FAQ
Q: What is Bifrost ?
Bifrost is a DeFi protocol (https://wiki.bifrost.finance/general/what) that connects with Polkadot and different PoS blockchains to provide staking derivative though XCMP or Smart Contract.Bifrost is a web3 derivatives protocol that provides decentralized cross-chain liquidity for staked assets. By leveraging on the cross-consensus message (XCM) it can provide cross-chain liquid staking services for multiple chains.Bifrost’s mission is to provide standardized cross-chain interest-bearing derivatives for Polkadot relay chains, parachains, and heterogeneous chains bridged with Polkadot. Furthermore, by aggregating over 80% of PoS consensus chains’ staking liquidity through cross-chain derivatives, our protocol lowers users’ staking threshold, increases multi-chain staking ratio, and improves the ecosystems application interest base, by creating a three-way positive cycle for the StakeFi ecosystem by empowering users, multi-chains, and ecosystem applications.You can find roadmap the current updates for roadmap 2023 (https://bifrost-finance.notion.site/7df6abf2acb54b398df75230e157c7da?v=02ecfe941c5242c3b5f8c77654512b80)
Q: Why the Bifrost name ?
In Norse mythology, Bifröst (https://en.wikipedia.org/wiki/Bifr%C3%B6st) is a burning rainbow bridge that reaches between Midgard (Earth) and Asgard, the realm of the gods. The bridge is attested as Bilröst in the Poetic Edda; compiled in the 13th century from earlier traditional sources, and as Bifröst in the Prose Edda; written in the 13th century by Snorri Sturluson, and in the poetry of skalds.According to the Prose Edda, the bridge ends in heaven at Himinbjörg, the residence of the god Heimdallr, who guards it from the jötnar. The bridge's destruction during Ragnarök by the forces of Muspell is foretold. Scholars have proposed that the bridge may have originally represented the Milky Way and have noted parallels between the bridge and another bridge in Norse mythology, Gjallarbrú.
Q: Why do i find two Bifrost companies ? Which one is the good Bifrost ?
There are 2 companies having the same name in the crypto world.
- The « good one » is https://bifrost.finance/, ticker = BNC, deployed on Substrate (Polkadot/Kusama).
Q: The Team
Q: Is there an announcement channel ?
On Telegram: Join the the official Bifrost announcement channel at https://t.me/bifrost_announcements to get the latest & fresh news
Q: What are the other community channels ?
Q: Bifrost tokenomics and BNC use cases?
Q: When Listing?
BNC was officially listed on 2021 Oct 21st after 2 days of bootstrap event (https://medium.com/bifrost-finance/bifrost-launches-on-karura-swap-with-over-200k-bnc-in-liquidity-mining-rewards-abfcb87b2d2e?source=collection_home---4------5-----------------------) on Karura. The bootstrapped pool reached an amazing 900% over the initial target.
Q: Where can I buy or trade BNC token ?
Q: What is the difference between staking directly on Polkadot.js and staking through Bifrost
Staking through Bifrost requires locking tokens, and there is no vDOT liquidity available for staking rewards. However, vDOT can be used for liquidity mining and collateral, and also requires learning how to choose nodes and optimizing node selection strategies for maximum profits.
Q: When participating in staking through Bifrost, why are the staking rewards higher than staking directly on Polkadot? Is it compounded? How can it be compounded?
Bifrost optimizes node selection algorithms, automatically balances node voting, and maintains the best node selection strategy. vToken is compounded. The staking rewards received by SLP are first calculated based on the ratio of vToken and token and then the vToken exchange rate is adjusted upwards. The staking rewards are then staked again into nodes, which means that vToken is compounded. Holding vToken allows one to earn compounded returns.
Q: What comprises the vToken earnings? How is it distributed, and what is its composability?
vToken earnings consist of basic earnings and derivative earnings. Basic earnings refer to staking rewards, and the latest version of the Bifrost DApp shows the daily earnings. Derivative earnings refer to the additional earnings generated by using vToken elsewhere, such as 5.2% liquidity mining for vDOT. The derivative earnings depend on how vToken is used, and it is not tracked on the Bifrost DApp.
Q: Will vToken be maliciously inflated? How to prevent malicious inflation?
The issuance of bifrost vToken is constrained by code, and artificial inflation is impossible. When tokens are minted, corresponding vToken is minted. The security of the code is ensured by multiple code audit companies, internal cross-team audits, real-time monitoring of issuance and reserve amounts, and emergency processing plans.
Q: Why can't vToken earnings be withdrawn separately?
vToken earnings can be withdrawn separately. For example, if 100 DOT is used to mint 100 vDOT today, after one week, 100 vDOT is equivalent to 105 DOT. You can redeem 4.76 vDOT = 5 DOT, and the remaining 95.24 vDOT is still equivalent to 100 DOT. You can also automate this process through OAK or other parachain.
