About us

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).

Summary

This proposal aims to add vDOT (Bifrost DOT LST) to the Interlay lend market, preparing for the following use cases:

• Increase base income for lenders who deposit IBTC, DOT, or any other asset as collateral in the lend market.
• Activate leveraging staking by rotating borrowed DOT stake to vDOT and depositing it as collateral.

Therefore, this proposal will perform the following functions (Check details at the "Technical Details" section below):

• Enable vDOT as collateral in the lending market.
• Add vDOT lending market.
• Activate vDOT lending market.

Why vDOT

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

Recent Developments and Collaborations

• The growth of vDOT in last month: The total vDOT volume staking has exceeded 1,450,000, with a monthly growth rate of 11.23%.
• Utilities of vDOT in cross-chain scenarios: Bifrost has completed the asset registration of all vToken on the Moonbeam and Moonriver network. Users can use the Moonbeam App to interact with xcvDOT and transfer assets between Bifrost and Moonbeam. Moonbeam App bridge: https://apps.moonbeam.network/moonbeam/xcm
• vToken voting in relay-chain: This feature allows users to participate in Kusama’s OpenGov governance (vDOT will be the next) on Bifrost parachain. It is currently in the final testing phase and is expected to be launched on the Bifrost Dapp next month. For more details, please refer to: https://x.com/0xLurpis/status/1706326874421661763?s=20
• vToken Stable Swap: It utilizes the LST Stable Pool to achieve low slippage swaps between LST and its original token. All vTokens on Bifrost Kusama have been adapted for Stable Swap. https://bifrost.app/swap?tab=pool
• vDOT Vault on Interlay: Interlay has proposed vDOT as collateral for Vault creation, allowing anyone to choose vDOT as collateral when establishing an IBTC Vault on Interlay. The staking reward feature of vDOT will enhance the collateral income for Vault creators, enriching the revenue attributes of Interlay Vault collateral.
• vDOT minted by HydraDX Treasury, via XCM: HydraDX used the treasury address to cross-chain invoke Bifrost SLPx and minted 81,800 vDOT, which was automatically transferred back to HydraDX to enrich the treasury revenue. This transaction was completed in one step with the help of SLPx. https://twitter.com/TheDolpha/status/1706358817225646177

What benefits for Interlay lend market?

• Increase passive income for lenders and expand the TVL of the lend market.

vDOT naturally earns rewards from DOT staking, therefore vDOT lenders can earn DOT staking APY + Lend APY + INTR APR.

• Introduce Leveraging Staking, combining staking rewards.

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?

1. First, collateralize IBTC, DOT, vDOT or USDT in the Lend Market.
2. Borrow DOT and mint to vDOT.
3. Collateralize the borrowed vDOT in the Lend Market and repeat the above steps.

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.

Technical Details

Extrinsic: https://polkadot.js.org/apps/?rpc=wss%3A%2F%2Frpc-interlay.luckyfriday.io%2F#/extrinsics/decode/0x0302086400010300000030390a00d0bf0b00a086010020a107000000ee042cfc430f00000000000000000000000000000000000000000000000000000000000000c52ebca2b10000000000000000000000b2d3595bf006000000000000000000350c00010000c16ff286230000000000000000000000c16ff28623000000000000000000020400000064010103000000