[ARC] - Add support for BADGER on Aave V3

Governance
1

Hi Aave community, I’m Spadaboom a long term contributor to Badger DAO and excited to discuss onboarding BADGER onto Aave v3 with everyone.

Rational

This proposal presents the Aave community with the opportunity to onboard BADGER onto the Aave v3 Ethereum Liquidity Pool.

References

The below list of links provide context in supporting the ARC.

More generally, all Badger related contract addresses can be found here.

Badger has two Chainlink feeds on Ethereum mainnet for USD and ETH, but no price feed on Arbitrum. This proposal intends to utilize the BADGER/USD Chainlink Oracle.

Summary

Badger is a DAO focused on building the products and infrastructure necessary to accelerate the growth of Bitcoin in Decentralized Finance across multiple blockchains. The BADGER token is a non-upgradeable governance token with the added utility of boosting user returns when funds are deposited into the protocol’s Sett Vaults.

Motivation

The BADGER token is already on Euler Finance. By listing BADGER, Aave is positioned to benefit from the first mover advantage by enabling users to deposit BADGER as collateral or borrow BADGER to participate in governance and/or earn boosted returns on Badger Setts.

The BADGER token has been audited and is supported by two Chainlink Oracles. There are several liquidity pools on Decentralized and Centralized Exchanges such as Uniswap v3 and Coinbase.

Audits:

Ethereum Chainlink Oracles:

BADGER/USD - https://data.chain.link/ethereum/mainnet/crypto-usd/badger-usd
BADGER/ETH - https://data.chain.link/ethereum/mainnet/crypto-eth/badger-eth
The main sources of DeFi liquidity are shown below.

Pool Composition Protocol Liquidity ($M)
B-80BADGER-20wBTC Balancer v2 7.67
BADGER/wBTC Uniswap v3 6.10
BADGER/wBTC Curve v2 2.50
BADGER/wBTC Sushiswap 1.06
BADGER/wBTC Uniswap v2 0.79
Badger/FRAXBP Curve v2 0.52
Total Liquidity 18.64

Specifications:

  1. What is the link between the author of the AIP and the Asset?

@Llamaxyz is supporting BadgerDAO in navigating Aave’s governance process, providing necessary proposal power, and writing the v3 payload required to list BADGER on the Ethereum Liquidity Pool. This initiative falls outside of the recently agreed Aave DAO funded work scope between Llama <> Aave DAO and is funded by Badger DAO.

  1. Provide a brief high-level overview of the project and the token

The Badger protocol is a yield optimizer deploying vaults to which users can deposit funds to earn a yield. Badger has released strategies using Yearn Finance, Curve Finance, Convex Finance, Balancer, Aura Finance and Sushiswap. The BADGER token is an ERC20 and was deployed on 28th November 2020 with a total supply of 21,000,000.

  1. Explain positioning of the token in the AAVE ecosystem. Why would it be a good borrow or collateral asset?

An Aave listing would be the first major lending protocol listing for BADGER and Aave would benefit from the first mover advantage. Similar to 1INCH, the BADGER token has added utility. Users can borrow BADGER to participate in governance and Badger’s tokenomics model. Onboarding Badger as collateral on V3 Mainnet would also increase the asset diversity on this market and grow the Reserve Factor.

  1. Provide a brief history of the project and the different components: DAO (is it live?) products (are they live?).

The Badger protocol was launched in December 2020 on Ethereum focusing on creating yield for BTC derivatives. Since then, Badger has launched on Arbitrum (September 2021), and expanded its product offering to to include other types of pools (stables, pegged assets etc). TVL across Ethereum and Arbitrum is $86.4m, of which $84.1m is on Ethereum and $2.3m on Arbitrum. Badger is also live on Polygon and Fantom, but has less than $10k TVL on these networks.

  1. How is the asset currently used?

The BADGER token is primarily used for DAO’s governance coordination via Snapshot and also provides boosted rewards to users who deposit in Sett Vaults.

With the introduction of the boost model, users who deposit funds in Badger Setts receive boosted rewards based upon their share of native and non-native assets on the protocol. The higher the ratio of the native balance (like BADGER or a DIGG LP) compared to non-native balance ( funds deposited into BTC vaults), the higher the BADGER token rewards you receive on your non-native vault positions. The boost formula is the following: :

Stake Ratio = [$ value of BADGER balance + $ value of DIGG balance] / [$ Value of non-native staked Sett positions].

Note: Not all non-native assets positions can be boosted. The current boosted vaults are cvxCRV and ibBTC/crvsBTC.

