On March 14 this year, FVM was officially launched. Developers can easily deploy EVM-compatible DApps on Filecoin to achieve decentralized storage of DApp data.
At this point, the development of the Filecoin public chain has entered a new narrative, and the global community is also paying close attention to the development of the entire ecosystem in order to realize more Web3 applications and functions.
Filecoin node pledge drives LSD demand
The launch of FVM has driven the "prosperous" development of Filecoin network nodes and storage capacity. On May 3, less than a month after FVM was launched, Filecoin's total network computing power exceeded 20EB, setting a new record. It should be noted that since the 2022 bear market, Filecoin's total network computing power has remained at 19EB for about a year.
The increase in storage nodes and storage capacity has given rise to the market demand for FIL staking, and LSD (Liquid Staking Derivative), as an important solution, has received widespread attention from storage service providers and the community.
What is LSD and what problem does it solve?
LSD means that coin holders can pledge their public chain tokens to the project's Staking pool through a certain DApp project and obtain the corresponding project token certificate, i.e. Token. The public chain tokens in the pool participate in node staking to obtain income, and the income after deducting the node operating costs is returned to the Staking participants.
The tokens pledged by the nodes are locked on the chain, while the certificates generated by LSD are not subject to this restriction. Holders can quickly cash out through market transactions, as well as obtain liquidity of the pledged assets through pledge lending and other means.
Filecoin storage service providers need to pledge a certain amount of FIL when packaging data to form computing power and completing sector proofs to ensure normal data storage and prevent nodes from doing evil. Therefore, the market demand for FIL has always existed. Staking can not only allow storage providers to reduce staking costs, but also provide benefits to Staking participants, and has always received continuous attention from the community.
In fact, many centralized exchanges package user assets into node staking (or lend them to node operators) to provide users with stable returns.
The centralized staking method leads to a lack of transparency. Users cannot tell whether their coins are only used to stake nodes to earn profits or are maliciously misappropriated by exchanges. Improving the transparency of the token staking process has become a top priority. For this reason, decentralized staking is more trusted by the community.
Since the retrieval of FIL staked on the FIL chain requires a long lock-up period, it is very necessary for Staking users of FIL to release the liquidity of locked assets through DeFI. The launch of FVM provides such an opportunity, so LSD on the Filecoin chain will usher in a period of rapid development.
Current Development Status of Filecoin Ecosystem LSD
Long before LSD was proposed, Filecoin's Staking market had already developed. For example, Hashmix (Part 1: Rejecting false computing power, new opportunities for Hashmix computing power tokenization protocol) provided Staking services to users, and Kiki Finance (Part 2: A safe haven in a bear market, how to use Kiki Finance to increase FIL Staking returns) realized decentralized Staking of FIL through the BSC chain.
However, single staking still limits the liquidity of assets for users. The difficulty in quickly retrieving and cashing out staked assets has become a major problem. LSD solves the problem of the liquidity of staked assets and has therefore become the focus of attention.
For users, in addition to security, yield and asset liquidity are also important indicators for Staking. We compared the yields of some mainstream Staking solutions (the data is dynamically changing, the screenshots are the data at the time of writing, for reference only), as follows:
It is not difficult to see from the above comparison that the Staking income of FIL of various projects is not too different. This is mainly because the Staking yield mainly depends on the yield of the storage miner node on the Filecoin chain. This yield itself is dynamically changing, and the additional yield is the empowerment provided by the DApp platform.
Filecoin nodes participating in staking generally implement a multi-signature method to ensure that the income can be distributed stably. Users also have certain requirements for the transparency of node information, which also ensures the security of assets.
Bifrost provides FIL users with complete LSD functions. Users can obtain vFIL through Staking, participate in vFIL-FIL LP liquidity mining, and realize the rapid realization of Staking assets through Swap.
Filet currently supports BSC and HECO networks. It is an early staking solution. The official recently launched the V2 version, which supports the FVM chain and provides two fixed-term staking FIL mining FIL products of 180 days and 360 days.
Hashmix focuses more on providing platform services for miners and pledge users. Through Hashmix, FIL miners and holders can be connected to realize staking and lending services.
MFIL mainly provides Staking for the FIL network in the form of DAO. Users can mint MFIL Tokens through FIL and obtain income by staking MFIL.
STFIL is based on the FVM network and currently mainly provides the Staking function of FIL. In the future, it will provide users with LSD services on this basis to release pledge liquidity.
In addition, for some other staking projects including Collectif DAO, the FIL Staking function has not yet been officially launched, so I will not go into details.
By comparison, we can find that Bifrost is currently the project with relatively complete LSD functions in the FIL ecosystem. Next, we will focus on disassembling Bifrost. Other projects that we have not yet touched upon will be explained in detail in the subsequent LSD track series of articles. It must be emphasized here that the LSD track of the Filecoin ecosystem is still in its early stages of development, and everything is possible in the future.
Advantages of Bifrost in FIL Staking
Bifrost (official website: bifrost.finance, product: bifrost.app) is a Layer 1 Staking public chain in the Polkadot ecosystem. It mainly provides cross-chain liquidity solutions. It is currently a Staking connector between multiple chains, supporting the Staking and liquidity release of ETH, DOT, FIL, KSM and GLMR.
