shepherds you know a greater Collective change and in turn the ability to actually get through it for sure so um I want to move this conversation to the exciting things that are happening today specifically ebtc but I think like the right way to get to that uh to to the product is like why don't you maybe give us like the the 30 second version of like how the um Community like now has been hacked has like Rec we've created the um the recovery program like we've hit steady state this is maybe like mid 2022 um can you like just kind of talk us through the evolution of like we've recovered but like Badger is not what it

was before to this new product like what happened during that time like what are the conversations what happened with the da with the people with the tokens like just uh get us to ebtc yeah no Rex that's a that's kind of a great kind of way to segue into it because it's an important part that you just can't skip over I say the biggest thing you know as we came through the restitution program it forced you to take and all contributors to take a very very very hard look at you know the State of the Union right like Not only was the capital and treasury State of the Union something that was had to have been completely uh ripped to shreds and

analyzed and determined like you know because how can you say hey here's $10 million of Bitcoin and you know 2 million tokens if you don't know like how much is being spent how much runways there what can go into new R&D investment how many people all that stuff needed to be baked for the restitution program to even have a foundational um understanding of of the data to make a decision and inform decision so in going through that process I think there was quite a bit of a shift amongst contributors to say like we need to take a hard look at everything like we can't just look at this because you got to remember going into the hack you know this is Bitcoin you know going back to all-time highs

after going to all-time highs crashing to 30 all-time highs again in the fall and the markets you know at its at its biggest and it's roaring right so to go from that into uh this and then all of a sudden you're coming out of restitution and then all the collapses start right it was literally right around the time that you know Tera was about to go down and then there was a few months before FTX went down and there was a whole slew in between you know those two so those just continue to reiterate like there needs to like there needs to be this community needs to take a hard look at everything and there needs to be some real changes because we're in a bare Market

and it's not going to be a 3-month thing it's going to be a multi-year thing and if we don't look to make changes now we won't be here on the next side of and I've said this to people for so long from my experience just building in the space for a couple Cycles is a lot of the times the number one goal is survival if you can survive the Cycles you're going to make it right it's it's a simple as that like just survive and the landmines are um plentiful let's call them across the board for both just participants Builders everything so it was around that time that everything started to get a really hard look like what is the profitability of these protocols which Protocols are growing which ones aren't which ones um have the

type of kind of potential for you know um making changes and adjustments and maybe finding product Market fit which actually have any fit at all what's happening with kind of the token emissions what is the decision-making framework within the Dow how can that be changed what were some of the things we could have done last year well before the hack like better manage the treasury right that could be that could be optimized if there was a different decision-making framework there so over the course of I'd say mid 2022 to early 2023 everything was changed um you know all the all the um decision-making

framework were evolved to have a treasury Council and a community council and different types of bodies that can help make decisions There Was You Know clear auditable um transparent financial reporting of all the products and everything that was part of the Dow ecosystem including what's being spent on contracts all this type of stuff it was around this time as well that an operational framework so how is there an actual legal entity that can support the Dow um um and really help empower the Dow's growth but not control the Dow like how do you create this principal agent model versus more of a rapper approach that most other groups were doing and how do we you know how does

the emission framework get adjusted because like 20 or $30 million was being pushed towards protocols that didn't necessarily have the right type of fit so all that stuff kind of worked its way through um Community decision um processes and naturally to your point earlier around inefficiencies and speed right there was many a months of more uh spending and and and things like that and longer products in Market that in a more traditional organization probably would have been um probably would have been discontinued in a much swifter way and things along those lines but all those things subsequently happened the community worked their way through getting to a point in mid

