What is Digg?
Digg is a cryptocurrency that is designed to match the price of Bitcoin (BTC). It's similar to other projects that let you trade and speculate on Bitcoin on DeFi, such as RenBTC or Wrapped BTC (WBTC), but differs in that it does not use a trusted custodian to hold assets, and therefore is truly decentralized.
Digg maintains a peg to the value of Bitcoin using an elastic supply mechanism that comes from the pioneering work of the AMPL project, which created a token pegged to the US inflation (Consumer Price Index).
The mechanism, known as rebasing, automatically adjusts the supply once per day based on the price of Digg relative to the price of Bitcoin. If the price is higher than BTC, more supply is created which influences the market to adjust the price downwards. If the price is below the price of Bitcoin, the supply will be contracted. The mechanism relies on the law of supply and demand to influence people in the market to bring the price of Digg to the price of BTC. This means that the price of Digg will not track BTC perfectly minute by minute - it depends on the speed of market forces to react.
The organization that is responsible for the deployment, operation and decision making for Digg is the Badger DAO (Decentralized Autonomous Organization), and being a community-driven project, anybody that holds the Badger token can participate in the governance of the organization.
Because DeFi is centered on Ethereum networks (i.e. ERC-20), in order to trade, speculate or utilize non ERC-20 assets within the DeFi ecosystem, we need to bridge the assets or build synthetic versions within DeFi. Some methods of bringing Bitcoin into DeFi involve using a custodian organzation to hold the Bitcoin assets and simultaneously release an ERC-20 version. Digg is a synthetic version of Bitcoin created without any centralized custodian. It is fully decentralized, and the method to keep the peg at the price of Bitcoin does not require holding Bitcoin or trusting a custodian.
In addition, because of the way the rebasing process works over a ten day period rather than all at once, this enables hedging of the volatility of BTC.