BadgerDAO, a decentralized autonomous organization focused on bringing bitcoin into DeFi, has unveiled a "purple paper" for its eBTC Protocol — enabling users to borrow synthetic bitcoin without any upfront fees or interest.

This fee-less borrowing mechanism aims to make Bitcoin accessible and affordable for users by using Lido's liquid staking ether derivative token, stETH, as collateral, according to an announcement on Tuesday.

How eBTC works

Users deposit stETH to borrow over-collateralized eBTC without incurring initiation fees or interest charges. Instead, the protocol generates revenue by taking a percentage of accrued staking yield from the total system collateral, known as the "protocol yield share."

To ensure the system's solvency, eBTC employs a liquidation mechanism — …