Bifrost: Liquid Staking as a Main Driver for the Growing Polkadot DeFi Ecosystem
Evolving Polkadot Ecosystem
The Polkadot ecosystem continues to expand and advance, undeterred by the bear market and downtrend in the crypto industry. The third quarter of this year has introduced new partnerships and parachains. These collaborations involve enterprise giants like Vodafone and Shell, as well as major game developers associated with NHL Rivals and NFL video games, to name a few. This only scratches the surface of what has been accomplished. The latest development report clearly demonstrates that Polkadot’s momentum is only accelerating.
What’s more interesting, multi-chain architecture and initial ideas of communication between chains are finally here. Pioneers of ecosystem has polished their products and ready for collaboration and creating advanced XCM use-cases. Bifrost is one of such projects, bringing liquid staking to a whole new level and unlocking DeFi opportunities.
In this article, our focus will be on the next crypto trend — liquid staking or LSD (Liquid staking derivatives) by Bifrost.
Liquid staking is a new trend
With the Ethereum transition to proof-of-stake consensus, it’s getting obvious that liquid staking is a new trend in crypto, and the total value locked across LSDFi (Liquid Staking Derivatives) protocols has grown 5,870% (58.7x) since January 2023, and has reached $919.0M on August 31, 2023.
Source: Deep Diving Into ETH Liquid Staking by CoinGecko
But why it’s growing so fast? The reason is simple — extra rewards! During the staking, users need to lock their coins to receive rewards over time in exchange, but liquid staking allows to get derivate token (vToken on Bifrost), so users can sell, farm, borrow/lend with these tokens. Liquid staking derivatives or LSD create additional opportunities for leveraging and earning more rewards.
What is Bifrost
Bifrost is a DeFi project built upon the Polkadot ecosystem, aiming to offer liquidity for staked assets. Bifrost supports a range of PoS tokens such as DOT, ETH, FIL, KSM, GLMR and many others.
By conveniently staking their tokens, users can participate in DeFi activities. This maximises their profit while ensuring constant access to their liquidity.
Bifrost is an Omni-chain dAppp
Omni-chain approach prioritises full-chain interoperability and interaction with different components between applications. Unlike Multi-chain or Cross-chain, where dapps simply copying their functionality and place it on different chains, Omni-chain dApps utilise different chains for distinct parts of the applications that is creating more advanced use-cases and features, allowing each chain benefit from each other.
For example, HydraDX using XCM minted vDOT for their protocol owned liquidity by transferring it to the Bifrost chain and receiving it back, in that case protocols just like users can interact with each other on its level. Or another example– unified liquidity allows perform vToken/Token swaps on chains like Moonbeam, Astar, leveraging liquidity from Bifrost (without the need for fragmentation liquidity on various networks which is not cost efficient).
In this way, omni-chain decentralised applications not only more cost efficient, but provides more user-friendly and intuitive experience, as users don’t need to jump between different chains, everything happens under the hood in a single user interface!|
SLPx — Staking Liquidity Protocol
Bifrost recently unveiled its SLPx pallet, to simplify the previously liquid staking process.
Users can now mint vTokens, redeem them, and perform vToken/Token swaps on chains like Moonbeam, Moonriver, and Astar, utilizing liquidity from Bifrost’s chain. This implementation simplifies staking, keeping underlying complex cross-chain transactions hidden.
Polkadot Harvest Unlock — an opportunity to leverage your tokens
Bifrost has recently initiated an incentivized liquid staking DOT campaign _ Polkadot Harvest Unlock, where users can experience increased rewards for staking DOT (mint vDOT, receive rewards in DOT, and earn BNC tokens for farming plus a raindrop reward).
The process is straightforward: participants simply mint vDOT tokens and begin farming on the Bifrost app. Let’s share a brief guide with you to explain the basics.
How to participate? — Mint vDOT and earn extra rewards
If you participated in the first batch of Polkadot crowdloans (Acala, Moonbeam, Astar, Parallel, Clover) you’re eligible to receive extra 2000 Raindrops at the campaign launch.
- Go to the Bifrost.app website to the Polkadot Harvest Unlock section.
2. Check if you’re eligible for airdrop and claim raindrops.
3. Go to the vStaking → vDOT page.
4. Enter the amount of DOT you’d like to put in the liquid staking (i.e mint vDOT).
5. Click on the “Stake” and “Confirm” buttons to proceed.
And you’re good!
Start farming to earn extra rewards.
- Go to the “Farm” page and find vDOT pool.
2. Click on the “Deposit” button in the vDOT pool. Enter the amount of vDOT and click “Deposit” again.
All good! Now, you’re farming rewards and staking DOT at the same time!
For example, using XCM HydraDX minted vDOT for their protocol owned liquidity by transferring it to Bifrost chain and receiving it back, in that case protocols just like users can interact with each other on its level. Or another example– unified liquidity allows perform vToken/Token swaps on chains like Moonbeam, Astar, leveraging liquidity from Bifrost (without the need to fragmentate liquidity on various networks which is not cost efficient).
In this way, omni-chain decentralised applications not only more cost efficient, but provides more user-friendly and intuitive experience, as users don’t need to jump between different chains, everything happens under the hood in a one user interface.
SLPx — Staking Liquidity Protocol
Bifrost recently unveiled its SLPx pallet, to simplify the previously liquid staking process. Now, users can easily execute staking processes across any chain, overcoming traditional cross-chain transfer and staking challenges.
The SLPx pallet, an upgrade to Bifrost’s original SLP module, offers numerous features, allowing users to mint vTokens on other chains like Moonbeam, Moonriver, and Astar; redeem vTokens on these chains; and conduct vToken/Token swaps, drawing liquidity from Bifrost’s chain. The implementation presents the staking process as local, masking the complex cross-chain activities behind it.
Polkadot Harvest Unlock — an opportunity to leverage your tokens
