Bifrost is a dedicated liquid staking Layer 1 built on Substrate powered by Polkadot providing non custodial decentralized cross-chain liquid tokens for staked assets. By leveraging off Polkadots cross-consensus message format (XCM) it can provide standardized cross-chain liquid staking solutions for multiple chains notably Polkadot (vDOT), Kusama (vKSM) and the first LST solutions on both Moonbeam (vGLMR), Moonriver (vMOVR) as well as other multiple chains (currently 6+ chains). Bifrost facilitates the issuance and deployment of liquid staked assets (“vTokens' '), allowing users to earn staking rewards while participating in DeFi, such as liquidity provisioning on DEXs, and lending/borrowing. Bifrost aims to offer a seamless staking and DeFi experience for PoS users and enable developers to build innovative applications around Bifrosts’ liquid staking derivatives (vTokens).
This proposal aims to add vDOT (Bifrost DOT LST) to the Interlay lend market, preparing for the following use cases:
Therefore, this proposal will perform the following functions (Check details at the "Technical Details" section below):
vDOT is a liquid staking token issued by the Bifrost SLP pallet. It represents staked DOT on the Polkadot Relay, but it is also a fungible and tradable asset. vDOT has unique features such as Fast-Unstake, Stable Swap, Automatic validator selection, Cross-chain voting, and deposit for harvest in DeFi. Additionally, vDOT naturally earns yield through staking rewards as its value appreciates. For more details about vDOT, please refer to the links below:
vDOT Application: https://bifrost.app/vstaking/vDOT
vDOT logic behind: https://docs.bifrost.finance/builders/liquid-staking-slp/vdot
OpenGov+Automatic Validator Selection: https://docs.bifrost.finance/builders/liquid-staking-slp/vdot#vdot-validator-se
vDOT naturally earns rewards from DOT staking, therefore vDOT lenders can earn DOT staking APY + Lend APY + INTR APR.
Loop lending is the underlying logic for leveraging staking. This means that it requires repeated operations of collateral depositing, borrowing, and deposit again to increase leverage while increasing your LTV. By stacking the leverage of vDOT, higher DOT staking returns can be obtained. For example, if the leverage of vDOT is expanded to 1.5 times, the APY of vDOT staking will also expand 1.5 times for your principal (actual situation may involve factors such as interest rates).
How to establish Leveraging Staking?
Below is an example of DOT leveraging staking by using vDOT
(The following charts are for the purpose of understanding the principle of leveraging and do not take into account details such as floating lend rates, utilization rate or live exchange rate and etc.)
Based on the assumed lending market conditions mentioned above, we can derive the following results under the 65% LTV:
As described in the chart above, leveraging user can achieve an approximate total APY of 50% with a near "1" health factor by combining vDOT lending positions and leveraging DOT's staking APY multiple times.
Bifrost is a platform that allows people to earn rewards by staking their cryptocurrency. They have a special type of token called vDOT that represents staked DOT on the Polkadot Relay. vDOT can be used to earn rewards while participating in DeFi. Interlay is a lending market that allows people to earn money by lending their cryptocurrency. They want to add vDOT to their lending market so people can earn even more money. By using vDOT, people can also do something called leveraging staking, which means they can earn even more rewards by borrowing and lending vDOT.