vDOT is coming soon! A Preview of its Core Benefits

We’re excited to announce the launch of vDOT, a yield-bearing DOT derivative aimed at maximizing locked liquidity and DeFi earning strategies in the Polkadot ecosystem.

The Staking Liquidity Protocol (SLP) protocol launched by Bifrost Finance this year is a Staking derivative protocol provided for the Polkadot ecosystem and other PoS consensus chains, such as bridging heterogeneous chains. The SLP will call for cross-chain stake interoperability through Cross-Consensus Message (XCM) broadcast to mint a fully decentralized staking derivative — vToken.

In addition to the already launched vKSM, the vToken series will soon welcome its third “member” — vDOT.

vDOT will follow the product features of vToken, with core advantages such as multi-scenario staking benefits, flexible redemption, and more, which will bring users intuitive reward and freer investment, and release more liquidity for the PoS network.

SLP is Bifrost Finance’s Staking liquidity protocol, which promotes the flow of funds in staking and provides a high-yield liquidity Token — vToken (Voucher Token). The SLP protocol launch solved the liquidity problem of staked tokens. SLP also maximized the use of Staking assets on the PoS blockchain.

The vToken generated based on SLP optimizes Trading in multiple scenarios such as DeFi, DApp, DEX, and CEX, among others. Through vToken, SLP realizes the transfer channel of staked rights such as Staking and Crowdloan and the risk hedging of staked assets. It also expands vToken use cases, which include:

  • Collateral for lending
  • To offset interest on loans
  • To realize low-interest lending

The launch of the SLP protocol is not only to release liquidity to revitalize the StakeFi ecology but also to ensure consensus security, lowering the user’s stake threshold and then feeding back the ecological prosperity. The SLP protocol selects validators with no security risk and a reasonable rate of return through on-chain governance, helping users complete one-stop nominations and complete final voting through the Sequential Phragménd Method. In the future, after XCM supports parachains to query the status of relay chain validators, SLP will complete intelligent filtering on the verifier set.

Therefore, vToken can help any user who wishes to participate in staking to complete staking in a one-stop way and improve the overall quality of staking through governance screening. vTokens facilitate higher returns to users and more vitality to the ecosystem while providing PoS public chains with more stable and sufficient staking assets.

vKSM is the first vToken introduced by the SLP protocol and Bifrost’s first staked liquidity derivative. vKSM is a combination of Staking original assets plus future Staking rewards, which are redeemable at any time using vKSM.

As of September 2022, vKSM had 217,529 staking and a total TVL of $13.99 M, or a total lock-up value of nearly $14 million for vKSM, an impressive achievement compared to other competing products in the same ecosystem. The achievement coincides with competing token derivative releases from other platforms, increasing its significance.

Inheriting the product features of vToken, vDOT is also an alternative fungible asset with transactional liquidity that unlocks the liquidity of the original staking. vToken also has six features such as traceability, governability, cross-chain, full reserve, substitutability and full scenario. Like vKSM, vDOT also offers the following core benefits.

  1. Interest-bearing assets with multiple returns

vDOT is a liquid vDOT that users can stake DOT to obtain liquidity. vDOT will allow users to continue to receive Staking rewards, while eco-applications supporting the SLP protocol can provide users with their own business returns, i.e. users are free to use vDOT to invest, thus enhancing their overall revenue base. As long as vDOT is held, users can receive staking rewards on staked DOTs, and can also trade vDOTs for cash, reducing their opportunity cost significantly. It is also worth noting that vDOT can be used as a DOT for all trading activities.

2. Multi-scene compatibility, automatic capture of Staking rewards

As mentioned above, the vToken generated by the SLP can be optimized for trading in multiple scenarios such as DeFi, DApp, DEX, CEX, etc. This is because the Bifrost team designed the SLP with the key of adding derivatives compatibility in mind, so the vToken’s revenue settlement is designed to be compatible with both centralized and decentralized scenarios. When a user stakes/redeems via the SLP protocol, the system gives a real-time exchange rate. vDOT is issued with Staking rewards by the SLP by adjusting the vDOT / DOT price. vDOT Rate = Total Staking DOT / Total vDOT issued. This rate is the basis for a large number of operations in the system and will be executed automatically by the SLP runtime module under the protocol with a high degree of confidence and reliability.

vToken eliminates the traditional way of on-chain transaction settlement, and adopts the method of raising the minting price to complete the settlement of vToken reward. Therefore, in order to avoid users sharing the reward of previous users, users who enter at different time periods will follow the current minting price. Therefore, when users who have used vToken have doubts about different minting prices, it can be understood that the increase in minting price is the ideal setting to ensure the profit of vToken under the premise of preserving liquidity.

3. Floating redemption period, vDOT redemptions ≤ 28 days

The DOT staking redemption period is fixed at 28 days, and Bifrost SLP helps users realize the possibility of early redemption of vDOT by matching the real-time vDOT minting quantity and redemption quantity at the protocol layer.

This means that a redemption request will be executed immediately when the real-time vDOT minting volume is greater than the current redemption volume. The redemption process is also flexible, as vTokens can be immediately canceled at any point during the redemption process to regain vToken without incurring any fees. This avoids the loss of liquidity during the redemption process, reduces the opportunity cost to the user at all stages, increases the potential for revenue and gives the user maximum control.

4. Intelligent node screening to achieve ideal yield

According to the Sequential Phragmén Method of node staking volume in Polkadot, when a single nominator stakes to multiple nodes, the staking will be automatically calculated and allocated by the algorithm, which may result in the user’s desired yield not being achieved. In the SLP protocol, the protocol filters out 10+ validator nodes (subsequently increasing with overall staking volume) through governance and adds multiple filters such as number of nominees, commission percentage, and history of blocks out to maximize the return on this portfolio of validators while ensuring that none of the nodes have experienced a forfeit. Automatic filtering rules will be added to the protocol in the future.

In other words, when users use vDOT, they can enjoy the staking reward, the investment revenue from the liquid vDOT, and the raindrops accumulated during the campaign period, which brings rewards such as airdrop dividends and NFT whitelist. I don’t think we need to elaborate on the liquidity vToken brings to the ecosystem and public chains, and the more investment options and portfolios it brings to users, as the above multiple benefits are the most intuitive illustration of the high value vToken creates for users.

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