The new white paper describes Bifrost from market overview, implementation plan, typical business, economic model, roadmap, etc. It also announces the objective of economic model design, describes the basic characteristics of vToken, minting method, risk control, revenue generation, revenue settlement, incentive method and other details, states the key points of consideration of derivative impossibility triangle in vToken design, and introduces the value capture, incentive model, participation roles, distribution structure and other details of Bifrost Native Coin (BNC).
With the development of more public chains adopting PoS consensus to improve project availability and decentralization, 80 more PoS public chains with more than $ 145.3 billion total market value have been born. Through Staking, over $ 2.5 billion rewards will be generated each year. Meanwhile, with the DeFi market boom and the anticipation of the Ethereum 2.0 Staking launch will stimulate the crypto market in 2020. The rapid growth of decentralized finance (DeFi) and the Staking market is pushing the two mechanisms of DeFi and Staking to interact frequently in the blockchain landscape and overlap to create more composability, but problems ensue.
Bifrost’s solutions focus on three core issues: revenue competition between Staking and DeFi, PoS network mobility and security exclusion, and the cost of Staking in cross-chain scenarios. Bifrost as a pledged asset (Staking, Collateral, IPO…) cross-chain network to provide liquidity, it takes advantage from Staking as the early stage to provide liquidity in the form of Staking derivatives. 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. Bifrost has acquired Web3 Foundation Grant, it is also a member of Substrate Builders Program under Parity, one of fifteen core members of Web3 Bootcamp incubator that organized by Web3 Foundation and WanXiang Blockchain Lab, supported by Web3 Foundation and WanXiang Blockchain Lab on technology, products, capital, legal affairs, ecological cooperation and other comprehensive aspects.
Bifrost will complete its business as a Polkadot parachain, sharing Polkadot consensus security with other parachains and avoid the high cost of operating and maintaining a separate network of public chains. The cost of operating a PoS public chain network is enormous; in Cosmos’ case, it costs approximately 15,344,540 ATOMs (about $83,474,302) per year to maintain network security through an inflation rate around 5.8% per year (according to 72% Staking rate and 8.09% yield rate currently), and high inflation can even push the network into a death spiral if the network usage is low and value capture is inadequate.
On the other hand, Bifrost currently entry from the Staking derivative to provide liquidity to most PoS networks will inevitably result in the native assets and their corresponding votes in most PoS networks being reflected in the Bifrost protocol, with the consensus security corresponding to such native assets being transferred to the Bifrost network. If the cost of a Bifrost Consensus Security attack is lower than the cost of the original PoS Consensus Security, this will cause hackers to intentionally attack the Bifrost network to complete the attack on the original PoS network, which will result in the Bifrost network no longer be trusted or even technically counteracted by other PoS networks. Thus, the Bifrost protocol can provide Staking mobility for other PoS networks under objective conditions only if the Bifrost consensus security is higher or equal to the original PoS network.
Therefore, Bifrost will bid for the PoS parachain slot and share the PoS consensus security by becoming a parachain, which on the one hand gives more consensus security to other PoS networks and parachains supported by Bifrost, and on the other hand, reduces the high cost that Bifrost incurs for maintaining the consensus security of independent PoS networks.
The Polkadot parachain auction requires locking in DOT or KSM for 6 to 24 months, which will result in significant opportunity costs to participate in slot auction. Bifrost introduces the IPO Liquidity solution to provide other parachains with the vsDOT and vsKSM (Voucher Slot DOT/KSM) derivatives to solve the liquidity problem of DOT and KSM in the slot auction process, to enable users to participate in the parachain IPO process with bonding right transaction at any time, will provide trading scenarios for vsDOT and vsKSM from the internal trading pool, parachain DEX, CEX, etc.
Bifrost White Paper PDF
What is Bifrost ?
Bifrost is the DeFi project for PoS tokens, that include both staking and liquidity. It is developed based on Substrate and built on the Polkadot network. As a DeFi project in the Polkadot ecosystem, Bifrost users can swap PoS Tokens into vTokens through the Bifrost Protocol at any time to obtain Staking rewards and liquidity. Getting rewards from the first day, without any locking periods. BNC is the native token of Bifrost. vToken can optimize transactions in multiple scenarios such as DeFi, Dapp, DEX, etc. When vToken is used as a collateral for lending, it’s staking income can offset part of the interest and realize low-interest borrowing.