BadgerDAO, a decentralized autonomous organization dedicated to implementing Bitcoin in DeFi, has unveiled the “Purple Paper” protocol for eBTC, allowing users to borrow synthetic Bitcoins without any upfront fees or interest.
This gratuitous borrowing mechanism aims to make Bitcoin available to users by using stETH as collateral, according to an announcement posted on Tuesday. Users deposit stETH to borrow overcollateralized eBTC without incurring fees or interest charges. Instead, the protocol generates revenue by taking a percentage of accrued staking yield from the system’s total collateral, known as the “protocol yield share.”
To ensure the solvency of the system, eBTC uses a liquidation mechanism, i.e. if the collateral ratio of a collateralized debt position falls below a minimum of 110%, the debt position becomes eligible for liquidation. The outstanding debt can be repaid by any market participant in exchange for some excess collateral and a gas stipend as an incentive, the team said.
Image: The Block