2023 where um all the the yield vaults the bridge the interest bearing Bitcoin the rebasing Bitcoin these things were all discontinued they there then was an emission change to pretty much move emissions down to zero and only use emissions to in a profitable way to um incentivize influence markets like on Bal and or balancer and aura or curb and convex or fra for example which made a significant impact on the ability for the to survive because there's quite a bit of uh Capital that went into the treasury that helped cover the cost during the bare Market um through those activities and um and throughout all

that the question is like what are the contributors that are still here because there obviously was a change with the bare Market want to build right what's everyone excited about building we took a lot of swings at Bitcoin is Bitcoin still what you know the contributors that are here and the community wants to um double down on yes no okay if it's a yes like where are their opportunities what are some of the things how can something be built with all the lessons that were learned um with the things that we've built before and people that have been participated in that and that's what kind of led to what eventually became ebtc was looking at you know the um the gaps in the market the um pain that came with really

building on top of other people's assets and protocols right like we talked about the bridge or interest bearing Bitcoin both of those were a product of Ren um going under right IB BTC was backed by rbtc and wbtc the bridge was built exclusively on Ren VM so with both of those going under it naturally you know pushed those products to a discontinued state but the question then became like what happens if it if if those things were not so dependent on others as an example and a lot of those decision a lot of those experiences kind of shaped what the foundational principles of ebtc were was you know we want something that is immutable we want something that is

decentralized we want something that fills a clear Gap in the market today that doesn't rely on extraordinary incentives and rewards we want something that can be a primitive that other people can build on top of that um again serves a real need and is exceptionally composable for what others want to build and we really wanted to be as close to the consensus layer as possible so that you know we felt like there that that's the brick that can have the building built on top of it versus us being you know the 10th brick on a you know a 20 you know brick building to put it in perspective right so anyways that's that's a bit of the journey that eventually led to it and you know the the hack and then in turn the market um

downturn and catastrophe really forced the community and the contributors to take a hard look at things through that hard look it pushed you know us to a state of kind of going back to the drawing board and doing it with the lessons learned and through that process get into where we are today cool so what is ebtc so ebtc I like to say is um the most Capital efficient way to borrow Bitcoin the best place to borrow Bitcoin in the world is what I would say so it's inherently a smart contract based boring facility um similar to you know what we've seen with stable coin designs or Catal debt positions or protocols like d uh for example except it's based on eth

and BTC versus many of the other kind of designs which are based on um you know assets and a USD equivalent stable coin uh so really with uh ebtc the protocol anybody can use eth to borrow Bitcoin and an unlimited capacity pay no fees and do it in an exceptionally uh Capital efficient way with two very correlated assets and they can have an enormous amount of confidence in the transparency of the system the system is and the protocol is uh exclusively smart contract based the code base uh for those smart contracts are immutable it's very governance minimized and all the software is open source and all the um

enormous security rigor all the enormous security rigor that's gone into it is also publicly available and what everybody can reference and use as they make decisions to build on this software stack Andor to use the protocol themselves and so when we were talking earlier about the first iteration of badger it it kind of seems like the major problem that was in front of you guys was that once kind of all of the pageantry of like the bull market and just like the Mania and like once the chaos lifted we saw that there wasn't actually a ton of demand for Bitcoin on ethereum can you talk through like why eth BTC isn't going to run into this problem and why like you're able to find

uh demand here that like wasn't able to be captured by the things you were building before yeah so this protocol in particular like its primary use case right is to borrow Bitcoin against eth and that that's what people would use the protocol in its current state as more people do that there's now more of this exceptionally transparent and more decentralized Bitcoin representation that's kind of coming out of this protocol right and um we naturally we think that there is a large appetite to borrow Bitcoin especially when it's significantly more Capital efficient than we've seen in both offchain and onchain um borrowing facilities that exist today but we think about the

potential for kind of this self- sustaining flywheel so what I mean by that in driving this Bitcoin appetite and demand so it's not that there's like there still is 11 or 12 billion dollar of bit coin sitting on ethereum that people are using to borrow dollars I think one of the the big pain points is there's no way to earn yield on it and I think yield is kind of unlocks an enormous amount of capital and and uh potential fit and that was kind of part of the design of of ebtc is he said okay um you're going to make it how do you make it the most the best way to borrow Bitcoin well there's no fees and has a lower over the collateralization ratio and it's super transparent okay cool how do you actually do that well in our

instance the eth is staked that is used as collateral and that yield that comes from that collateral is shared with the protocol and the user right the question then becomes is what do you do with that yield as a protocol and and of course this is governed by Badger D in the treasury that could be used to help incentiv incentivize the growth and the demand side of ebtc the asset and that that was one of the things that we saw glimpses of how it worked in the stable coin realm and we obviously participated in things like the curve Wars and and stuff along those lines but you saw the ability for something like fra to create

