Bifrost recently announced the completion of a seed round of $600,000. Investment institutions include NGC Ventures, SNZ Holding, Consensus Lab, Digital Renaissance, Youbi Capital, DFG, Longhash, etc. Bifrost said, “Investors participating in this round of financing are not lack of early Polkadot investors and staking business-related institutions. It is expected that these institutional investors will be able to provide Bifrost with parachain slot auctions and staking liquidity business support in the future.”
The popularity of the DeFi market and expectations for the launch of the ETH 2.0 staking mechanism flood the crypto market in 2020. The rapid development of DeFi and Staking markets is driving the two mechanisms of DeFi and Staking to interact more and more in the blockchain landscape, and superposition has produced more and more composability. But the problem also followed.
In the Polkadot ecosystem, there is also such a project that is positioned in the DeFi basic protocol and aims to solve the liquidity of PoS tokens, which has attracted market attention under this background.
What problem does Bifrost want to solve?
DeFi and Staking rewards competition issues
Due to the emergence of DeFi products including liquid mining, DeFi products may bring users a super high annualized rate of return, but whether the prosperity built on the ETH PoW consensus can continue under the ETH 2.0 or Polkadot PoS consensus is a problem. For users, when staking and DeFi lending can only choose one of them, which method is more profitable becomes the basis of choice. The PoS consensus network will compete with DeFi products from the underlying mechanism to compete for users. To solve the problem of DeFi and staking rewards competition, Bifrost allows users to obtain staking rewards and release liquidity at the same time to obtain and optimize the interests of more DeFi fields including DEX, liquidity mining, etc. Also, Bifrost can solve the two problems first is PoS network liquidity and security mutunlly exclusive. Another is Staking reward acquisition in cross-chain scenarios.
How is Bifrost achieved?
Bifrost provides an intermediate layer between staking and the application layer, so that the staking and application layer originally built on the underlying protocol change from a parallel relationship to a top and bottom compatible relationship, thereby solving the problem of DeFi and Staking reward competition.
The project designed a mechanism that allows users to swap PoS Tokens into Bifrost vTokens through the Bifrost Protocol at any time, and each PoS Token will correspond to a different vToken, such as vDOT that bridges Polkadot tokens. Bifrost said that the nature of vToken includes:
- By providing the liquidity of vToken, the liquidity and security of the PoS network can be achieved, thereby solving the mutual exclusion problem of the liquidity and security of the PoS network.
- The cross-chain feature built in the parachain through vToken enables Staking reward in cross-chain scenarios, thereby solving the problem of obtaining Staking reward in cross-chain scenarios.