Q: How does Bifrost ensure the security of funds, including contract security, non-custodial security, and whether there will be slashing penalties? How does Bifrost protect assets if the project team runs away?
Bifrost's code is open-source and transparent, and the security of funds is ensured by code constraints, which cannot be controlled by humans, establishing trust through blockchain. 1. Multiple code audit companies audit the code. 2. Internal cross-team audits. 3. Real-time monitoring of issuance and reserve amounts. 4. Emergency processing plans. Slash penalties are possible, and the Bifrost white paper defines three ways to deal with it: 1. 20% of vToken commission revenue enters the vToken Slash public insurance fund. 2. BNC reserves 5% of tokens as protocol insurance funds. 3. If the public insurance fund and protocol insurance fund are insufficient to compensate, the vToken exchange rate will be lowered, which is equivalent to all vToken holders sharing the compensation. The probability of a slash is low, and the amount is small. vKSM has been running for a year and a half, and there has only been one slash, which was caused by Kusama's upgrade and was ultimately canceled through governance.
Q: Why is the redemption period for vDOT shorter than the normal redemption period of 28 days for DOT staking on the Polkadot chain?
The vDOT redemption has a matching function. When vToken is minted, the protocol checks whether there are people redeeming in the redemption queue. If there are, DOT will be paid to the redeeming party first instead of being used for staking. Therefore, the redemption period is less than 28 days.
Q: What are the risks associated with farming in the Bifrost network? What are the risks associated with LP? Will there be impermanent loss? How to solve the problem of insufficient liquidity?
There are almost no risks associated with vToken farming, and the only risk is that the overall yield is lower than the staking yield. Providing LP requires a pair of tokens, one of which does not have staking rewards. If the staking yield is higher than the farming yield, then exchanging everything for vToken yields more profits, and there are no losses. Trading fees and incentives will maintain liquidity at a relatively high level, and Bifrost will optimize the vToken trading pair algorithm to increase capital utilization.
Q: When using DOT to mint vDOT, why is the ratio not 1:1? How are vToken staking rewards distributed?
The vDOT price has been rising, and when vDOT is redeemed, the principal and earnings are withdrawn together.
Q: What is the source of the project team's revenue?
10% commission fee, 0.1% unstake fee, on-chain transaction fees. As long as the vToken issuance volume is high enough, the protocol will continue to make money.
Q: Why is DOT inflation around 10%? If the funds in the treasury are not distributed in an era, will they be destroyed continuously, and can this destruction partially resist inflation?
Yes, the treasury destroys 1% of the DOT balance in each era. If the treasury revenue increases and the balance increases, the amount destroyed will also increase, which can partially resist inflation.
Q: The average staking yield for DOT on Polkadot.js is 15%, while the basic staking yield for vDOT is 24%. Why is Bifrost's staking yield so much higher? Is the staking reward source from the Bifrost project team? Will they run away if they cannot pay out? How to retrieve assets if they run away?
vDOT earnings include basic staking earnings and derivative earnings. Basic staking earnings benefit from Bifrost's optimization algorithm for node staking and are typically 1% to 5% higher than direct staking earnings. Derivative earnings come from additional earnings generated by using vDOT elsewhere, such as liquidity provision and lending, so comprehensive earnings can reach 24%. Therefore, the high yield of vDOT is sustainable, and there is no risk of being unable to pay out. Moreover, vDOT is completely decentralized, and ownership belongs to the user. Users can interact with the blockchain at any time to retrieve assets. Here is a comparison chart from Bifrost's Polkadot Decoded presentation.
Q: If there is an emergency situation with Bifrost, will my assets be affected if my DOT is staked on the Bifrost platform?
DOT is staked through the Bifrost parachain's sovereign account, which has no private key and cannot be controlled unilaterally by any individual or organization. Therefore, the risk of exposure is low, unless the Bifrost parachain is completely controlled by hackers. However, it takes 28 days to withdraw DOT, and attacks can be intercepted through governance and other means. The Bifrost code has undergone multiple rounds of audits by different audit companies, and the SLP protocol has been running without incidents for nearly two years. Therefore, the probability of emergency situations is low.
Q: There is a shortage of liquidity in the entire Polkadot ecosystem, especially now that the market is slowing down, and liquidity is diminishing as it flows into various parachains. How to solve the problem of insufficient liquidity?
In the current market stage, the entire industry is facing a lack of liquidity, which is due to a lack of market activity and insufficient new capital. The Polkadot ecosystem can respond in two ways: 1. Aggregate liquidity as much as possible through technical means to increase capital utilization. 2. Establish a more secure and decentralized cross-chain bridge, bridge the Polkadot ecosystem with more blockchains, and introduce more liquidity. Bifrost is also building Polkadot ecosystem liquidity through these two approaches.
Last modified 1mo ago