an enormous growth in and and overall demand for their stable asset by using their influence and share of another ecosystems uh governance token to vote on incentives and things along those lines so if you had a sustainable way to drive incentives and there really wasn't any other way to earn yield on bitcoin on eth in particular is that something that you know this structure this protocol design can help you know uh uh shepher Bitcoin into this kind of new are New Era on ethereum and in Defi and that's where we thought that um this design kind of check those boxes it allowed for that scale since the system needs to be over collateralized that

means there's always going to be more collateral than there is ebtc in Market which mean there's naturally going to be a boost on the underlying yield we think that you know again with the the uh smart contract uh nature of the protocol you could automate the the looping um leverage looping of borrowing ebtc against eth so we almost think about it like well why would someone you know borrow BTC against eth well they're going to be trading the flippening essentially they're going to be long eth against Bitcoin that's really what the protocol does if you sell the Bitcoin that you borrow but then what does that do if more people do that there's more yield to influence the people that

actually want to hold the ebtc so it's almost just like the Bitcoin shorters pay the people that want to go long Bitcoin and you have this system that allows for kind of enhanced yield on to drive the demand side for the actual asset cool man so I guess with the final question here um what do you think that a a defi that has like really really deep strong uh ebtc liquidity and like has created this new um sorry has replaced whatever we're using for Bitcoin at with ebtc as like ethereum's Bitcoin proxy like what kind of future how does defi look different than it does today I think um defi looks

different in the sense that its foundation is naturally more decentralized right like if you look at defi Foundation it's a product of first and foremost the the assets that are used in all these apps and the more centralized the assets are inherently the more centralized the apps are and defi as a whole is so there's still a lot of work to be done a lot of work to be done there um a lot of the most prominent assets are very centralized if there's centralized stable coins or is there centralized parameters in different LST and LRT Solutions now and um you know governance token and all this stuff so I I think it just I guess the the overall goal and vision of the

builders that came together to bring you BTC to life was to create something that can live on forever and you know if it is adopted it naturally has a positive impact on further decentralizing you know the the defi stack as a whole and that happens because of the uh decentralized and immutable nature of the smart contracts that power this asset so I'd say that that's the type of impact if it ever gets to the point where it's um you know the de facto kind of Bitcoin and Defi and uh there's a most likely a long road to get there too yeah but I mean long road to get there means like a lot of uh opportunities to contribute and to grow with it as well

so um I guess if we're already done we don't need to be making podcasts and like continuing building so I I take that as a win agreed man agreed yeah cool man well I really appreciate this time and um this is one of those moments where I'm like a little annoyed with myself for keeping these episodes to about an hour because I think there's so much more that we can go into whether it's the like specifics of the implementation of ebtc and like how you're going to actually bring this to Market to grow strategies to like even like what are the next products and that kind of stuff but I think for the sake of uh everyone's time and and attention span I'm going to cut us off here so spot again thank you um your journey is incredible and I think that like your

story and the story of badger is like really the most important story anyone willing to walk into web 3 needs to like really take deep in their heart which is we are in an inherently Risky Business where people are actually trying to steal your money and if you like don't have the values to like stick to in those like completely hairy moments whether it's s SPF or North Korea like you just should not be in this industry and if you do have them like look at the things you can achieve well said rugs very well said thank you man so before I let you go um can you just share with the audience how they can find you how they can find Badger and if they're interested in either like starting to use ebtc as a defi user or like

contributing to the project from the Dows side like what's the best way to get involved yeah so I'd say um for Badger it's easy it's badger.com and you can and there's a variety of different links to The Forum or a lot of the Community discussion the Discord um the social platforms things along those lines and then um um ebtc is easy as well it's ebtc dominance um they most likely by the time they hear this they'll it will be in market and they'll be able to uh participate with it on mainnet and there should be some fun incentive programs and things happening around it as well and then um me I'm spaboom on on Twitter uh primarily where where I hang out and kind of uh you know

engage in in crypto Twitter and all that type of fun stuff but yeah thanks again for having me man it's uh it's been a great conversation no man it was my pleasure and um we got to be sure to have you back in a few months like once we understand where ebtc is going and again how defi is changing totally man awesome man well have a great rest of your day and uh thanks again thank you n