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

**Speaker A:** Hello and welcome back to the Strange Water 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, daos. The history of daos is super interesting. Before there were daos, there was the dao. Now the first dao 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 Strangewater. But suffice to say that even from the day the first DAO was deployed on chain, there were very strong opinions on all aspects of daos. 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 dao that can tell us the whole story from what it means to achieve greatness and to overcome adversity. And most importantly, a dao that can bind a community together through the depths of a major hack and through a brutal bear market and emerge still vibrant and shipping. Today I am pleased to announce Spataboom, the co founder of Badger Dao. 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, badgerdao deploys Bitcoin into Defi. Today we'll walk through the history of Badgerdao with a specific eye towards how the dao impacted the growth of protocol. We cover the implication of decentralized contribution and the mindset needed to build a strong community or owned enterprise. And we talk through what it's like to experience a nine figure hack and how to shepherd a community through the darkness. But don't worry, we end on a high note. Just this week, Badgerdao 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, easily lose all of your money between now and then. All right, let's go to Spoom Spoom. Welcome to the Strange Water Podcast. Thank you for joining us. **Speaker B:** Thanks for having me, man. I'm excited of course. **Speaker A:** So I'm super excited to talk about Badger, mostly because of, like, the incredible stuff that's going on this week. But I guess, you know, taking a step back, 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 start this off a little bit by. Can you tell us a little bit about yourself and eventually how you found crypto and then made it to Badger and started a, you know, BTC DeFi on Ethereum protocol? **Speaker B:** Yeah, for sure, man. So, you know, I. I was enthralled with bitcoin. I've always been, you know, kind of this believer that 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 broke away from that early. But it was those kind of societal norms that brought me to bitcoin, because, you know, born and raised in Toronto and 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 the, 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, you know, I started to realize that there was more. But I didn't really take the full plunge. Kind of the classic story for many. And 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 working full time until 2016. I moved back to Toronto, kind of had, like, a really good experience, like accelerating my career and then deciding to travel and spend time, like, you know, with my wife and just kind of, you know, get our heads in order 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 Exterior Ethereum came to market. So, you know, the, the city was on fire, right, with ETH and started, you know, started kind of doing more consulting. I started just helping projects that were, you know, looking at the time to do token launches and stuff along those lines. And then that's where I really started to get my wits about me 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, 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 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, there was no demand for that business in that service anymore. So it was in 2018 through 2019, 2020, where I continued to provide more advisory and like hands on services to different projects. But it's there that I got the exposure to what was the kind of the early days of cefi. And it was at that point that I realized that I needed to be more of a mover of change in creating 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. **Speaker A:** Why don't you take us to this time when you're like, sounds like 2019, 2020 ish, when 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? **Speaker B:** The problem we were trying to solve is to make it, to make it easy for people and to actually have things to do with their bitcoin in apps on Ethereum, right? That was like in the first product that we thought could do that is a yield product. So we built a variety of yield aggregation vaults as we called them that back then, if you remember, is Akin to what yearn kind of spearheaded. And it was built on top of you know, common liquidity mining frameworks like Curve and then eventually convex and, and a few others. But it was really deposit, you know, synthetic bitcoin assets like at the time wbtc, tbtc, rem, BTC versions of BTC and maximize your yield. And 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, and then there was a variety of other things, but that's pretty. We started with Rex. Yeah. **Speaker A:** Okay, so in the beginning you, the idea is essentially like we, we understand all this crazy stuff is happening on Ethereum with Defi 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 like WBTC Rack or Run btc. So that's correct. **Speaker B:** Right, correct. **Speaker A:** And I guess like what was that moment where you realized that this isn't viable just like collecting other people's btc like tracking tokens. Like we need to create a bridge on our own. **Speaker B:** Yeah, the bridge inherently still used the underlying tracking tokens. It was based on renvm, which I think we know has collapsed since. So it took us a while to learn that lesson. Rex. We built a variety of products 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. And it really wasn't until you know, 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 change. **Speaker A:** I guess maybe this is like the next part of the story or maybe we're really like addressing the part that we really talked about. But talk to me about it sounds like you were just iterating as fast as possible and dumping out new products. Really the moment that you realized the last one wasn't working. With the benefit of hindsight, what was the experience of just 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 DAO that like just like delivered so much in such A short amount of time. **Speaker B:** I'd say that, you know, for, for us, it was very different than a more traditional approach to, you know, Web2 development and bringing software protocols to market and MVPs and these quick iterative cycles. Because it was a DAO, and it was a doubt from the beginning. You know, between December launch in 2020 and May of 2021, it went from two to 50 people that are working full time. And most of these people never met each other before it was ready. It was still coveted time. So everyone was remote and everyone was just contributing because they believed in kind of the direction 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, significantly 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 yield and abilities to create yield, so much of it 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 all that type of stuff, and I think that's very beneficial. At the same time, it's, 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 we didn't have product market fit and were using kind of 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 DAO should operate. Right? Like, we didn't have any frameworks. None of this stuff was there at the time. It's. 