The below transcription from Tyrone, Bifrost Product Manager live stream(AMA) has been condensed and edited slightly for clarity.
Welcome Bifrost team to the Hoo Community!
Q1.Staking derivative is a hot topic recently and Bifrost is one attender which researching it from past year. Can you introduce Bifrost, and why Bifrost choose staking derivative?
Bifrost is a parachain network developed based on Substrate to provide liquidity for Staking assets. It solves three problems:
(1). The competition between Staking and DeFi revenue in PoS networks;
(2). The problem of Staking revenue generation in cross-chain scenarios;
(3). The conflicts between liquidity and security in PoS network;
We’ve received $600,000 seed financing from NGC, SNZ and other institutions and Web3 Foundation Grant, we are also a member of Substrate Builders Program and Web3 Bootcamp.
It is very simple for users to use Bifrost, they only need to convert tokens into vTokens, for example, to take DOTs and convert them into vDOTs via Bifrost, as long as they hold the vDOTs, they can get staking revenue and liquidity.
In fact, we launched a decentralized PoS pool with Staking liquidity before Bifrost was launched, at the time when DeFi and Staking was the crazy and there were no Staking liquidity derivatives on the market. Thanks to this, the product reached nearly 500K USD in just two weeks after launch. So, we’ve accumulated much experience to do Bifrost now.
Q2. There are many projects involved in Staking field, What is Bifrost’s comparative advantage?
The concept of Staking derivatives is very similar, but Bifrost’s strengths are mainly in the product experience from users’ perspective. The advantages are mainly in the higher revenue and settlement of Staking earnings.
On one hand, Bifrost created a role named “bidder”, who is the candidate of validator. Bidders participate in ticket bidding by pledging staking revenue to users in advance, which means what percentage of the revenue that bidders are willing to give to Staker.
So, bidders are bidding for higher staking revenue to users here and only top revenues can be made a deal first. That’s why users might get higher staking revenue than their original chain. After bidders get those votes, they can vote for validators though Bifrost protocol and get profits based on their investment strategy.
On the other hand, In terms of revenue settlement, there are two major drawbacks to sending revenue quantities directly to user addresses. Firstly, it will cost lots of calculation resources. Secondly, for DeFi, a self-propagating Token is not conducive to cross-chain circulation and widespread participation in DeFi.
So, In simple terms, Bifrost breaks the 1:1 exchange rate between derivatives and the original asset, allowing the exchange rate to change in real time as Staking yields increasing returns.
Under this mechanism, the derivative represents the sum of the principal and revenue, users can receive their yield even if the asset is in Centralized Exchange or wallet.
Q3. With the official launch of Ethereum beacon chain, Bifrost also launched the Staking derivative vETH for ETH 2.0, is the minting of vETH as expected? What are the expectations for the future?
Recently, Ethereum 2.0 online which is a big news for whole industry, Bifrost, as one of contributors of the staking derivatives field, we deployed the ETH 2.0 Mint Drop campaign, which provide a liquidity solution for users of Ethereum 2.0 who pledge deposit contracts. Our contract received 10,000 ETH of vETH mint on first day, equivalent to $6 million, the campaign was a great success and far exceeded our expectations.
Please notice, the Mint Drop event will continue until December 29th, during this period, users can share the incentive of 100K of BNC by mint vETH. The end of the incentive does not mean the end of the vETH mint, which will always be accompanied with ethereum 2.0 deposit contract to provide staking liquidity for users.
In addition, as ethereum 2.0 does not support decentralised certificate of deposit keeping on its under-layer.
Bifrost decides to use multisig and threshold signing techniques, whenever 32 ETH is entered into a smart contract, Bifrost will join forces with several institutions and Validator service providers to co-sign the deposit certificate through a secure multi-counting process, ensuring that no one institution can control users deposit alone.
Q4. What are differences between Ethereum and Polkadot, why Bifrost choose Polkadot?
Bifrost chose Polkadot because we found weaknesses of developing based on single-chain smart contract, its hard to be transfered to multi-chain. After technical research, it was found that the combination of the Polkadot relay chain and the Substrate development framework would be a good solution to this problem, that’s why the Bifrost project was born.
From an ecological point of view, I think there are three main differences between Polkadot and Ethereum. They are forkless upgrade & on-chain governance, heterogeneous cross-chain, and shared security.
