What is Bifrost? (BNC)
The Beginner’s Guide to Bifrost BNC
Cryptocurrency staking allows users to lock their tokens into smart contracts to earn staking rewards. However, one of the major limitations with traditional staking is that those who lock their cryptocurrency cannot access their funds to participate in various DeFi activities.
The Bifrost team aims to remove this particular blocker by introducing liquid staking, a concept that allows users to stake any cryptocurrency using the Bifrost platform, such as DOT or ETH, and receive a vToken of equal value (vDOT or vETH) in exchange.
These vTokens subsequently allow anyone to access DeFi on Kusama without having to give up more than a small amount of their staking rewards.
Bifrost’s token BNC is expected to be airdropped to community members who use their KSM, Kusama’s cryptocurrency, to vote for the application to go live as a parachain on Kusama in a process called a Parachain Auction.
Bifrost BNC Network Design
The Bifrost parachain is designed to act as an additional layer between Kusama’s Relay Chain and the application layer within the Kusama network.
Participants can send their proof of stake (PoS) cryptocurrencies (like ETH, KSM or ADA) to the Bifrost protocol and convert them to a corresponding vToken (vETH, vKSM or vADA) in order to earn staking rewards.
vTokens give these participants the liquidity they need to participate in the Bifrost DeFi ecosystem. For example, those who own vTokens can use vTokenSwap, an automated market maker (AMM) trading pool that allows them to trade between 64 pairs in a single pool of 8 currencies.
Of note, vToken holders can also use them to access other DeFi applications in parachains built on the Kusama network.
BNC Token Launch & Issuance
The Kusama network is built to operate two types of blockchains:
- Relay Chain – Kusama’s main blockchain that provides the network’s main security and is where transactions are finalized and settled
- Parachains – Custom blockchains that leverage Kusama’s relay chain security and access one of its limited parachain slots
Bifrost is one of the first projects to bid for a parachain slot in the Kusama network through a parachain auction.
During a parachain auction, Kusama holders can bond their KSM in support of the project they believe should receive a parachain slot. At the end of a determined period of time, the project with the most KSM committed to their campaign generally wins access to a parachain slot, allowing them to operate on Kusama’s network for a 6-48 week period.
The Bifrost team will crowdsource support for its parachain auction bid by accepting community contributions. If Bifrost wins an auction, supporters are expected to receive Bifrost’s BNC token.
Of note, if Bifrost fails to win a parachain slot, the KSM committed to their bid by community participants will be returned at the end of Bifrost’s auction campaign. If Bifrost wins an auction, the bonded KSM will be returned to participants when Bifrost’s access to the parachain slot expires.
For more information on Kusama parachain auctions, visit our Parachain Auctions page which covers the topic in more depth.
Bifrost BNC Tokenomics
The BNC token plays a key role in maintaining and operating the Bifrost network and can be used for:
- Transaction fees – These fees are collected for transfers, transactions and staking actions done on the Bifrost network and held in a treasury to support network development.
- Collateral – Participating nodes stake BNC to ensure good behavior. Collateral will be increased or decreased based on node performance.
- Governance – BNC holders gain the ability to propose and/or vote on network upgrades, with each vote being proportional to the amount of BNC cryptocurrency they hold
Like many other cryptocurrencies, the total supply of BNC is limited to 80 million BNC tokens, roughly 2 percent of which will be allocated to those who participate in the Kusama parachain auction.