I am excited about using students collecting my Tool Icons (Badges) rather than academic results. I teach Automotive Studies and the collecting the the Tool Icons should appeal to my students.
One problem in my Moodle 3 Admin setting
I'm unsure why you consider the activity default to be a problem.
For every activity you can change the completion tracking of it. This, in turn, will allow you to issue badges for activities when they are complete.
Have you read https://docs.moodle.org/30/en/Using_badges ?
That page explains badges in detail.