Is It Time to Start Staking Again?

Market Meditations | July 7, 2022

Bifrost Finance was the 5th winner of a parachain auction on Kusama back in July of 2021. The liquid staking platform is seeking a 50,000 KSM loan from the Kusama treasury worth $2.5 million.

  • In exchange for staking coins on Bitfrost, users receive ‘vtokens.’Thetokens can be deployed in defi protocols on PolkaDot or Kusama.
  • The loan will be used for liquidity for the staked KSM derivative called vKSM (similar to stETH). If approved, the loan will allow Bifrost to incentivize vKSM utilization across both chains. 
  • The proposal requests the loan for one year, offering a generous 19% interest rate.
  • Bifrost plans to split the loan between Solarbeam, a decentralized exchange on Moonriver, and Taiga Protocol, a derivatives protocol similar to Synthetix. Each protocol will receive 25,000 KSM to provide liquidity for the KSM/vKSM trading pair.

The loan has not yet been approved, but can currently be voted on by the Council, the Polkadot and Kusama governing body, and the general community. Given the recent climate in centralised finance, it will be interesting to see what incentives are given to stakers, and whether those incentives will bring the volume and TV that they have in the past for other chains.