Good day there! Thank you for your proposal. I guess that the loan mechanism is the way to support the Protocols that seek users and liquidity in the Polkadot Ecosystem.

1. Can you please provide information regarding all loans and liquidity rewards that Polkadot Treasury provided to Bifrost in the last 18 months?
2. What is the actual strategy to attract more users from outside the ecosystem?
3. How many BNC rewards will be allocated from your side?
4. Is this loan claimable at any time or will it be repaid after 1 year only?

JAM Implementers DAO currently ABSTAINS on this proposal as we have not reach quorum yet. Summary of comments are included below.

Supporters (AYE):

• View the proposal as a loan rather than a grant or gift.
• Believe the requesting team plays a central and ongoing role in Polkadot DeFi.
• Emphasized the dedicated presence and continued contributions of the team.

Opposition (NAY):

• Primary concern is lack of updated security audits:
  • Specifically requested clarity on the audit coverage of current code, including components like vDOT minting, staking, StableSwap, and XCM flows.
  • Noted that prior audits are several years old, and emphasized the need for current security assessments before approving financial support.

Dear Proposer

Thank you for submitting the proposal

Trustless Core has voted AYE.

Budget: The amount requested is high but there is a loan with a 7% interest in the form of staking rewards. Among the positive aspects is that Polkadot's treasury, by granting the loan, will not only recover its capital, but will also obtain staking rewards, which diversifies its investment strategies. In addition, the increased liquidity and adoption of vDOT can stimulate user and developer participation in the ecosystem, encouraging innovative DeFi use cases and projects.

Team experience: The team behind the project (Bifrost) offers a successful track record in previous loans with Kusama and Polkadot, having met the established repayment and interest terms, which supports the viability of this new agreement and support of this referendum.

Transparency: There is also an emphasis on transparency and auditability, as the entire lending and repayment process will be managed through the governance of Polkadot, Bifrost and XCM, reducing reliance on third party reliance. However, there are potential risks and limitations. For one, crypto market volatility and correlation with vDOT could impact liquidity or repayment timelines.

In addition, the success of the proposal depends on Bifrost's ability to meet its expansion and partnership goals, so any setbacks would delay the repayment process. Tying up 500,000 DOTs for a year could restrict other initiatives that also require treasury funding. Finally, the integration of multiple networks and the use of bridges such as Hyperbridge and Snowbridge add technical and operational complexity, which could create delays or require additional resources.

A crucial aspect is alignment with ecosystem objectives. This type of proposal is aligned with the ecosystem objectives to support projects and increase the Polkadot ecosystem. As Trustless Core, we firmly believe it is critical to prioritize initiatives that foster direct engagement with the network—focusing on supporting developers and driving genuine adoption of Polkadot’s technology.

Best Regards

Trustless Core

[Deleted]

PolkaWorld vote AYE on this proposal.

Bifrost is one of the very few teams in the Polkadot ecosystem with a proven track record of borrowing from the treasury and successfully repaying both principal and interest. In 2022 and 2023, Bifrost repaid two loans of 50,000 KSM each, contributing over 8,000 KSM in interest to the Kusama treasury. In 2024, it also repaid a 500,000 DOT loan on time, delivering over 40,000 DOT in staking yield. This consistent performance demonstrates a high level of reliability and makes Bifrost a trusted partner for the treasury’s capital utilization.

The primary purpose of this loan—to support the vDOT-DOT liquidity pool—is strategically important for the entire Polkadot DeFi ecosystem. vDOT is already being used as a key asset in several major applications, including Interlay’s iBTC Vault, Hydration’s money market, Bifrost’s LoopStake, and cross-chain scenarios on Moonbeam and Astar. With the continued development of SLPx and Hyperbridge, vDOT is becoming the first truly multichain LSD (Liquid Staking Derivative) base asset on Polkadot, which makes deep liquidity all the more essential.

From a governance and risk perspective, the proposal is clearly designed, transparent, and trust-minimized. The loan issuance, minting, liquidity provision, and repayment will all be executed on-chain via XCM, using a stablecoin pool mechanism to avoid impermanent loss. This ensures the full return of DOT assets with an estimated 6% yield (based on a 10.68% annual staking rate, approximately 60,000 DOT). For the Polkadot treasury, this represents a low-risk, interest-bearing deployment of capital.

Finally, from an ecosystem growth perspective, Bifrost has integrated over 13 partners through its RSP (Revenue Sharing Program), including Astar, Subscan, and The Kusamarian. It has deployed vDOT liquidity pools on platforms such as Omnipool, Interlay, Base, Arbitrum, and BNB Chain, actively expanding the cross-chain utility and influence of DOT, and pushing DOT toward becoming a true multichain native asset.

In summary, this proposal addresses capital safety, ecosystem growth, and long-term value creation—and stands out as a highly beneficial initiative for both the Polkadot treasury and the broader ecosystem.

Dear Proposer,

Thank you for your proposal. Our first vote on this proposal is AYE.

