Overview

Bifrost is a Liquid Staking app-chain tailored for all block chains leveraging off the Polkadot SDK. Bifrost currently stands as the most extensive liquid staking protocol on Polkadot, Kusama, Astar, Moonbeam, and Manta. The total TVL is $63M, and the annual protocol revenue is approximately $1.5M. The fixed issuance of its token BNC is 80M, with no inflation.

In the second half of 2024, the core mission of the Bifrost Team is to launch Bifrost 2.0. This major update includes several key initiatives:

• Bifrost will launch its new tokenomics.
• Complete the cross-chain integration and merging of Bifrost Kusama and Bifrost Polkadot parachains into one.
• Achieve decentralization of the Bifrost Polkadot Collator set.
• Ensure compatibility with the EVM ecosystem and establish cross-chain connectivity with Ethereum and its L2.
• Launch the BNC 2.0 launch campaign.

In the field of cryptocurrency, there is a viewpoint that suggests: Tokens are a greater invention than blockchain technology itself. This statement may sound sensational, but it serves as a reminder that tokenomics design is crucial for the success of crypto protocols and broadly for businesses.

In order to further expand Bifrost's market share in the liquidity staking track and make BNC holders more closely bound to the Bifrost protocol, this new BNC economic model is now proposed to stimulate the start of Bifrost's growth flywheel by binding the Bifrost protocol revenue sharing with BNC governance and staking functions.

Proposal

This proposal suggests using 100% of the profits from the Bifrost protocol for the buyback of BNC, with 90% allocated to bbBNC holders and the remaining 10% to be burned. bbBNC, short for Buy Back BNC, is a type of escrow token used for sharing the protocol's profit.

What is bbBNC?

Users can obtain bbBNC by liquid staking BNC to acquire vBNC and then locking this vBNC to receive bbBNC. The amount of bbBNC a user gets depends on the quantity of vBNC locked and the duration of the locking period.

bbBNC is non-transferable and can be redeemed for locked vBNC upon maturity. However, bbBNC can be redeemed before maturity, but users may face a slash for redeeming earlier than the set date. Slash will be fully counted as protocol revenue and will participate in BNC buybacks, burns, and bbBNC incentives.

Benefits of Holding bbBNC

• Profit Distribution: bbBNC holders will share protocol profits. The distribution proportion depends on the amount of bbBNC held and the length of the locking period. The larger the holding and the longer the lock-up period, the higher the share of the profit distribution.
• Staking Rewards: bbBNC, obtained by locking vBNC, integrates the staking rewards from Bifrost liquid staking token vBNC.
• Governance Rights: bbBNC inherits the governance rights of BNC, allowing holders to participate in the governance of the Bifrost protocol.
• Boosted farming: bbBNC holders can receive additional incentives when participating in vToken farming.

Sources of Bifrost Protocol Revenue

• vToken Commission: The protocol earns a commission from staking rewards through its liquid staking services, which are then transferred to the protocol treasury. This is a significant part of Bifrost's revenue.
• System Staking: This is generated by staking assets within the Bifrost system account.
• Tx Fee: As an independent app chain, Bifrost charges gas fees for transactions on the Bifrost chain. A percentage of these fees is allocated to the Bifrost treasury.
• vToken Swap Fees: Bifrost has established a dedicated LST Stable Swap Pool for vTokens. Users can swap vTokens in this pool, and the Tx fees paid will largely go to liquidity providers (LPs), while a portion will also be shared with bbBNC holders.
• Expanded Application Revenue: Bifrost will also launch various extension application services centered around liquid staking, including LST leverage staking (Loop Stake). Users utilizing these services will generate revenue for the Bifrost protocol, thereby providing returns for bbBNC holders.
• bbBNC Early Redemption Slash: If bbBNC is redeemed before maturity, a certain slash will be incurred, and the slash will be fully allocated to protocol revenue.

How to get bbBNC:

Lock vBNC and receive bbBNC. The bbBNC value is proportional to the amount and duration staked (up to a maximum of 4 years). Each address is associated with a single bbBNC expiry date, and bbBNC can't transfer.

BNC -> vBNC -> bbBNC

The bbBNC value is a key indicator for participating in dividends. Simply put, the higher the proportion of bbBNC value in the overall, the more you might get in various bbBNC holdings benefits.

Your bbBNC value will decrease over time and will reach zero once the lock duration ends. At this point, your staked vBNC will be unlocked.

Locking time of each vBNC	bbBNC value
4 years	1
2 years	0.625
1 year	0.4375
3 months	0.296875
Expired	0

Redeem bbBNC to unlock vBNC in advance:

For users who need to unlock bbBNC immediately to retrieve locked vBNC in advance, Bifrost offers a method of early unlocking. However, this comes with a certain slash, the amount of which is related to the time of early redemption. The relevant formula is as follows:

Redemption Slash % = ((Remaining locked blocks + 2,628,000) / 10,512,000)^2
The vBNC that users can get by unlocking in advance = Locked vBNC * (1 - Redemption Slash %)

Unlock Time left	Unlock Block left	Redeem Immediately Slash
3 Months	657,000	9.77%
6 Months	1,314,000	14.06%
1 Year	2,628,000	25.00%
2 Year	5,256,000	56.25%
3 Year	7,884,000	100.00%

bbBNC Growth Flywheel

Higher BNC value capture leads to a higher market capitalization for Bifrost, which in turn drives more LST application scenarios. More application scenarios will promote an increase in the comprehensive yield of vTokens (staking yield + vToken restaking yield), resulting in more vToken minting. More vToken minting means more protocol revenue, which will enhance the returns for bbBNC holders, further capturing more value for BNC and forming a positive growth flywheel. bbBNC serves as the engine of this growth flywheel, aligning the interests of token holders closely with those of the Bifrost protocol and providing greater motivation to contribute to the co-development of the Bifrost protocol.

Bifrost 2.0 Progress and Roadmap

The Bifrost 2.0 upgrade has officially launched. bbBNC core logic code development is complete and in the testing process. Currently, BNC 2.0 functions, parameters, and allocation methods are still in the draft stage. Please put forward your expectations and suggestions here, or you can join the community at discord.bifrost.io to get the latest updates.