DESCRIPTION OF BUSINESS
Bifrost is a cross-chain network which provides liquidity to staked assets in the form of staking derivatives.
The project operates on the Polkadot network, developed by Substrate. Bifrost Finance can be subject to competition from staking derivatives platforms (e.g. Kira Network) and decentralised projects that track PoS token baskets and offer wrapped products (e.g. StakerDAO).
On Polkadot’s terms, ‘a parachain is an application-specific data structure that is globally coherent and validatable by the validators of the Polkadot Relay Chain. Most commonly a parachain will take the form of a blockchain, but there is no specific need for them to be actual blockchains.’
The project’s website and whitepaper do not list team members. Although, since the project is open-source, we were able to track down its contributors through the Bifrost Finance Github account, which lists three people (Lupris, Edwin and Jianping Deng) to be involved in development. Two of them are based out of Shanghai, China, and one of them out of Hunan, China.
Bifrost Finance is raising funds by offering BNC tokens in a seed round, a private round, and a public round. The seed round was completed by securing $600,000. The private round, at the time of writing, is still happening. Assuming that all the seed round tokens (8 million) were sold for the announced capital of $600,000, we can arrive at a per-token price of $0.075. The token price for the private round is still unknown, as well as any information regarding the public sale.
Our researchers gave Bifrost Finance a final rating of 50.8%. The breakdown of this rating is available at the end of this report.
PRODUCT & COMPANY DESCRIPTION
Bifrost Finance is built as a “parallel chain” using Substrate, a paradigm of the recently launched Polkadot blockchain. The project aims to provide its users with the opportunity to earn staking rewards, whilst at the same time providing liquidity to their tokens. It seeks to offer three services: a hedge for staking assets, double rewards, and leverage to expand staking principal.
Polkadot is designed for cross-chain interoperability and as a potential alternative to Ethereum (and Ethereum 2.0’s proof of staking consensus mechanism). It uses Polkadot’s GRANDPA consensus algorithm to perform staking, planning to capitalise on a) the blockchain industry moving to different variants of PoS and, b) the rapid rise of the DeFi ecosystem.
Bifrost Finance’s mission is to:
“(…) resolve the Staking – DeFi competition and its liquidity and security conflicts.”
Bifrost aims to be successful based on it being:
- One of the first DeFi projects on Polkadot.
- A solution for staking derivatives.
- Backed by venture capital.
- Focused on the Chinese market
MARKET CONDITIONS AND COMPETITION
Decentralised Finance had its breakthrough moment in 2020, with the total value locked on its protocols reaching more than $13 billion and a flourishing ecosystem of DeFi applications. Most of this ecosystem is built on Ethereum, as it is the preferred network to build on by developers. Ethereum also pioneered the use of a blockchain to write smart contracts and program decentralised applications, giving this protocol a first-mover’s advantage. Additionally, dApps built on Ethereum are inter-compatible and can interact with each other, creating a powerful ecosystem. Therefore, with the creation of Decentralised Finance, developers on Ethereum quickly managed to develop interoperable solutions that users could leverage to profit from this new financial ecosystem. Staking is also a prominent piece of DeFi’s ecosystem. Staking is the act of ‘locking’ or committing assets to validate transactions of a network. In return for staking, networks rewarding stakers with a percentage of the locked assets. Return on Investment (ROI) percentages in DeFi can vary widely from project to project. Users are, therefore, incentivised to reshuffle their digital assets regularly to capture the best ROI rates. This process is called Yield Farming.
Bifrost Finance’s main competitors are other similar parachains and protocols (e.g. ChorusOne, Interlay’s Bitcoin Parachain, Acala’s Homa Protocol, Everett (not active), Stafi, etc).
The Polkadot network is completely new in the ecosystem and, as such, one can expect a considerable number of parallel chain providers to join the Polkadot system soon, even if there currently are no 1-1 competitors. There are only 100 parachain slots available on Polkadot. Available alternatives to Polkadot (such as Cosmos, Wanchain etc.) may be able to address the inter-chain and interoperability issues –although the Polkadot framework has demonstrated robustness and scalability on its favour.
Bifrost Finance is currently well-placed competitively since it solves a niche problem in DeFi and staking. As addressed by themselves: “To solve the problem of DeFi and staking rewards competition, Bifrost Finance allows users to obtain staking rewards and release liquidity in the form of staking derivatives at the same time to take advantage of more DeFi fields including DEX, liquidity mining, etc.“
Bifrost Finance can be subject to competition from staking derivatives platforms (e.g. Kira Network) and decentralised projects that track PoS token baskets and offer wrapped products (e.g. StakerDAO).
Bifrost Finance has in place various bug bounties, encouraging developers to actively search and report bugs in the project’s code to earn rewards in BNC tokens, the protocol’s native token.
Bifrost Finance is on the Polkadot network, developed by Substrate. Its underlying consensus is based on the GRANDPA consensus (GHOST-based Recursive Ancestor Deriving Prefix Agreement). This means that the project will share the Polkadot consensus mechanism, as stated in the whitepaper’s p.3,4 and 8). If Bifrost is unsuccessful in securing a parachain slot, the project can go on to become a parathread. Its consensus (Polkadot’s shared security) will then be similar in that instance.
