Bifrost: The Achievement of Decentralization From ETH to vETH

ETH 2.0 launched Phase 0 Beacon chain yesterday at 8 p.m and successfully produced blocks. As of this writing, a total of 21,063 Validators are maintaining block release validation of ETH 2.0 Beacon chain networks. Prior to this, Bifrost released the Online Roadmap for vETH, a staking derivative for ETH 2.0 on November 24. vETH will be launched in four phases: Phase 0 Mint Drop, Phase 1 ETH 2.0 Staking, Phase 2 Bifrost Mainnet and Phase 3 ETH 2.0 Redemption. With the official launch of the ETH 2.0 Beacon chain, vETH is currently transitioning from Phase 0 to Phase 1, but before it officially enters Phase 1, you need to know how vETH achieves security and decentralization.

Progress

vETH Redemption Close Time

Phase 0 has started Mint Drop (Airdrop) for a total of 32 days. Mint Drop will be extended to Phase 1. Users who conduct vETH minting will share 100,000 BNC airdrops based on the vETH age and minting amount. The total airdrop has been 9,273.3162 BNC, as planned, Bifrost will close the vETH redemption function at 12:00 (UTC+0) / 20:00 (UTC+8) on December 3rd, and simultaneously make the vETH transferable. The Mint Drop is only available for vETH minting but will not receive the Mint Drop for the vETH obtained through the exchange.

After vETH enable the transfer, it will first consider liquidity support in DEX, such as Uniswap, Loopring, DODO etc. and the ETH 2.0 staking operation will be carried out after Bifrost completes the multi-signature co-management (the latter part of the article describes the multi-signature co-management method). After staking, the staking proceeds will be issued by raising the mint price of vETH : ETH. When the redemption function is opened again, users will be able to get back ETH based on the current mint price of vETH : ETH (see Bifrost Whitepaper for detailed).

vETH Staking reward generation and settlement

When the Bifrost mainnet is launched and vETH enters Phase 2 to become a Substrate Base asset, the reward generation and settlement of staking will be planned according to chapter 3.2.3 of the white paper. The selection of validator will be completed by the decentralization of the voting rights market, and the staking reward structure will be settlement is completed based on 10% BNC repurchase funds, 1~5% Public insurance funds, 3% Channel rebate, and 82~86% User distribution (raise the mint price).

In the current Phase 1, the Bifrost mainnet has not yet been released, and the staking reward structure will be based on 15% Validator commission (server and maintenance costs), 5% Slash public insurance funds, and 80% User distribution (to raise the mint price) to complete the settlement. When an accident occurs slash, If the public insurance funds are not enough to cover the amount of Slash, Bifrost will bear the Slash losses. If no slash is occur when vETH enters Phase 2, the slash public insurance funds will be entered together the slash public insurance pool of the Bifrost mainnet continues to bear the slash risk, and Bifrost will automatically select the Validator based on the self-mortgage and Slash security score.

Phase 1 Functional Design And Implementation

The Bifrost project deployed two contracts on the ETH 1.0 system: the Mint Drop contract for casting vETH and redeeming ETH (Address: 0xec1d6163e05b3f5d0fb8f354881f6c8b793ad612), and the ERC20 contract for vETH. (Address: 0xc3d088842dcf02c13699f936bb83dfbbc6f721ab).

The Mint Drop minting contract has the following core functions and features:

  • Users put in ETH and receives an equal amount of vETH.
  • Users destroy vETH to redeem an equal amount of ETH.
  • To open and close the redemption function, the contract administrator can close the redemption function, and then users will not be able to redeem ETH.
  • After the redemption function is closed, the contract administrator can 32 ETH from users’ deposit, and then invest in the Deposit contract (address: 0x00000000219ab540356cbb839cbe05303d7705fa) deployed by the ETH 2.0 project on the ETH 1.0 system, and then participate in ETH 2.0 Staking process.
  • The Contract Administrator only has the authority to make ETH Deposits (Staking) that uses put into the Mint Drop contract, but has no other operation authority.
  • BNC mint bonuses are released linearly over time, with a total term of 32 days, every 8-day turn, and are divided by mint amount and age.