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 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 bear market. But regardless, like, to answer your question, it was, it was different than this iterative approach and it was in hindsight very, very 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 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 debt and like all that stuff. **Speaker A:** 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 DAO time as something that brought like a lot of challenges and maybe like led you in a direction that 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, knowing what you know now, do you think that like the dao, the DAO is like an appropriate structure for this type of like high stakes, 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 learned from this experience? **Speaker B:** Well, I don't think if there was more structure that it 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 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 or 15 billion dollars or 10 or 12 billion dollar asset and a top 20 cryptocurrency in the world. And that was only mintable 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 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 the largest market share of tokenized Bitcoin, sits in money markets, borrowing dollars. Ethereum, almost all of this just uses collateral. That's really the extent of it andor settlement and trading, you know, on different pairs and, 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 on the operational side, I think it's hard to say, you know, we could have done variety things different because it was such a green space, right. Like it was so early in those days and badgers evolved so much since then. And I think if we would have been able to have a framework that we have today, then that would have been enough to kind of stunt some of the inefficiencies that can come with dao. So Badgers move more to a representative democracy where there's different councils and these councils are more specialized and token holders kind of have an overview of the decisions that are being made and veto rights. But it is really more specialized groups that are making focused decisions in given areas with much more, much more information to make those decisions. And then there's also like the underlying financial reporting infrastructure that exists now that before you couldn't even determine like a profit and loss. Right. Or anything along those lines. So I feel like 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 all that stuff. But in terms of how that has an impact on protocol and product development in such an emerging space, I feel like there were both gigantic challenges that even if it wasn't a dao, you would have still faced an enormous amount of challenge on you know, this very immature new like very, almost no protocols found product market fit. Like there's literally like two or three like it's like liquid staking Dexs 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 companies, most of them didn't find product market fit. And a lot of the, the excitement and and 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 even if it wasn't a dao, there would have been challenges and even if you could find product market fit, the Dow challenges would have still been there and it would have just been, you know, a very challenging thing to navigate and almost create from the ground up. **Speaker A:** Well, let me ask you the direct question and sorry, the first half of your answer was about like the demand side and we'll get back to that when we talk about like EBTC and like the amazing things that are happening today. But just on this like dao 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 dao or would you run it as a company? **Speaker B:** I would 100% run it as a dao. **Speaker A:** 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 like chaos. So I would love to hear like the, the benefits of the dao. **Speaker B:** The benefits of the dao or 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 you know, overall participation from participants with so many different perspectives that probably would have never came together and push towards, you know, something right real. And again I think that daos are amazing right on chain collectives of humans working are really, really amazing and doing it Completely on chain with absolute transparency is 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 also is very important that you have the transparency on the, the actual tech and the transparency on the kind of operational side. And if the tech's not transparent, then how 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 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 daos good? And it's more of a question of, you know, what's the power of open source software and open communities supporting that software in a transparent way. **Speaker A:** I guess, I mean we had open source software long before we had daos and like we have amazing centralized companies that give us perfectly transparent like software, for example. Uniswap. 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 but yeah, you're totally right that that is like the core ethos of like Bitcoin and Ethereum and like the, 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 daos or people about to start daos on how to achieve that? Like, channeling 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? **Speaker B:** I think, I think it's really around being very conscious on what you want the community to have 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 number one thing that I recommend. Right? Like find those areas that that specific community cares the most about and. And give and empower those. Those community members to have 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 bank account for Badger ever to put in perspective. So if you have complete transparency, 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 the transparency. And then everyone also decides on how to impact that. Right, Whatever. That given kind of sliver of decision that needs to be made or kind of work stream. So, yeah, that would be the number one thing is like, really try and figure out 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 the organization starts to grow. **Speaker A:** Yeah, yeah, it makes a lot of sense. So just paying attention to the clock here. I want to make sure that we hit the two main topics of this and the next one is I want to just spend a little bit of time talking about the hack. And, like, I think that, you know, we could talk about what happened. We can talk about, like, just learning about, like, the specifics of, like, software and whatever. But I think, like, the really interesting thing to pick apart is, like, how to handle a hack as a business leader or as a DAO leader. 