  1. Emission schedule

The BADGER token is a MiniMe token with balance checkpoint functionality (balances can be checked on-chain for any given block. Minting and burning is managed via the [controller contract](https://etherscan.io/address/0xddb2dfad74f64f14bb1a1cbab9c03bc0eed74493#code). The owner (Badger governance multisig), can mint and burn tokens to its own address.

  1. Token (& Protocol) permissions (minting) and upgradability. Is there a multisig? What can it do? Who are the signers?

The token contract is not upgradable. The controller contract is upgradeable via Badger governance, using a two day timelock. It allows the owner to transfer ownership, and permanently disable minting / burning functionality.

There are several Badger multi-sigs:

  • Dev Multisig (dev.badgerdao.eth)

  • Main multisig which has governance/admin rights. It’s the controller contract owner and can set parameters on vaults and strategies, queue/execute timelocks, and implement votes by Badger holders. This multisig holds a relatively small amount of funds (~$125k).

This multisig is secured by 3/5 anonymous signers who are proven contributors. The track record of this multisig shows commitment to the DAO with years of operation, with 98 BIPs executed upon snapshot approval. This commitment is especially strong in crisis situations, leading to proposals like BIP-76 to upgrade the contracts, BIP-77 to reactivate smart contracts and recover funds, and BIP-78 to return recoverable tokens, following the Badger hack last year.

  • TechOps Multisig (techops.badgerdao.eth)

  • Controller for the DAO. This multisig can call internal system functions such as sweepRewardToken(reward token address) every two weeks on the bveCVX strategy. This call is executed atomically along with the usual call of claimBribeFromVotium(). As the name suggests, the sweeping function will transfer all rewards (cvxFXS for instance) into the hardcoded BribesProcessor. It can also set emission schedules.

This multisig is secured by 3/7 anonymous signers (members of the internal technical team).

  • Treasury Vault Multisig (treasuryvault.badgerdao.eth)

  • This multisig is for the treasury’s long-term holdings: Bitcoin, Ether (gas), POL, farming positions, and uncirculating BADGER. It holds the largest part of Badger treasury ($31.7m+), including $9.4m worth of Badger/WBTC liquidity, so 50% of the total liquidity as protocol owned liquidity.

This multisig is secured by 5/13 signers including the signers voted on BIP-89 and part of dev multisig signers.

  • Treasury Ops Multisig (treasuryops.badgerdao.eth)

  • This multisig is used for short-term treasury holdings and is the beneficiary of the DAO’s fees and the treasury’s yield. This multisig processes incoming tokens into long-term holdings for the treasury vault. It holds part of the Badger DAO treasury (~$900k).

This multisig is secured by 3/8 signers (members of the internal technical team).

  • Treasury Voter Multisig (treasuryvoter.badgerdao.eth)

  • This multisig executes the Convex voting weight allocated to the treasury as per BIP 87. It holds bveCVX and vlAURA.

This multisig is secured by 5/13 anonymous signers (members of the internal technical team).

  • Payment Multisig

  • This multisig is used to execute financial transactions, such as payments to contractors, contributors, expenses, bounties, advisors, etc. It holds $2.8m, including $1.8m of Badger (2.5% of supply).

This multisig is secured by 3/7 anonymous signers (members of the internal technical team).

  • ibbtc Multisig (ibbtc.badgerdao.eth)

  • This multisig is an internal wallet which claims yield on behalf of the ibBTC contract, only to redistribute it again as emissions. It currently holds $310k of funds.

This multisig is secured by 3/6 anonymous signers (members of the internal technical team). .

More information about the Badger multisigs can be found here and here.

  1. Market data (Market Cap, 24h Volume, Volatility, Exchanges, Maturity)
  • Market Cap: $56.7 circulating
  • Fully Diluted Valuation: $75.19m
  • 24h Volume: $2.55m (from Coingecko)
  • Volatility: Low
  • Maturity: Medium
  • Centralized Exchange Listings: Binance, Coinbase, Crypto.com, FTX, Kucoin, Kraken, and Huobi, plus others.

Souurce: Badger DAO Price in USD: BADGER Live Price Chart & News | CoinGecko

  1. Social channels data (Size of communities, activity on Github)
  1. Contracts date of deployments, number of transactions, number of holders for tokens

On mainnet:

  • Date of deployment: December 3rd, 2020
  • Number of transactions: 174,224 transactions and 524,669 transfers
  • Number of holders for token: 30,768

On Arbitrum:

  • Date of deployment: September 2021
  • Number of transactions: 1,454 transactions and 11,122 transfers
  • Number of holders for token: 815
9 Likes
2

In total support for Badger and its listing on AAVE.

