On Friday, Bifrost, a Web 3.0 derivatives protocol that provides cross-chain decentralized liquidity for stacked assets, launched an updated slots liquidity auction protocol dubbed “SALP 2.0.” Projects such as Moonbeam, Unique network, OAK network, Polkadex, etc. held group parachute coupons on Kusama and Polkadot via the original SALP. A total of 177,690 vsKSM ($439 million) and 3,045,564 vs DOT ($21 million) were minted through the protocol.
The SALP protocol works by releasing the liquidity of the tokens collected during the auction; Liquid derivatives such as vsDOT and vsKSM are issued on a 1:1 basis for tokens. Both vsDOT and vsKSM can be used for decentralized finance, or DeFi, applications, and rewards across the ecosystem as long as the original tokens remain locked for the duration of the parachain lease.
This avoids the opportunity cost of locking in their currencies. However, the new SALP 2.0 allows users to obtain liquid tokens through direct investment, and not just through mass participation. Tyrone Ban, Head of Development at Bifrost commented:
“The SALP 2.0 upgrade creates a bond market for Crowdloan assets, improving vsToken & vsBond liquidity efficiency while lowering the bottom line for users. This model not only makes it easier for Crowdloan users to manage derivatives, but also intelligently combines Crowdloan and DeFi.”
Liquid staking is a relatively new phenomenon in the world of DeFi, and was primarily created to allow users to recover potential opportunity costs while stabilizing their assets. The potential downside is their susceptibility to changes in the underlying assets as they are classified as DeFi derivatives.