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Bifrost is a cross-chain network that provides liquidity for staking. It is developed based on Substrate and built on the Polkadot network. As a DeFi project in the Polkadot ecosystem, Bifrost users can exchange PoS currencies into vTokens through the Bifrost protocol at any time to obtain staking Earnings and liquidity.
The project announced that before completing the seed round of fundraising, it has obtained the Web3 Foundation Grant, is also a member of the Substrate Builders Program under Parity, and is also listed in the Web3 jointly established by the Web3 Foundation and Wanxiang Blockchain Lab One of the 15 core members of Bootcamp incubator. Bifrost stated that it has received all-round support from the Web3 Foundation and Wanxiang Blockchain Lab in terms of technology, products, capital, legal affairs, and ecological cooperation.
What problem does Bifrost want to solve? Staking and DeFi revenue competition issues
Due to the emergence of emerging DeFi products including liquidity mining, DeFi products may bring users a super high annualized rate of return, but whether the prosperity built on the ETH PoW consensus can be under the ETH 2.0 or Polkadot PoS consensus Continuity is a problem. For users, when staking and DeFi lending can only choose one of them, which method is more profitable becomes the basis of choice. The PoS consensus network will compete with DeFi products from the underlying mechanism to compete for users. To solve the problem of staking and DeFi revenue competition, Bifrost is exploring the liberation of staking liquidity, aiming to allow users to obtain staking revenue, while releasing liquidity to obtain and optimize the revenue of more DeFi fields including DEX, liquid mining .
PoS network liquidity and security are mutually exclusive
The PoS equity proof mechanism determines that the security of the network is maintained by the staking mechanism, which also means that the liquidity and security of the PoS network are in a state of mutual exclusion. Under normal circumstances, increasing the liquidity of staking requires weighing network security, and the PoS mortgage token liquidity solution seeks to break this restriction, reduce the opportunity cost of users participating in staking, and at the same time increase the overall staking rate of the PoS public chain.
Staking income acquisition in cross-chain scenarios
With the launch of cross-chain projects such as Polkadot and Cosmos, users will participate in more and more cross-chain scenarios, and the current cross-chain exchange of tokens may cause users to lose the original token Staking rewards. Bifrost aims to build cross-chain features in parachains through vToken, so that staking benefits can also be obtained in cross-chain scenarios.
How is Bifrost achieved?
Bifrost provides an intermediate layer between staking and the application layer, so that the staking and application layer originally built on the underlying protocol change from a parallel relationship to a top and bottom compatible relationship, thereby solving the problem of staking and DeFi revenue competition.
The project designed a mechanism that allows users to exchange PoS tokens into Bifrost vToken through the Bifrost protocol at any time, and each PoS token will correspond to a different vToken, such as vDOT that bridges Polkadot tokens, and vETH that bridges Ethereum. To put it simply, users only need to hold vToken to obtain staking income. The project said that the nature of vToken includes:
By providing the liquidity of vToken, the liquidity and security of the PoS network can be combined, thereby solving the mutual exclusion problem of PoS network liquidity and security.
The cross-chain feature built in the parachain through vToken enables staking revenue to be obtained in cross-chain scenarios, thereby solving the problem of obtaining staking revenue in cross-chain scenarios.
How to understand and use vToken?
To put it simply, holding vToken is equivalent to owning the Staking income rights of the original PoS token. But Bifrost said that this basic mechanism can give vToken more rights and usage scenarios.
First of all, the project indicates that users can obtain vTokens through direct exchange through wallets or exchanges that support the Bifrost protocol, and through DEX and CEX for purchase. After the user obtains the vToken, the currently developed or planned use cases include:
Hedging the risk of staking lock-up, no need to wait for a few weeks of lock-up date, buy and sell at any time;
Carry out DeFi collateral lending, and in the future, it will cooperate with Polkadot ecology including Acala and other projects to support vToken for mortgage lending, deriving a "Staking leverage" mechanism;
Support the operation of tokens in other parachain DApps. For example, DApp games can support both original assets and vToken staking assets;
vToken has the governance power of the original chain voting and realizes cross-chain staking income;
It is worth noting that Bifrost stated that compared to other PoS liquidity solutions, the project focuses on the liquidity of tokens and rewards. On the one hand, the trading platform can directly list the vToken series of tokens to provide better liquidity; on the other hand, because vToken can have the governance power of the original chain voting, the voting and bidding mechanism allows users to independently need nodes and can also let The token holders receive the staking premium income generated by the bidding, which may cause the staking income of the vToken series of tokens to be even higher than the original token.
Bifrost product roadmap
According to Bifrost's roadmap, in the third quarter of this year, the project will release the Beta version of Bifrost DApp. The AMM trading pool provided internally is also in the testing phase. At the same time, Bifrost plans to release the mainnet in the fourth quarter and prepare for the IPO (Parachain auction) related plans, ready to participate in the auction of Polkadot Parachain Slots.
