How to unravel Staking and DeFi’s Gaming Situation?
By: Bifrost Finance
Tags: Staking, Defi, Crypto, Polkadot, Blockchain

The Conflict Between Staking and DeFi

DeFi (Decentralized Finance) is undoubtedly one of the hottest blockchain technology application tracks, and one of the easiest tracks to land. After all, blockchain technology and finance are closely related.

Among the many Public Chain DeFi, Ethereum has the first-mover advantage and is also the best developed today, far surpassing the layout of EOS and TRON in the DeFi track, and currently developing the best DeFi application. For example, MakerDAO, Compound, Synthetix, Uniswap, etc., are all DeFi applications built on Ethereum. Especially after Compound issued the governance token COMP and proposed the “borrowing is mining” model, the platform’s business volume and lock-up volume greatly increased, and the token price also skyrocketed in just a few days Many times.

The popularity of Coumpound has not only driven ETH DeFi, but also the entire DeFi market. For a while, projects and cryptocurrency users have flooded into this “prosperous” market.

For users who hold encrypted assets, DeFi allows cryptocurrency to have more application scenarios. Users can make arbitrage on DeFi products, such as borrowing EOS from the hands of DeFi products to obtain certain benefits.

At the same time, cryptocurrency holders can also stake the tokens in their hands to obtain a certain amount of reward. Most of today’s PoS networks have relatively complete staking products, such as REX in the EOS blockchain. It is to obtain certain rental reward through staking of some free resource of EOS.

However, if you participate in staking, you will lose a certain amount of liquidity due to the locked position. If the market fluctuates greatly, you will miss the opportunity to trade.

For digital currency users, staking can be used to obtain reward, such as ETH 2.0, and DeFi can also be used to earn interests.

However, for chains that adopt PoS consensus, there is a certain contradiction between Staking and DeFi. If there is too much staking, although the PoS blockchain network is more secure, the tokens are locked, and DeFi users will decrease, which will inevitably affect the development of the DeFi market. On the contrary, if all the tokens are used for DeFi, there will be fewer staking users, and fewer tokens will be locked through staking, which will inevitably affect the security of the PoS blockchain network.

For users, not doing staking will be inflation, doing staking will be locked up, the market rises and missed opportunities, the market falls are helpless, and often it is not possible to have both income and liquidity.

So, is there a solution that can reconcile the contradiction between Staking and DeFi? Can you have both reward and liquidity?

What problem does Bifrost solve?

In order to reconcile the contradiction between Staking and DeFi, and to solve the problem between reward and liquidity, Bifrost was born.

Bifrost is a cross-chain network that provides liquidity for staking. It is developed based on the Substrate framework and relies on the Polkadot relay network to achieve cross-chain multi-asset support.

Bifrost uses Polkadot’s cross-chain network engineering to bridge various PoS networks (such as ATOM, EOS, ETH2.0) into Bifrost, and map out vTokens (such as vATOM, vEOS, vETH) with staking revenue and liquidity through the Bifrost protocol to help users hedge the risk of staking lock-up.

As the basic protocol for accessing the Polkadot network, Bifrost can safely provide staking liquidity for all kinds of PoS public chains. Users can use Bifrost to complete the risk hedging of staking lock-up. DeFi can use Bifrost to achieve staking for users. Cross-chain You can use Bifrost to realize the transition of staking income.

Users who have done staking know that sometimes the reward generated by staking in a year is less than 10%, but it is very likely that it will fall in a plunge, and users will lose a lot because of being locked. Bifrost allows users to trade while staking, avoiding the loss of funds due to staking lock-up.

For example, in traditional EOS staking financial products, after users staking, EOS will be locked. If the EOS price plummets during the lock-up period, users cannot unlock and sell EOS quickly, and can only passively bear losses.

However, in Bifrost, users only need to exchange their PoS Token into vToken through Bifrost, and hold vToken to obtain staking reward and liquidity (sell at any time).

In the above example, the user converts EOS to vEOS through Bifrost, and holds vEOS. Not only can they enjoy staking reward, but also without losing liquidity, they can sell vEOS in their hands at any time, that is, holding vEOS can have both staking reward and Liquidity, when the price fluctuates significantly, vEOS can be sold in time without being restricted by lock-up.

So, where does the reward from holding vToken come from?

In terms of revenue, it is divided into two parts. The first part of the guaranteed revenue depends on the staking rules of the public chain. For example, the current nomination rate of KSM is 20%, then vKSM will also be at least 20% of the annualized revenue; the second part the reward comes from the bidding for voting rights in the Bifrost Staking Pool. Different nodes are willing to pay a higher premium to purchase the nomination rights, so the corresponding user’s staking income will even exceed the 20% income set by KSM.

At the same time, the Bifrost Staking Pool nomination bid will give small nodes with high-quality services but low votes have the opportunity to compete with giant whale nodes, making the PoS network more decentralized and safer.

Stages of development of Bifrost

Bifrost released the Bifrost Asgard CC1 network on May 21. Asgard is Bifrost’s pre-production network, which can be simply understood as a test network. The project party can connect to the Asgard network for testing before officially connecting to the Bifrost main network, thereby eliminating business risk.

Asgard is like a testing ground. After practice, more valuable features are selected to be integrated into the Bifrost main network. With the development of the Polkadot ecology, the planned Bifrost Asgard will also become Kusama’s parachain network to complete the first parallel chain connection.

In the Bifrost Asgard CC1 network, the EOS Jungle Testnet testnet cross-chain, Token and vToken exchange, SWAP transaction and other functions have been supported.

Bifrost has released the Asgard CC2 network at 12 pm on July 21.

In the Bifrost Asgard CC2 network, EOS two-way cross-chain will change from a single-node signature to a multi-node signature, making the cross-chain more complete! Bifrost plans to open EOS cross-chain at CC2 activities to encourage users to participate in cross-chain testing. Currently, it is possible to connect EOS Jungle Testnet nodes through wallet or Cleos to initiate cross-chain transfer transactions.

In addition, the Validator campaign will be opened in CC2, so that all nodes in CC1 can participate in the block generation verification of the CC2 network. At the same time, Validator will also be included in Bifrost’s incentive plan. Users can receive the test ASG at the Faucet faucet to conduct self-mortgage and nomination operations, and complete the Validator campaign.

In order to cooperate with the operation of the Bifrost Asgard CC2 network, full-node construction, Validator election and EOS cross-chain (vEOS exchange) will serve as the three directions of incentives to make Bifrost more robust by testing network parameter settings, multi-signature logic, and operating load.

This Asgard CC2 incentive is divided into three modules, namely the node duration competition, the EOS cross-chain big PK, and the Validator king contest! The start and end times of the three activity modules are July 21-August 21, and the total reward is up to 15,000 BNC! Compete for BNC and win CC2!