Bifrost was founded in the last bear market and was one of the earliest projects involved in Ethereum POS staking. In December 2020, Bifrost launched the vETH functional module. After that, Bifrost also actively promoted the application scenarios of vETH, such as establishing a vETH liquidity pool. In addition to obtaining Staking income, users can also participate in vETH-ETH liquidity mining and conduct transactions. While releasing liquidity, they can also participate in DeFi activities across chains in the Polkadot parachain.
In May of this year, Bifrost officially launched the Staking function of FIL. Users can obtain a rate of return of about 14%-20% by staking FIL through Bifrost. Compared with centralized exchange financial management or direct node staking, the income is significantly increased. level. The launch of the FIL Staking function has also been recognized by the market, and the total staking amount is currently close to 90,000 FIL.
At the same time, Bifrost has launched the vFIL-FIL LP Farm function and the vFIL trading function. Users can also participate in LP and obtain a yield of about 8.16%, which improves the overall liquidity of vFIL.
Bifrost releases the liquidity of FIL in Staking in the form of v-FIL. At the same time, it introduces FIL into the Polkadot ecosystem, providing more possibilities for FIL:
1. Cross-chain brings more application scenarios to FIL
The launch of FVM makes the cross-chain of FIL and Bifrost easier. Bifrost uses the SLP protocol (Staking Liquidity Protocol) to provide Staking derivative functions for the Polkadot ecosystem. This protocol uses cross-consensus message communication XCM to transmit cross-chain Staking information and use it to mint decentralized vFIL interest-bearing tokens.
Through cross-chain, Bifrost enables FIL holders to participate in the DApp applications of various parallel chains in the Polkadot ecosystem, which also greatly expands the application scenarios of FIL in Web3 and directly empowers FIL.
2. Security and transparency
Bifrost provides users with public Staking information and node block information, so that users can view the operation status of Staking nodes, thus ensuring that the income from staking is used to reward Staking users. At the same time, Bifrost participates in the management of nodes through multi-signature contracts to ensure the security of user assets.
Bifrost improves cross-chain security by enabling cross-chain communication with various parallel chains, smart contracts, and other public chains through SLP. vToken further aggregates Staking derivatives on the Bifrost chain, providing richer application scenarios. In addition, Bifrost's Staking cross-chain has not had any smart contract security incidents since 2020, and the security of smart contracts has been verified through actual operation.
3. Newbie-friendly and easy to operate
Bifrost provides a complete Dashboard page for FIL Staking users, where users can monitor FIL Staking income, total staked amount, and vFIL liquidity. At the same time, the Bifrost page UI is relatively clear, the user cross-chain operation process is simple, the waiting time during the cross-chain process is relatively short, and the experience is high. This is mainly due to Bifrost's SLP cross-chain message module, which can quickly realize liquidation and staking operations.
Bifrost has ensured the transparency, functionality and security of releasing Staking liquidity, while also having certain advantages in terms of yield.
LSD continues to explore FIL scenarios
There are two ways to participate in FIL Staking through DApp. The first is to stake directly through DApp, such as transferring FIL across the chain to the Bifrost network through Bifrost as mentioned in the article, and then participating in Staking in DApp.
The second method is to directly purchase the corresponding Stake asset certificate. For example, in Bifrost, vFIL is the certificate obtained by the user after participating in Stake. Users can obtain Staking income by purchasing vFIL.
It is not difficult to find out from the research that Bifrost’s innovation in LSD is to regard vFIL as an interest-bearing asset that includes interest. Its Staking income is already included in the price, which means that the price of vFIL will be slightly higher than the market price of FIL. However, most of the Stake assets in the FIL ecosystem have not yet included interest income in the Stake certificates. Generally, the platform will issue them regularly or users can manually claim Stake income. Interest-bearing assets have greatly reduced the difficulty for users to participate in the LSD track and simplified the process.
In addition, in order to reduce the waiting time for users to Unstake, the author learned from public information that Bifrost is currently developing a fast Unstake function, which mainly matches Stake orders with Unstake orders, thereby reducing the waiting time for users to redeem and improving the efficiency of capital utilization of participants. This will also be a potential solution for capital exit needs in the LSD track in the future.
It can be seen that the LSD track is currently full of vitality, and the introduction of many innovative functions has also provided convenience for users to participate, exit and increase returns. In the next year, if community partners see good LSD projects, please feel free to recommend them to us for research.
summary
Bifrost releases the value of FIL tokens through FVM cross-chain, introducing FIL into the Polkadot parachain world. It also prospers the application scenarios of vToken and increases the empowerment of vFIL in DeFI applications, which is of great significance to the FIL Staking track.
The launch of FVM allows Filecoin to complete the data storage function that most public chain smart contracts do not have, and also fully explores the potential of Filecoin. It can be foreseen that with the rapid advancement of Web3 and emerging technologies in the future, the demand for data storage will continue to increase. As distributed storage, Filecoin can provide cheap and reliable data storage methods and will inevitably be popular. Filecoin's LSD market has obvious development potential.