BIFROST, a universal multi-chain technology platform, enters the native cross-chain lending market with a plan to eliminate widespread reliance on wrapped tokens.
BIFROST Finance (BiFi) is a multi-chain, decentralized money market that offers lending services across the Ethereum, Avalanche, BNB Chain and Klaytn networks. The release, unlike other decentralized finance (DeFi) services, relies on BIFROST’s interoperability technology to make it more scalable and transparent, while simultaneously enabling BiFi to natively integrate Bitcoin (BTC) into the Ethereum-based market.
The result is that with its release, users can borrow Ethereum-based assets against their BTC native to the Bitcoin (BTC) network, without having to trust issuers of wrapped tokens, such as Wrapped Bitcoin (wBTC).
Effectively, by enabling an efficient cross-chain money market, as well as other DeFi apps, the primary use case for wrapped tokens will be virtually eliminated. Preserving a design that relies on native tokens allows users to keep the security guarantees of the underlying network that, to a large extent, makes native assets valuable in the first place. Wrapped tokens, on the contrary, are only as secure as the multi-signature wallet that is used for the custody of the bridged assets.
Steps towards a multi-chain future
The BIFROST team’s announcement about BiFi comes at a pivotal time. Consider that the industry as a whole is trending toward a multi-chain future, a reality indicated by the rise of activity on alternative Layer-1 solutions following last year’s DeFi summer. It was then that the world saw the benefits of DeFi applications on Ethereum sidechains, and L1s started gaining traction for two reasons: the high Ethereum gas fees that priced out many users and the exposure of users to new ecosystems.
These new ecosystems presented significant opportunities, often fueled by incentives that were put in place. Unfortunately, many of these users also wanted to keep exposure to their assets that are native to the Ethereum network.
For instance, an Ether (ETH) holder wanting to get exposure to the Avalanche ecosystem, which is incentivized by the Avalanche Foundation, would bridge their Ether to the Avalanche network first. Then they would borrow stablecoins on Aave against the Ether and buy Avalanche (AVAX), or some other token native to the Avalanche network, that they could use in other DeFi applications.
As bridges attracted tens of billions of dollars in total value locked, they also became the most lucrative targets for hackers, and a series of exploits followed shortly thereafter. According to Rekt.news, four out of the five largest crypto hacks recorded are due to vulnerabilities related to token bridges, for a total of more than $1.5 billion in capital lost.
While smart contracts also have vulnerabilities that led to exploits, the consequences were typically the same. As the smart contract on one chain was drained, the wrapped assets issued on the other chain became worthless too, since the collateral backing them was stolen.
The logical conclusion to these vulnerabilities is simple — a solution like BiFi that allows users to borrow native tokens, resulting in a significant reduction of risk. Even in a worst-case scenario, users would still have control of the native tokens they borrowed.
A native lending network that keeps growing
Now, with the BIFROST network’s mainnet launch around the corner, BiFi is preparing to gradually add native lending on other chains, starting with Polkadot, BNB Chain and Avalanche. The BIFROST team is excited to provide this novel technology to solve an ever-present weakness in the current state of DeFi.
Founded in 2016, BIFROST was born when a team of experienced finance, computer science, quantitative trading and fintech developers came together with the goal of turning the promise of blockchain into a widespread reality. The team, which now comprises trusted advisors from Coinplug, Blockwater Management, Block Crafters and Kaist engineering, has since turned this mission into creating a truly multi-chain technology. To display the platform’s full potential, the team continues to build out its leading DeFi offering, BiFi, completely powered by BIFROST.
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