Mint Drop Decentralized Contract Manager Account

Since ETH 2.0 is still in its early stages and its basic functions (transactions and contracts) are still unavailable, Bifrost has adopted Multisig solution. It will be deployed on the ETH 1.0 smart contact to replaces the current single administrator address. Whenever Mint Drop contract reaches or exceeds 32 ETH, Bifrost and other cooperative institutions will jointly initiate Multisig operation, perform a round of secure multi-party calculation to generate deposit transaction data and transfer invested ETH to the deposit contract to participate in the ETH 2.0 staking process. When ETH 2.0 can process transactions and smart contracts normally, Bifrost will redesign and implement the functions of vETH minting and redeeming, and adopt a decentralized solution what is better than Multisig (such as Relay cross-chain or zero-knowledge proof technologies) redesign and write a new set of contracts to run on the ETH 2.0 system to better coordinate with the Bifrost mainnet on Polkadot.

Decentralized Staking Operation on ETH 2.0

When performing the Deposit (Staking) operation on ETH 1.0, you need to specify the Public Key, Withdrawal Credentials, Validator Signature, and Deposit Data Root. These data are generated according to the ETH 2.0 staking operation specification. The staking operation of ETH 2.0 involves two pairs of keys, one pair is the public key and private key of the Validator, which are used for block-related operations, and the other pair is the public key and private key of Staker, which is used for operations related to the withdrawal of staking funds. The ETH invested by the users’ vETH minting will be managed by multiple contract administrators and perform staking operations for users. Multiple co-managers and Bifrost are the real Staker. In order to ensure the decentralization of Staker key generation, custody, and signature operations, Bifrost currently plans to adopt BLS threshold signature technology, where several well-known entities (individuals or institutions) simultaneously run secure multi-party computing (MPC) to generate a pair of key to withdraw staking funds to achieve the decentralized operation authority and operation management mode. When the basic functions of ETH 2.0 are available, Bifrost will adopt more complete technical solutions (such as Relay cross-chain and zero-knowledge proof technologies) to achieve a more thorough decentralized design.

Entrust a Third-party Mining Pool to Deploy And Run Validator

At the current stage, Bifrost will entrust a third-party mining pool to deploy and run the Validator. There are two different key processing methods.

1. Bifrost also holds a copy of the Validator’s private key, so Bifrost can generate the private key.

2. The Validator generates and holds the private key separately, but a certain amount of ETH needs to be pledged to the contract (for example, 4 ETH).

The reason for this is that if Staker wants to withdraw the staking funds, the Validator needs to be in the Exited state. If the Validator refuses to execute Exit, the staking funds cannot be withdrawn.

Conclusion

Bifrost chose a decentralized method to deploy Ethereum 2.0 service to achieve ETH conversion to vETH. After users participate in any amount of vETH minting and fulfill 32 ETH, Bifrost will co-initiate a Multisig operation with other cooperative institutions, use BLS (threshold signature technology) to perform secure multi-party calculations online and deposit the user’s ETH into the deposit contract, nothing else operation authority. Therefore, each deposit certificate is jointly kept by multiple parties, rather than exclusively controlled, so as to achieve the first stage of decentralization. In the future, Bifrost will follow the pace of Ethereum development and iterate more perfect solutions.

What is Bifrost ?

Bifrost is a Polkadot Ecosystem DeFi infrastructure protocol that aims to become an infrastructure for providing Staking liquidity, and currently offers a derivative vToken for Staking and Polkadot Lease Offering (PLO). It is also a member of the Substrate Builders Program and Web3 Bootcamp. vToken can optimise transactions in multiple scenarios such as DeFi, DApp, DEX and CEX.

vToken can optimise transactions in multiple scenarios such as DeFi, DApp, DEX and CEX. vToken can be used to realise the transfer channel of governance right such as Staking and PLO to hedge the risk of Staking assets. In extended scenarios such as when vToken is used as collateral for lending, the staking proceeds can offset part of the interest and realise low-interest lending.

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