Firstly, I would put forkless upgrade and on-chain governance together because they are complementary, without good governance mechanisms, forkless upgrade cannot play its part. Forkless upgrades allow Polkadot and its ecosystem to iterate quickly. Thanks to the design of XCMP, the technical cost of cross-chain is reduced to a very low level, and it is also very fast.
Finally, parachain essentially reduces the cost of consensus maintenance of public chain by providing shared security, projects can focus on product development. So, we are happy to develop on Polkadot.
Q5. Now, DeFi seems not overhearing as in several months ago, what possibilities does Bifrost can bring to the future of DeFi and “Yield Farming”?
OK, In fact, we think Staking derivative will be the breakthrough for the next wave of DeFi.
In past year, the hot DeFi game was basically a set-up LEGO game, which representative one is YFI, a collection of various protocols to deposit and staking that allows users have three or four layers of incomes. But, this game requires users to have a large amount of capital, enough professional knowledge and also familiar with the technical operations, at lease you need to know where is your assets in several protocols. So the threshold for participation will be relatively high.
In Bifrost, common users can just hold vToken instead of doing staking by themselves, it will be automatically done by our protocol and bidders.
Users can sell vToken at any time to unstake, If users want to join DeFi, they can put their vToken into DeFi project. For example in Acala, users over-collateralize vToken for aUSD, then use aUSD to buy vToken, execute this routine over several times, they can maximally lend up to three times the number of vToken, because each vToken can earn Staking income, so it will equal to three times of Staking income. Bifrost can bring DeFi more effortless and flexible.
Q6. There are many ways to capture the value of Bifrost’s token BNC, and what investors are most interested in is what is the core support in the value of BNC?
Ok, lets brifely introduce the value capture scenarios for BNC, they are derivatives liquidity fees, Slash collateral of bidder, governance vouchers and Staking revenues repurchase or burning.
There are 10% of Staking revenue generated through Bifrost which will be used for BNC repurchase, then flow to the treasury for governance issuance or destruction. In order to ensure that the vToken has sufficient liquidity at an early stage, a portion of BNC is set aside as mint incentive for the vToken, with ten years of linear release and the yield halved every two years.
Q7. With Bifrost’s vToken, users can access more scenarios, such as lending, leverage, etc. Will Bifrost be involved in these follow-up services in the future?
Acturallly, we are not going to deploy these functions in the main Bifrost network, because the Polkadot ecology will have a lot of DeFi parachains professionally providing these services. We are fully focusing on staking derivative business model now. But we are talking with Acala for cooperation, vToken will be able to participate in any of these decentralised financial applications in the future.
Q8. When will Bifrost release a specific campaign proposal for the slot auction? And if the auction is not successful, what is the impact on the project’s progress?
BIfrost’s mainnet will be launched with the Polkadot parachain slot, So we will be the first to connect to Rococo Test Network V1, ensuring that the main network will run smoothly when we are officially connected to the slot.
In relation to this parachain slot auction, users will face a lock-in period up to 6–24 months if they participate in the PLO (formerly IPO), which represents a significant opportunity cost. For this reason, Bifrost has launched the PLO Liquidity protocol, which provides vsDOT and vsKSM (Voucher Slot DOT/KSM) derivatives for other parachains to address the liquidity issues of DOT and KSM during slot auctions.
We are having Initial partnerships with Zenlink and ChainX to provide trading scenarios for vsDOT and vsKSM, and this agreement is in the process of being approved by the Web3 Foundation for a new Grant.
About Bifrost
Bifrost is a cross-chain network which provides liquidity to bonding assets. It takes advantage from Staking as the early stage to provide liquidity in the form of Staking derivatives. Bifrost is established on Polkadot network and developed by Substrate, the underlying layer is based on the WebAssembly, LIBP2P, and GRANDPA consensus. As a DeFi project in Polkadot ecosystem, Bifrost launches vToken (Staking Derivatives Voucher Token) which allows users to exchange PoS token to vToken and obtain liquidity and Staking rewards through Bifrost protocol at any time.
Website: https://bifrost.finance/
Whitepaper: https://whitepaper.bifrost.finance/en/marketing_overview/01_marketing.html
Twitter: https://twitter.com/bifrost_finance
Telegram: https://t.me/bifrost_finance
Discord: https://discord.com/invite/XjnjdKBNXj
