After weeks of anticipation and a carefully observed series of preparatory steps, BadgerDAO’s synthetic rebasing Bitcoin DIGG is now live and can be used for qualified addresses on the Ethereum mainnet.
The publication is greeted with excitement by a perhaps overzealous community that has been lighting Twitter with “wen DIGG” for weeks. However, despite all the memes and fuss, there are some serious technical issues with both the distribution and maintenance of the latest Bitcoin asset on Ethereum.
Ultimately, however, now that DIGG is in the wild, the forces will determine the long-term success of Bitcoin synthetic wealth – a success that may not be assured.
Fair, flat start
According to Jon Tompkins, key contributor and sales architect for BadgerDAO, the amount of DIGG claimed for each eligible account was determined using a formula that focuses on the activity of an Ethereum address in the BadgerDAO app. Factors such as the total number of native platform badger tokens earned, the ratio of badger to badger stake, and total days of stake were taken into account.
However, in order to prevent an overall allocation to “whales” that are too deep in their pockets, the DAO approved the use of a root of 1.75 in order to smooth the distribution between the addresses. As Tompkins wrote in the original DIGG distribution proposal, this root means that, in a linear distribution, the top 100 addresses would have been eligible to get over 70% from DIGG, but they could only claim 33%.
Tompkins said that of the 600 DIGG tokens currently available, the topmost address will receive 8.75 DIGG, while the average of the 8517 eligible addresses can claim 0.07 of a token.
The goal of this distribution was to enable the project to “reward the little boys who are strong badger followers but don’t completely penalize the whales,” Tompkins said.
Keep a pen
Now that the token is live, the rebase games begin.
Algorithmic stablecoins have been a hot topic in DeFi circles in recent months as one of the most popular trading instruments. The assets, which are primarily designed to track the price of the US dollar, have “rebasing” functions that dynamically expand or decrease the overall supply of the asset based on preset parameters such as price or time.
So far, however, they have proven to be far more effective at enriching users who know how to play the rebase parameters than they are at creating really stable assets.
DIGG will possibly be the first synthetic rebasing Bitcoin and certainly the first to offer this method of distribution. Out-of-the-gate users can put their DIGG in a profitable vault so that DIGG / WBTC sushi swap and uniswap pairs get liquidity, hold core assets pending positive rebase, or sell the tokens in the open market .
While there has been speculation about how DIGG will perform and which strategies are best, it is ultimately unclear to what extent the asset will be able to meet its intended peg given the volatility of BTC and DIGG’s unique launch.
In a previous interview with Cointelegraph, BadgerDAO founder Chris Spadafora expressed the hope that additional upcoming stabilization mechanisms may help DIGG better track BTC.
“What we want to do with our vault system is really spacious, let’s be … let’s call it the” buy-and-sell “dictators. So through automated strategies, we can buy when the time is right and sell when the time is right to optimize the return on investment for users, ”he said.
Future safes designed for programmatically playing the Rebase games are designed to do just that. However, given the unknown game theory landscape, it’s impossible to say whether the vaults will be enough to stabilize DIGG – or what will happen after the incentives for vaults run dry.
In the end, after weeks of anticipation, instead of “Wen DIGG?” BadgerDAO attendees lining up for a round at the newest rebase casino must ask themselves: “What’s next?”