Please read the comments from Bifrost below, they clarify some details which this article lacks!
The Technology
Bifrost is a defi (decentralized finance) application that mints vouchers in the form of “vTokens” and “vsTokens.” They provide an intermediate layer between staking and trading KSM and also provide liquidity to their crowdloaners’ locked KSM. This is perhaps the one thing that sets Bifrost apart from other parachains: they are the only ones who will provide 100% liquidity of their loan to their loaners on day one. Bifrost is also intent on creating a decentralized application to stake ETH along with other stake-able tokens as well, providing liquidity vouchers to users of Bifrost’s dApp. Bifrost is trying to be the defi of stakers!
Bifrost is not attempting to mimic the Kusama-Polkadot duality like some other parachains are. Bifrost is stand alone and plans to deploy on both relay chains with a crowdloan reward preference toward DOT loaners.
The BNC Token
BNC is the token that powers the Bifrost ecosystem by incentivizing the minting of vTokens. It is also used to regulate governance and to back Bifrost nodes with slash collateral. Bifrost has a built-in decrease of mint rewards over time where 3,600,000 BNC will be rewarded to liquidity providers in the first year and only 225,360 BNC in the 10th year.
The total supply of the Bifrost token is set at 80,000,000: 1/5th of which will be used to incentivize the minting of vTokens.
The Crowdloan Reward
- 2.25% of the total supply going to Kusama parachain crowdloaners (1,800,000 BNC)
- BNC:KSM ratio (TBD, depends on winning bid)
- Assumed 48 week long lease (they have not published their intended lease period)
- KSM is locked but they mint vsKSM which can be used in their defi app effectively making your loan liquid.
- BNC reward is released at the end of the lease once a loaner returns their vsKSM for their KSM back
Since Bifrost has not promised any kind of ratio, the reward is dependent on the winning bid. To help with understanding how Bifrost liquidates their loan to their loaners, here is a comparative chart:
Let’s also look at potential outcomes of the auction:
Keep in mind that the trade-off from staking column is effectively moot because Bifrost will allow crowdloaners to liquidate their loan during the lease period. Also take note that vsTokens do not have to apply to the Bifrost crowdloan alone. If Bifrost wins a slot then all future parachain loans can be liquidated through Bifrost making it an extremely valuable early slot winner! Imagine if Bifrost wins the first slot and Karura the 2nd, everyone could keep the KSM they bond toward Karura liquid through Bifrost.
Overall Evaluation
Risk: Low
Reward: Medium
Novelty: Low
Utility: High
The best thing about Bifrost is that they allow users to liquidate their loan right off the bat. That is why I see this as a low risk project because no matter what you will have access to your bonded KSM in the form of vsKSM. They have made it so that there is literally nothing to lose and everything to gain from bonding toward their project.
Although the reward for parachain crowdloaners is only 2.25% of the total supply, it is enough to justify bonding KSM especially if that KSM is still available after bonding. That is why I think the reward is middle-of-the-road.
Defi is inevitable in Kusama and it is not a very unique idea. While Bifrost’s flavor of defi is interesting I do not see it as a revolutionary dApp technology. That is not to say it is a bad technology, only that it is an obvious one. However, the fact that users can stake more than just KSM on Bifrost is highly useful and allows stakers of ETH and other blockchain tokens to interact with the relay chain.