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 walk us through a day in the life of, you know, an owner that's getting hacked? **Speaker B:** Yeah, yeah, yeah. So I think, you know, it's something that you don't wish 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, I would definitely say. And you know, really, when you think about, you know, orhack 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 Code arena or Sherlock contests and before there was bug bounties and before, you know, reentrancy attacks were, you know, the easiest thing to kind of quote unquote block and all this type of stuff, right? So we invested an enormous amount of time and focus from day zero into, into security. Right? More so than many others. And I think that's part of the reason why the contributor like it kind of set that 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 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 exploit because it was, you know, a zero day on a very prominent Web2 service provider. And it was exceptionally calculated over the course of months and months and 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, it was obviously like anything, all hands on deck. And the number one focus was, 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, you know, in a way that, that allows for, you know, the right parties to be involved. Like. So for us in particular, we started by working with, you know, some of the security analysis and you know, those types of companies, the mandiants of the world, the chain analysis of the world, to really help us with the sleuthing to figure out like, what happened. Like, number one, it's like, what happened and how do you, and how do you understand enough about 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 we can just help protect them from, you know, an 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, 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, 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 because you think you kind of have to, to just make some swift decisions, right? We just talked a lot about like dao 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 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 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, well experienced companies in 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, but it was really about getting into restitution mode and also activating, you know, the reopening the doors, let's call it, for the products and protocols. And there was still a billion dollars plus in the smart contracts at the time and, and things along those lines. So that was, that's a bit about, you know, kind of how it all happened, what 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 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. That's a bit about it. **Speaker A:** Cool. Yeah, man. I really appreciate you, like, talking through this extremely difficult time, and I would be remiss 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. And so I just, like, that moment is like, one of the most stressful, like, situations that a Web3 builder can be in is like, while 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, like, how was that time, like, getting through? Did you find that there was a lot of, like, conflicting 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 found or in that moment? **Speaker B:** Yeah, it's. It's. It's something I don't wish on anybody, to be totally frank. It's. It's unbelievably challenging. You know, I cannot. 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 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 Brian. I, I refuse 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 in 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 the community and the organization as a whole. And 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 this challenge and did try to do with the highest level of integrity, the highest level of transparency, not closing any doors to any types of influence of folks that could have good or bad ideas and again didn't shy away from what worked already within the community. 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 dollar hack? A lot of the same participants, a lot of the same channels, a lot of the same forums and the 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 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, further kind of vibrates throughout all the other participants. And, 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 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. 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. **Speaker A:** Yeah, man. 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. And, and I love that you said that. And I just want to say, like, thank you again for, for helping us understand 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 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 be get done? 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 you even were here in the first place. **Speaker B:** And I'd say most folks would run away, right? 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 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. Again, that's what actions are all about. And by facing those things head on and doing 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 a greater collective change and in turn, the ability to actually get through it for sure. **Speaker A:** So I want to move this conversation to the exciting things that are happening today, specifically btc. But I think like the right way to get to that, to the product is like, why don't you maybe give us like the, the 32nd version of like how the community like now has been hacked, has like recover. We've created the, the recovery program. Like we've hit set, steady state. This is maybe like mid-2022. 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 dao, with the people with the tokens? Like, just get us to ebtc. **Speaker B:** Yeah, Rex, 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'd 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 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 Runway is 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 understanding of the data, to make a decision, an informed 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 at 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 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, Tara 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 bear market and it's not going to be a three 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 things. 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 as simple as that. Just survive. And the landmines are 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 have the type of kind of potential for, you know, 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 dao? 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. You know, all the, all the decision making frameworks 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, transparent financial reporting of all the products and everything that was part of the DAO ecosystem, including what's being spent on contracts and all this type of stuff. It was around this time as well, that an operational framework. So how is your actual legal entity that can support the DAO and really help empower the DAO's growth but not control the DAO? Like how do you create this principal agent model versus more of a wrapper 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 is being push towards protocols that didn't necessarily have the right type of fit. So all that stuff kind of worked its way through community decision processes. And naturally to your point earlier, around inefficiencies and speed, right. There was many months of more spending and things like that and longer products in market that in a more traditional organization probably would have been, 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 all the yield vaults, the bridge, the interest bearing, Bitcoin, the rebasing bitcoin, these things were all discontinued. There then was an emission change to pretty much move emissions down to zero and only use emissions to in a