The project’s blockchain technology is scalable in two ways:
- By bridging to more PoS networks.
- Thanks to the growing DeFi segment. Since Bifrost is based on Substrate, it could scale independently of its relayer chain (which is currently Polkadot).
Bitfrost has not conducted any security audits yet. As per the roadmap, a security audit is scheduled to begin in 2020 Q4.
The project’s roadmap is presented in both the project website and its whitepaper. Interestingly, there are several discrepancies noted among both roadmaps. The roadmap presented on the website is a comprehensive illustration, while the whitepaper is less illustrative.
As of writing, the project has reached a significant milestone due for 2020Q4 by launching Bifrost Finance Asgard CC3. Bifrost publishes weekly updates on its Medium blog. This demonstrates particular transparency.
The project’s website and whitepaper do not list team members. For crypto projects operating in the current environment, it is important that the people working behind them are clearly shown. Although, since the project is open-source, we were able to track down its contributors through Bifrost Finance’s Github repository, which lists three people (Lupris, Edwin and Jianping Deng) to be involved in development. Two of them are based out of Shanghai, China and one of them out of Hunan, China.
Additionally, we matched Lurpis and Jianping Deng with their LinkedIn profiles and were able to find more about their background and past experiences.
Lurpis Wang has been a software engineer for the Weibo Corporation and Ping++. Lurpis founded Liebi, a blockchain development company that created various tools on the IOST and EOS blockchains, in 2017.
Jamie Deng is one of the three main developers of Bifrost Finance. Previously, he worked as a Test Development Engineer for NI (National Instruments) in Shanghai, China. and a Product Engineer at Pegatron also in Shanghai, China.
There are no advisors listed on the project’s website or whitepaper.
LEGAL AND COMPLIANCE SPECIFICS
Based on the project’s website, Bifrost Global Limited seems to run the project, but we couldn’t find any information supporting this claim. The project’s LinkedIn page refers to the company behind the project as a Sole Proprietorship based in Singapore. Since we can’t find any information regarding such a company or sole proprietorship or business, it is within reason not to confirm the information regarding this entity running the project. In another business’s website, Liebi (https://liebi.com/), Bifrost Network is presented as one of the said business’s products. Liebi’s website directs users to the Bifrost website once they click on the relevant Bifrost Network product. Based on this, we could assume that this other company, Liebi, is developing Bifrost Finance, but again this cannot be confirmed based on the available information. We have not been able to find any corporate details for Liebi. Further to all the above, we cannot confirm the ownership and structure of the project.
It appears that the team is not quite sure whether the BNC token is a utility or a security token. They tend to refer to it as a utility token, which arguably, in the eyes of regulators may not be the case. At the moment, private rounds of the token sale are being conducted. There haven’t been any discussions about KYC or AML during the public sale process.
No legal advisors or team members spearheading legal issues have been listed on the project’s documents or website.
We identify the following issues as possible legal complications:
- We have not been able to confirm the structure and ownership of the project, and hence its jurisdiction, or to identify relevant corporate details on the entities which seem to be connected to this project. This, effectively, prevents the conduct of proper regulatory assessment.
- Lack of legal advisors.
- Unclear token classification status.
- Apparent lack of a KYC/AML policy.
- The inherent risk in DeFi projects in terms of lack or uncertain regulatory framework.
Total supply: 80,000,000
Name of token: Bifrost Network Coin
The project dedicates an allocation of 8% of the total tokens (6.4 million BNC tokens) to the Foundation. This number would be split across developers and as grants to the community.
The team’s projected allocation of tokens is vested and will begin a linear unlocking after six months following Day 0 (the day of circulation) and will continue to unlock for two years. The two founders will get an allocation of 20% of the tokens.
Bifrost Finance is currently raising funds by selling a portion of its total amount of BNC tokens in a seed round, a private round, and a public round. The seed round was completed by securing $600,000, and the private round is happening at the time of writing of this report. Assuming that the project sold all the seed round tokens (8 million) for the announced capital of $600,000, we can arrive at a per-token price of $0.075. The token price for the private round is still unknown, as well as any information about the public round.
SOCIAL MEDIA AND VIRALITY
The project has 7,967 followers on Twitter, with a very good engagement turnaround.
Bifrost Finance doesn’t have a substantial presence on LinkedIn, with no activity at all, but the page has given us directions on who the people behind the project are.
The project is very active on Telegram, with 4438 members in the main chat and 453 members on the announcement channel.
Everything you see in this report is the aggregate result of an extensive research process carried out by a distributed team of researchers and crypto enthusiasts around the world. The process consists of 60 questions divided into three phases. Researchers are called to answer these questions about a project, while providing links or screenshots as evidence to support their answers. For every answer, they also provide a rating from zero to five. The average of their ratings is detailed below.
Our researchers gave Bifrost Finance a final rating of 50.8%.
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