Very happy to seeing this happening.

4 Likes
3

Excited to see Badger on Aave

5 Likes
4

Thank you for the application but just curious, if onboarded, is the team planning to use Aave itself with the team’s Badger token treasury potentially? To help with initial liquidity

3 Likes
5

Llama is supportive of this proposal. BADGER is an excellent candidate for Aave V3 given its liquidity profile and Badger’s proven community. Llama will work with BadgerDAO to bring the proposal through the Aave governance process including writing and deploying the necessary payload. We will also explore other opportunities between Aave and BadgerDAO.

6 Likes
6

Hi @spadaboom - thanks for bringing this to the forum. I am grateful for your project as it was one of my first foyers into DeFi :sweat_smile:

@Llamaxyz I am surprised by your haste support here. While V3 leads to new possibilities with new assets, it feels like the classification of excellent liquidity is generous:

And $2.5mm in volume…

This feels very similar to assets that were just trimmed and limited by Gauntlet.

Looking at the risk qualification criteria, for me the value is in the age / maturity of Badger, history of transactions, and amount of holders. This leads to new users for Aave.

I am happy to support it but would caution against not using any scrutiny.

There is a difference between an asset with demand and an asset that feels like another D2D partnership - especially one that was hacked and lost the trust of its community.

1 Like
7

Thanks, @spadaboom for the proposal. Gauntlet will analyze this listing from a market risk perspective.

As for Aave’s initial V3 ETH launch, we recommend that V3 ETH initially include primarily assets that have been listed on Aave V2 ETH (wstETH may be an exception).

1 Like
8

Hey Doo,

That would would be the intention yes. For recent BADGER token integrations the treasury team has deployed capital as part of seeding initial liquidity when those integrations launched.

Examples;

  • Badger/wbtc pool Balancer
  • Badger/FRAXBP Curve
  • BADGER Euler Market - Not on the below debank link but 100k BADGER deployed

Overview of treasury positions and those deployments DeBank | Your DeFi wallet

1 Like
9

Thanks for your support and Badger is excited to explore new opportunities beyond this initial first step.

2 Likes
10

Glad to see a fellow early Badger!

Appreciate your support and pragmatic approach to risk management and agree on the potential for new users coming to Aave. Numerous community members have expressed interest in have Badger available on Aave.

One thing I’ll point out on demand is with Badger’s extensive offchain and onchain liquidity hubs, when markets pick up Badger volume picks up significantly which can be seen with multiple $100M+ volume days. Even as recent as early this month there was a $15M+ volume day as well.

Let me know if there are any additional questions or comments

11

BADGER is an excellent candidate for Aave V3

To clarify this, we look forward to sharing the risk assessment which will include protections such as a low SupplyCap and BorrowCap. Assets like BADGER are an opportunity to leverage V3 features to onboard new assets to the protocol while prioritizing safety. See comments in this thread related to Aave V3 reducing the risks presented by the type of looped liquidity attack alluded to.

4 Likes
12

Thanks for the reply, but can you give a range for the AAVE community to make a more informed decision? It will be a good way to build a good will.

13

I can’t give an exact number as that would be up to the treasury council via a 5/9 approved vote but I can’t imagine the amount being lower then what was deployed to Euler already (100k Badger tokens) and I can see them being interested in deploying more to kickstart the integration with Aave being a much larger protocol.

2 Likes
14

Would love to see BADGER listed in AAVE v3…

3 Likes
15

Hi Everyone, :wave:

Please see below our risk assessment for BADGER. We look forward to hearing your thoughts in the comment section.

General

Badger DAO is focused on building the products and infrastructure necessary to accelerate the growth of Bitcoin in DeFi across multiple blockchains.

Badger DAO is governed by the BADGER token, which is non-upgradeable with the added utility of boosting user returns when deposited into the protocol’s vaults. BADGER liquidity is spread across multiple networks which can be redeemed from the respective bridge deposit contract. The table below summarizes the key details for the BADGER token at the time of publication:

Screenshot 2023-02-09 at 13.17.18

Note:

  1. Liquidity Pools and Bridge Contracts are counted as one address

The BADGER token on Arbitrum, Fantom and Polygon represents a claim on BADGER deposited into the Ethereum to Arbitrum One: L1 ERC20 Gateway, Multichain: Fantom Bridge and Polygon (Matic): ERC20 Bridge contracts.