The Big Spender track requires 60% quorum according to our voting policy v0.2, and any referendum in which the majority of members vote abstain receives an abstain vote. This proposal has received seven aye and zero nay votes from nine available members. Below is a summary of our members' comments:

> The voters overwhelmingly supported the proposal, citing Bifrost's admirable efforts to provide transparency and structure through loans. They praised its proven reliability and strong track record of repaying loans with interest, emphasizing its importance to the DeFi ecosystem and the Polkadot network. Many expressed that Bifrost should set a precedent for interest-based lending, reinforcing the belief that it was the right project to lead such initiatives. Overall, the sentiment reflected confidence in Bifrost's ability to effectively manage and return liquidity.

The full discussion can be found in our internal voting.

Please feel free to contact us through the links below for further discussion.

Kind regards,
Permanence DAO
Decentralized Voices Cohort IV Delegate

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@14p3...tgp4 That makes sense, thank you for the detailed answers

So to confirm - the repayment interest will not be capped at 6% right? It shall be higher or lower depending of staking APY. Also would fees earned from DOT-vDOT LP be included in repayment?

Could you also please clarify #3 - What percentage of the current codebase relevant to this proposal (e.g. vDOT minting, staking, StableSwap, XCM flows) is covered by audits? Since the last full security audit was a few years ago, have there been any significant updates or new modules added since then? If so, have those [along with their integration] been audited as well? Thanks again

@prasad

Thanks to your questions

1. The ~6% APY is derived from 60% of the vDOT proportion under a ~10.68% staking APY. As vDOT is a yield-bearing asset that accrues varying staking rewards throughout the year, the final repayment APY will reflect these actual changes. If the staking APY decreases, the repayment interest will decrease accordingly.
2. Both Bifrost and Hydration are providing long-term incentives for vDOT-DOT liquidity, with approximately $3M on Bifrost and $9M on Hydration. This allows arbitrageurs to maintain balanced liquidity between the platforms.
3. https://github.com/bifrost-io is our current site after changing from bifrost.finance to bifrost.io (due to another project also named Bifrost).

We’ve been working with the Bifrost team since the early days of Velocity, and we see both the team and their products as key to unlocking growth for DeFi on Polkadot. Even before Velocity, we’ve been beating the drum about the opportunity to increase LST penetration in our ecosystem—which currently sits at around ~2% of staked capital.

Treasury support for this initiative has proven not only successful in driving adoption of vDOT, but also financially beneficial for the Treasury itself, thanks to the accrued interest on the loan. We hope to see more proposals like this brought forward—ones that leverage the Treasury in safe, efficient, and creative ways.

Velocity Labs

A few questions:

1. Why 6% repayment when DOT staking APY is ~10.68%? Would be great to understand how this number calculated, and what happens if the staking APY drops. On contrary, shouldn't the Treasury be offered at least 10%+ to match staking opportunity cost and security risk?

2. What happens if vDOT-DOT pool liquidity dries up near repayment? Any trigger points for unwinding early?

3. What percentage of the current codebase relevant to this proposal (e.g. vDOT minting, staking, StableSwap, XCM flows) is covered by audits? Since the last full security audit was a few years ago, have there been any significant updates or new modules added since then? If so, have those [along with their integration] been audited as well?

4 https://github.com/bifrost-finance is empty, where can we access the latest codebase?

Bifrost has a strong track record of reliably repaying loans, and this has brought significant benefits to the ecosystem! Aye for sure!

Many thanks for your proposal, Bifrost Foundation!

We have carefully reviewed your application and are pleased to share our assessment below, prepared using our standardized evaluation methodology.

Summary of our analysis

■ Impact on the Ecosystem

The proposal significantly enhances Polkadot’s DeFi ecosystem by increasing vDOT liquidity, reducing trading friction, and promoting adoption. It addresses low liquidity in the vDOT-DOT pair, strengthening network resilience and interoperability. Sustainable value is ensured through higher TVL and treasury returns.

■ Governance Compatibility

The proposal aligns perfectly with the Big Spender track, requesting a 1,000,000 DOT loan within governance limits. Bifrost’s history of successfully repaying similar loans demonstrates compliance and reliability. The submission respects OpenGov processes without overburdening the system.

■ Cost-Benefit Ratio

The 1,000,000 DOT loan is proportionate, delivering ~60,000 DOT in treasury interest and ecosystem growth. The budget is reasonable compared to prior loans, and the loan structure is cost-effective versus grants. Enhanced liquidity drives significant DeFi adoption and TVL.

■ Transparency and Traceability

Fund usage is clearly detailed, with KPIs like vDOT TVL, though lacking specific targets. The budget, timeline, and on-chain XCM process ensure traceability, but a formal reporting plan is absent. Financial repayment criteria are robust, supporting evidence-based evaluation.

■ Record and Credibility

Bifrost’s repayments of 542,723.02 DOT and 8,370 KSM showcase financial reliability. Successful projects like vDOT and cross-chain integrations, backed by open-source code and audits, confirm their capability. Their proven expertise ensures delivery of the proposed outcomes.

Conclusion

🔹🔷🔹 vonFlandern 🔹🔷🔹 has therefore voted with: ** AYE **

Our methodology aims to analyze and evaluate OpenGov proposals objectively, effectively, and transparently, establishing clear decision-making foundations for our votes while making our process visible to the community.

Not biaised at all (joking). The ref is about to make Treasury DOT from idle assets to working assets for the ecosystem basically.

It's a loan so in the long run, the Treasury is preserved.

Full AYE ah ah. :)