CLAWS Explained: Scratching the Surface of Sett-Vault Assets
What started off as rumor is now becoming reality. The community heard whispers of a stablecoin coming to the Badger ecosystem and dubbed the mysterious project “claws” — a name which has stuck and is now the official title. $CLAWS is coming, so we’re going to explain what it is, how it works, and what you can do with it in this article. Let’s get started!
What is CLAWS?
CLAWS is actually more accurately described as a “yield dollar” than as a stablecoin. If you are at all familiar with products built on UMA, the concept of yield dollars is familiar. Essentially, a yield dollar is a collateralized asset with an expiration date. Once the yield dollar expires, it can be redeemed on the UMA protocol for $1 worth of its collateral. Until expiration, the market determines the price of the asset — but generally it should approach $1 as expiration nears.
Yield dollars are collateralized assets — meaning they are minted when a user puts up collateral at some LTV (Loan-to-Value) ratio. In the case of CLAWS, there are actually two collateral types that can be used to mint tokens — bBadger and wBTC/ETH SLP tokens. These collateral types will create bCLAWS and sCLAWS, respectively. You read that right — there are multiple types of CLAWS in the pipeline!
But that’s not all! For each type of CLAWS, there will be a subset of tokens with a variety of expiration dates. While this has not been fully set in stone, initial discussions are expiration dates in 60 day increments.
There will be two ways to get CLAWS tokens. Unlike the airdrop of DIGG tokens, the CLAWS token supply will be entirely created by users wishing to take advantage of additional yield opportunities through creating CDP positions. Alternatively, users could purchase CLAWS on the open market — but beware of price premiums. Remember that all variations of CLAWS tokens have an expiration date, at which they will be worth only $1. Investors must take this into account when purchasing at a price over the expiration peg.
What You Can Do With CLAWS
One of the wonders of DeFi composability is the ability to earn multiple forms of yield with the same base assets — maximizing your potential returns. This is the case with CLAWS. Once a user mints CLAWS tokens, they will be able to deposit their CLAWS into a Sushiswap Liquidity Pool and receive CLAWS-SLP tokens in return. These CLAWS-SLP tokens can then be staked in a dedicated Badger Sett vault to earn additional rewards (in the form of additional UMA, xSushi, bDIGG, and bBadger)!
The result is a “yield-ception” of sorts. In the first “layer” of the Sett, we have many forms of income already. In the case of bBadger — you are earning both BADGER and DIGG rewards, which are auto compounded. In the case of the SLP — you are earning bBADGER, bDIGG, xSUSHI and trading fees. Now, these tokens are used to collateralize CLAWS, which then in turn earns additional bBADGER, bDIGG, UMA, xSUSHI, and more trading fees. In total, CLAWS Sett vaults have nearly 10 sources of income — making it a diversified basket of passive incomes unto itself!
But that’s not all! Users who do not wish to participate in CLAWS Setts can still utilize CLAWS to unlock some of their value stored in their Badger or SLP Vaults — all while retaining their base yield. For example, they could mint CLAWS using their LP tokens and sell CLAWS for USDC in the highly liquid Sushiswap pool. This gives users the flexibility they need to pursue trades or other yield opportunities as they see fit — so long as they pay back the CLAWS to unlock their collateral before expiration!
With all of the added incentives, CLAWS Sett vaults are going to change the yield farming game by providing a stable asset with multiple yield streams. Such a profitable base makes CLAWS an important primitive asset in the ever-evolving space of DeFi. Though its value is relatively stable, CLAWS tokens serve to further Bitcoin’s presence in DeFi by being a BTC-backed asset. Let’s CLAW our way to the future!
How Do I Learn More?
There are many ways to engage the Badger DAO community and educate yourself on the use of our protocol.