BADGER: $3.61 | Badger (BADGER) Token Tracker | Etherscan

Oracle: BADGER/USD: 0x66a47b7206130e6ff64854ef0e1edfa237e65339

BADGER/ETH: 0x58921ac140522867bf50b9e009599da0ca4a2379

# BADGER Smart Contract Risk

Badger has been audited by Quantstamp, Code4rena and has a bug bounty program on Immunefi.

Quantstamp’s audit was related to the reward manager on the Badger protocol, not the BADGER token. Moreover, all high and medium findings have been fixed as shown below.

“Following the re-audit, reported issues have been fixed or acknowledged. We found the Badger team to be responsive and cooperative regarding the recommendations made by the auditors”.

The Code4rena audit was about the vested Aura contracts. All high and medium findings have been fixed and were not related to the BADGER token.

Badger also launched a $750K bug bounty program on the 8th January 2021 which is still ongoing to this day. The details of the program can be found here.

BADGER Counterparty Risk

BADGER token is an ERC-20. The contract is a MiniMe token, not upgradable with balances checkpoint functionality, and the functions are defined here.

The controller contract is upgradeable via governance using a 2 day timelock and is owned by the Badger Dev Multisig (dev.badgerdao.eth), which is governed by 3/5 signers remaining anonymous but having proven their commitment in the past.

Aragon Minime contracts have a contract owner which controls the various active functions over the BADGER token. The below summarizes the statues of each function:

Controller Contract: 0xB65cef03b9B89f99517643226d76e286ee999e77

This contract is a Gnosis Safe, 3 of 5 signers required to process a transaction.

Noteworthy Functions:

  • Generate: Enabled - generateTokens(address_owner, unit _ amount)
  • Destroy: Enabled - destroyTokens(address _owner, unit _amount)
  • Safety Methods: Enabled - claimTokens(address _Token) Extracts tokens mistakenly sent tokens
  • Transfer: Enabled - transferFrom(address _from, address _to, unit256 _amount)
    • The controller of this contract can move tokens around at will.
  • Safety Methods: Enabled - claimTokens(address _token)
    • This method can be used by the controller to extract mistakenly sent tokens.

On the Controller Contract, ownership can be transferred by changeController(address _newcontroller). Setting this to 0x00 address effectively burns controls of the contract.

Reference: GitHub - aragon/minime: Minime Token

Llama recommends increasing the threshold to a 5/9 multisig, potentially including proven community members elected by the Badger DAO, and identifying signers if possible.

The Badger protocol also owns an important part of the token liquidity on the Treasury Multisig (treasuryvault.badgerdao.eth) which is governed by 5/13 signers partially voted on by the DAO and partially by anonymous members of the internal technical team.

Llama recommends increasing the threshold to a 8/13 multisig, and identifying signers if possible.

Finally, the DAO is holding part of its treasury on the payment multisig used (0x30a9c1D258F6c2D23005e6450E72bDD42C541105), including 0.94% of the Badger total supply and a several other assets used to pay for DAO expenses. This multisig is governed by 3/7 anonymous members of the technical team.

Llama recommends increasing the threshold to a 5/9 multisig, potentially including proven community members elected by the Badger DAO, and identifying signers if possible.

The other Badger multisigs are for operational use, and don’t present any risks for the Aave protocol:

  • Techops.badgerdao.eth: DAO controller, used for rewards management (3/7 anonymous)

  • Treasuryops.badgerdao.eth: Treasury yield & Protocol fees management (3/8 anonymous)

  • Treasuryvoter.badgerdao.eth: Holding bveCVX + vlAURA and execute voteing weights (5/13 anonymous)

  • ibbtc.badgerdao.eth: Multisig used to claim yield to be redistributed, and managed by 3/6 anonymous members of the technical team.

As these multisigs have no risks over the Aave protocol and concern the Badger internal protocol use, no recommendation regarding these multisigs will be made in this proposal.

However, Llama recommends updating the documentation to show all of these multisigs and remove the deprecated ones, and the function details for all contracts.

BADGER Market Risks:

Oracle risks:

Considering that the BADGER token uses Chainlink oracles and that we suggest to disable borrowing, the risks are very limited.

Liquidity & POL breakdown on Ethereum network (Last Update: 09/02/23):

Screenshot 2023-02-09 at 13.16.44

Note: Badger DAO currently holds 24.97% of the liquidity available on the BADGER token as Protocol Owned Liquidity (UniV3 Positions out of range are not taken into account)

Volatility Parameters

Parameter Value
30 Day Average Daily Volume 5,270,788.15
60 Day Average Daily Volume 3,978,681.51
90 Day Average Daily Volume 3,927,808.59

Risk Parameters

Considering the current liquidity and following the BGD Aave V3 Listing technical parameters, Llama suggests the following risk parameters and welcomes feedback from Gauntlet and Chaos to amend these prior to performing a Snapshot.