profitable way to incentivize influence markets like on Balancer and Aura or Curb and Convex or FRAX for example, which made a significant impact on the ability for the Dow to survive. Because there's quite a bit of capital that went into the treasury that helped cover the cost during the bear market. Through those activities 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 in the community wants to 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 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 the gaps in the market, the pain that came with really building on top of other people's assets and protocols. We talked about the bridge or interest bearing Bitcoin. Both of those were a product of Ren going under, right? IBBTC was backed by RenBTC and WBTC. The bridge was built exclusively on RenVM. So with both of those going under, it naturally pushed those products to a discontinued state. But the question then became like, what happens 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 shape 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 again serves a real need and is exceptionally composable for what others want to build. And we really want it to be as close to 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 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. **Speaker A:** So what is ebtc? **Speaker B:** So ebtc, I like to say, is 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, similar to, you know, what we've seen with Stablecoin designs or collateral debt positions or protocols like DAI for example, except it's based on ETH and BTC versus many of the other kind of designs which are based on, you know, assets and a USD equivalent Stablecoin. So really with ebtc, the protocol, anybody can use ETH to borrow Bitcoin in an unlimited capacity, pay no fees, and do it in an exceptionally 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 exclusively smart contract based. The code base for those smart contracts are immutable. It's very governance minimized. And all the software is open source. And all the 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 and, or to use the protocol themselves. **Speaker A:** And so when we were talking earlier about the first iteration of Badger, 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 demand here that like wasn't able to be captured by the things you were building before? **Speaker B:** 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 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 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 dollars of Bitcoin sitting on Ethereum that people are using to borrow dollars. I think one of 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 potential fit. And that was kind of part of the design of ebtc is he said, okay, 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 it has a lower over 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 of course this is governed by Badger, Dow and the treasury that could be used to help incentivize the growth and the demand side of ebtc, the asset. And that was one of the things that we saw glimpses of how it worked in the stablecoin realm. And we obviously participated in things like the curve wars and stuff along those lines. But you saw the ability for something like FRAX to create an enormous growth in overall demand for their stable asset by using their influence and share of another ecosystem's 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, shepherd bitcoin into this kind of new era, new era on Ethereum and in defi. And that's where we thought that this design kind of checked 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 means there's naturally going to be a boost on the underlying yield. We think that, you know, again with the, the smart contract nature of the protocol, you could automate the, the looping, leverage looping of borrowing EBTC against eat. So we almost think about it like, well, why would someone, you know, borrow BTC against eat? Well, they're going to be trading the flipping essentially they're going to be long EAT 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 to drive the demand side for the actual asset. **Speaker A:** Cool, man. So I guess with the final question here, what do you think that a Defi that has really, really deep, strong EBTC liquidity and has created this new. 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? **Speaker B:** I think Defi looks different in the sense that its foundation is naturally more decentralized. Right. Like if you look at Defi's foundation, it's a product of first and foremost the assets that are used in all these apps. And the more centralized the assets are inherently the more centralized the apps are and DEFY as a whole is. So there's still a lot of work to be done, a lot of work to be done there. A lot of the most prominent assets are very centralized of those essentialized stable coins or is there centralized parameters in different LST and LRT solutions now and you know, governance tokens and all this stuff. So I think it just, I guess the overall goal and vision of the builders that came together to bring EBTC to life was to create something that can live on forever. And if it is adopted, it naturally has a positive impact on further decentralizing the DEFI stack as a whole. That happens because of the 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 the De facto kind of bitcoin and defi. And there's most likely a long road to get there too. **Speaker A:** Yeah. But I mean, long road to get there means, like, a lot of opportunities to contribute and to grow with it as well. So I guess if we're already done, we don't need to be making podcasts and like continually building. So I take that as a win. **Speaker B:** Agreed, man. Agreed. **Speaker A:** Yeah, Cool, man. Well, Spot, I really appreciate this time and 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 growth strategies, to like, even like, what are the next products and that kind of stuff. But I think for the sake of everyone's time and attention span, I'm going to cut us off here. So Spada, again, thank you. Your journey is incredible. And I think that, like, your story in the Story of Badger is like, really the most important story. Anyone willing to walk into Web3 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 SBF 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. **Speaker B:** Well said, Rex. Very well said. **Speaker A:** Thank you, man. So before I let you go, 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 Dow side, like, what's the best way to get involved? **Speaker B:** Yeah, so I'd say 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, the social platforms, things along those lines. And then EBTC is easy as well. It's EBTC Finance. They most likely by the time they hear this, they'll it. It will be in market and they'll be able to participate with it on Mainnet and there should be some fun incentive programs and things happening around it as well. And then me, I'm spoom on on Twitter primarily where, where I hang out and kind of you engage in. In crypto, Twitter and all that type of fun stuff. But yeah. Thanks again for having me, man. It's. It's been a great conversation. **Speaker A:** No, man, it was my pleasure. And we gotta be sure to have you back in a few months, like once we understand where EBT and again how defi is changing. **Speaker B:** Totally, man. **Speaker A:** Awesome, man. Well, have a great rest of your day and thanks again. **Speaker B:** Thank you.