Dotsama Ecosystem Gets New Cross-Chain Strike With Up To 42% APR Via Bifrost

dotsama bifrost

We recently announced the launch of Bifrost’s Collator Mainnet, bringing cross-chain staking to the Dotsama ecosystem. However, there is much more to the announcement than meets the eye. In addition, some terminologies can be a little difficult to understand for the average crypto investor. Using liquidity through cross-chain derivatives? Expansion ratios for multiple chains? A positive three-way cycle for the StakeFi ecosystem? These terms describe Bifrost’s approach to yield-bearing crypto-assets, but what do they mean? Ultimately, Bifrost allows you to create derivative tokens from your PoS or DOT Slot Auction tokens so that you can wager them to earn additional rewards.

Unlock vTokens and Lock Auction Tokens

Firstly, they mean that there are some extremely smart and passionate people working at Bifrost. We had the pleasure of speaking with them last week, and it is clear that they have a great understanding of the majority of blockchain infrastructure. This is required because their platform runs on Dotasama, which is a combination of the Polkadot and Kusama blockchains. Polkadot is a low-0 blockchain because it allows projects to create parachains on top of the main Polkadot blockchain. This allows a project to develop its chain without building the entire blockchain from scratch. They also have the security of the more extensive Polkadot network, so they can focus on scalability and decentralization while securing the network.

Bifrost claims

“provide standardized cross-chain interest-bearing derivatives… by pooling more than 80% of the liquidity of PoS consensus chains… empowering users, multi-chains and ecosystem applications.”

They do this through voucher tokens, of which there are two types, one for proof of stakes chains and the other for slot auctions in the Polkadot ecosystem, using a system they call the Staking Liquid Protocol (SLP). In slot auctions, tokens are locked in slot auctions for the duration of the lease. However, Bifrost’s SALP protocol creates a derivative that allows users to release liquidity with a 1-1 link. The vKSM token is currently live and can be minted on the Bifrost dApp. Holders of a vToken can wager them using Bifrost’s Colators, allowing them to earn a return from their derivatives in the form of the BNC Token.

Collectors and Rewards

Collectors are where you deploy your vTokens. Each rally point is limited to 300 delegators, and once completed, future delegators will not earn any more rewards. Further, the sooner you delegate your tokens, the higher your yield.

The team gave us the following example to explain the numbers.

If a collector’s total delegated amount is 100,000 BNC and it is in the set of 64 active collectors for the entire year, the collector’s average revenue is:

Reward Collection: 800,000 x 10% / 64 = 1,250 BNC
Delegate self-binding Reward: 800,000 x 90% / 64 x 5,000/100,000 = 562.5 BNC
Total revenue: 1,250 + 562.5 = 1,812.5 BNC
APR: 1,812.5/5,000 = 36.25%

The Bifrost SLP will also use a selection of validators and colators to “help users complete higher-yielding strategy combinations.” Currently the best yielding Collator on the Bifrost dApp is LSVT with 34,441 BNC ($27,709) and 33 delegators with a 45% yield. This means that there are still over 200 slots available to lock in this reward level. The total value locked in for the Bifrost dApp is $125,918,038, and BNC strike is yet to come.

This is certainly a new approach to yield aggregation and is only made possible by Polkadot’s unique interoperable ecosystem.

The future of Bifrost and other opportunities

Interestingly, the value of vETH to ETH differs about $650 at the time of writing. This is because vETH currently does not have a “determined redemption time”, which creates an arbitrage opportunity. In addition, because there is no SMP link, markets can price vETH independently. According to the team, once the Polkadot – Ethereum bridge is completed, vETH will be fully controlled under the SLP protocol.

The Bifrost team believes the second quarter of 2022 will be a historic quarter as the core protocol, SLP, goes live on the mainnet. The release order for vToken derivatives is vKSM, vBNC, then vMOVR. MOVR is the Moonriver token used by the vETH token. The team is also “discussing upgrading the BNC auxiliary model to vToken minters and capturing more value for users participating in staking, stay tuned.”

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