Our thoughts are to list BADGER in isolation mode with a SupplyCap and BorrowCap based upon the daily trading volume range.

Supply Cap = Number of BADGER tokens sold to move the price by 25% using Gauntlets Conservative Supply Cap framework

Borrow Cap = 10% Daily Trading Volume over a 60 day using Coin Gecko as a data source using Choas Lab’s methodology for enabling borrowing on MaticX

Screenshot 2023-02-09 at 13.15.50

Risk Parameters Category Value
Isolation Mode Yes
Collateral Yes
Borrowing Yes
LTV 45%
Liquidation Threshold 60%
Liquidation Penalty 10%
Reserve Factor 25%
Liquidation Protocol Fee NA
Debt Ceiling NA
Supply Cap 965k units
Borrow Cap 121k units
Variable Base 0
Variable Slope1 7%
Variable Slope2 300%
Upotimal 45%
Stable Borrowing Disabled
Stable Slope1 2%
Stable Slope2 300%
Base Stable Rate Offset 2%
Stable Rate Excess Offset 5%
Optimal Stable To Total Debt Ratio 20%
1 Like
16

Thanks for sharing this risk assessment Llama.

I’m here from the Badger side to answer any questions or provide further insight where needed.

I think its important to share that the treasury council at Badger DAO would be looking to supply BADGER similar to what they did when the Badger market was activated on Euler. There has also been significant interest from community members and active holders over the last 6 months in having a BADGER market live on Aave which suggests we’ll see strong participation here.

17

Due to Badger’s small market cap (<$60M), Chaos Labs does not recommend listing it as collateral.

Tokens with a small market cap are highly susceptible to market manipulation and therefore pose a risk to the protocol by being enabled as collateral. Isolation mode with tight debt ceilings is a mechanism designed to allow the listing of long-tail assets, limiting the protocol exposure and potential bad debt. However, this improved security mechanism should not mean adding any asset without community alignment on the rationale and/or revenue potential when listing different assets.

Could @Llamaxyz share the rationale, revenue, and growth considerations for listing $BADGER? Additionally, what is the motivation to allow it to be used as collateral?

The community will be better informed about the asset listing process with a better understanding of the above.

Although Chaos’ recommendation is not to enable the asset as collateral, an option for listing the asset in isolation mode with a proposed debt ceiling should be presented to the community to accommodate a “risk-on” option.

1 Like
18

BadgerDAO treasury council member here.

Besides the excellent quantitative analysis by DefiLlama, I’d like to add a couple more qualitative points here. Mostly to speak to ChaosLabs’ concerns around community alignment and revenue potential.

BadgerDAO has been active in the DeFi space since late 2020, and has grown to a community of 30,000+ token holders since then. Over the lifetime of the protocol, BadgerDAO has integrated with other DeFi platforms, including but not limited to Uniswap, Curve, Convex, Balancer, Aura, Frax and Euler. There is both a demand for lending and borrowing in our community, depending on the type of user. Many users holding the BADGER token are utilizing various liquidity providing activities on the mentioned platforms, which has created borrowing demand. Volume is of course hard to estimate, but the initial 100k BADGER deposited by the treasury on Euler had over 50% utilization within the first few weeks. BadgerDAO is expecting an increase in volume once listed on the Aave platform, given its longer track record, depth of liquidity and wider user base.

The BadgerDAO treasury is in a healthy state to provide a runway for future development and can continue the protocol for years to come. The DAO is currently in active development of eBTC, a Bitcoin token on Ethereum, which again will provide future opportunities for the BADGER token. Please find the introduction post to eBTC here: Introducing eBTC - A Decentralized Bitcoin Powered by Ethereum Staking - General Discussion - BadgerDAO

Lastly, I understand DefiLlama’s request for feedback from ChaosLabs to be more geared towards their risk parameter choices, which I do not see mentioned in your reply. Besides the very general concerns you raised, do you see any issues with their proposed configuration?

19

@ChaosLabs any response here would be greatly appreciated!

Because besides your comment, it looks like everybody else in this thread is in favour of adding BADGER to V3. The market cap concerns have been covered by @Llamaxyz. And as previously mentioned, with a token that is more than two years old, has more than 575k transactions and 31k holders, it is clear that BADGER has a large following which can all potentially become (new) users of Aave.