Polkadot has granted Dedicated liquid staking middleware Bifrost a 500,000 DOT treasury loan, the company stated. The one-year loan is meant to support the adoption, utilities, and use cases of the asset across DeFi dApps within the Polkadot ecosystem, including Substrate and EVM parachains. It was made possible after the Bifrost Foundation successfully laid out a Treasury proposal in January.
Remarkably, the Polkadot-driven Bifrost has promised to pay back the whole DOT liquidity loan plus the yield from the rewards it earns from staking. This arrangement follows the successful model established by Kusama’s two prior successful 50,000 KSM Treasury liquidity loans under the protocol.
The minting of vDOT for the Polkadot Treasury “represents a strategic diversification approach, effectively putting its DOT capital to productive use over 1 year, while ensuring the return of its 500,000 DOT principal with staking rewards,” per the most recent proposal submitted to Polkadot in January.
With 1.1% of voters against (748.1k DOT) and 98.9% of voters in favor (69.2m DOT), the referenda were carried by a substantial majority. With the approval, Bifrost will get the funds within the next 12 days.
At the time of writing, the 500,000 DOT loan was worth $3.9 million. This is a major milestone for Bifrost, the most popular liquid staking mechanism in the Polkadot ecosystem, with over 6.5 million DOT tokens staked on its platform.
Bifrost has a significant impact on various Polkadot parachains, such as Astar and Manta, and goes beyond the Polkadot ecosystem since it has long allowed ETH staking. One of the first liquid staking options for Filecoin was also introduced by Bifrost last year.
The acceptance of Bifrost’s loan is indicative of the increasing complexity of Polkadot’s canary network Kusama and the use of its decentralized governance platform OpenGov. Bifrost and others have shown that Polkadot is prepared to accommodate base-layer DeFi primitives that encourage adoption by meeting the needs of many financial use cases, even when the blockchain’s treasury was not always linked to DeFi. Meanwhile, Polkadot community members are guaranteed a voice in the allocation of treasury funds via the network’s OpenGov procedure.
