BIFROSTS NATIVE CROSS-CHAIN LENDING ELIMINATES THE USE CASE FOR WRAPPED TOKENS

Imagine a world where you can seamlessly lend your Bitcoin on the Ethereum network, or use your Avalanche tokens to borrow stablecoins on BNB Chain, all without the cumbersome process of wrapping and unwrapping tokens.This vision is becoming a reality thanks to innovative platforms like BIFROST, a universal multi-chain technology platform spearheading the charge towards native cross-chain lending. After you have used the bridge, you are no longer dependent on its security to ensure your destination token retains value. You are either dependent on another bridge (in the case of non-native bridged tokens) or hold the native tokens on the destination chain. Transfers can also be very quick and cheap. DisadvantagesFor too long, the DeFi space has relied on wrapped tokens – essentially digital representations of assets from other blockchains – to facilitate cross-chain interactions. Chain A: 400 tokens. Chain B: 200 tokens. Chain C: 200 tokens. Chain D: 100 tokens. Chain E: 100 tokens. If a user transfers 50 tokens from chain E to chain A, then those tokens will be destroyed on chain E and minted on chain A. The updated distribution will be: Chain A: 450 tokens . Chain B: 200 tokens . Chain C: 200 tokens . Chain D: 100While useful, they introduce complexities, security risks, and inefficiencies. Bifrost Finance is a web3-based protocol developed for facilitating cross-chain derivatives. Its primary objective is to establish a decentralized protocol for cross-chain liquidity, specifically designed for liquid staking derivatives (LSDs).BIFROST aims to change this by enabling an efficient cross-chain money market and other DeFi applications that virtually eliminate the need for wrapped tokens.This unlocks a new era of interoperability, where digital assets can flow freely between different blockchain ecosystems, creating a more unified and efficient decentralized financial landscape.This article explores how BIFROST is achieving this ambitious goal and what it means for the future of DeFi, from increased liquidity and accessibility to enhanced security and user experience.

The Problem with Wrapped Tokens and Cross-Chain Bridges

Wrapped tokens, like WBTC (Wrapped Bitcoin) on Ethereum, were initially created to bridge the gap between different blockchains.They allow users to utilize assets from one blockchain on another, enabling participation in DeFi activities that would otherwise be impossible. DeFi isn t the only sector where wrapped tokens find use. In other words, cross-chain interoperability means that developers and users can utilize them in practically any type of application, no matter the blockchain. Key Benefits of Wrapped Tokens. Wrapped tokens offer several advantages that make them a vital tool in the crypto ecosystem.The process typically involves locking the original asset on its native chain and minting a corresponding wrapped token on the destination chain.This ""lock and mint"" mechanism allows BTC holders, for instance, to participate in Ethereum-based DeFi protocols.

However, this approach comes with several drawbacks:

• Security Risks: Wrapped tokens rely on centralized or federated custodians to hold the original assets.A vulnerability in the custodian's infrastructure or a malicious actor could lead to significant losses.Smart contract vulnerabilities in the wrapping/unwrapping process also pose a threat.
• Complexity and Gas Fees: Wrapping and unwrapping tokens involve multiple transactions, incurring gas fees on both the source and destination chains.This can be costly and time-consuming, especially during periods of high network congestion.
• Liquidity Fragmentation: Wrapped tokens create fragmented liquidity across different blockchains. We want XTZ holders to be able to fully participate in defi lending while still earning staking rewards. Stake on Tezos and lend on Ethereum for double passive income! The app has 2 main functions: Mint and Burn. Mint Tezos users deposit XTZ into a smart contract that acts as a vault to hold andInstead of a unified pool of liquidity, there are separate pools for native tokens and their wrapped counterparts, leading to inefficiencies and potential slippage during trades.
• Reliance on Bridges: Wrapped tokens often depend on cross-chain bridges to facilitate the transfer of assets between blockchains. These platforms help you find the best prices, reduce slippage, and enable cross chain swaps. In this review, we ll look into the top DEX and bridge aggregators, sharing real-life experiences and rating their features to help you make informed decisions.These bridges can be complex and vulnerable to attacks, as highlighted by several high-profile bridge hacks in recent years.

These issues have driven the demand for a more seamless and secure cross-chain solution, one that eliminates the need for wrapped tokens and reduces reliance on vulnerable bridges.

BIFROST's Native Cross-Chain Lending Solution: A Paradigm Shift

BIFROST is tackling the challenges of cross-chain interoperability head-on with its native cross-chain lending platform, BiFi.Unlike traditional approaches that rely on wrapped tokens, BIFROST enables users to lend and borrow native assets directly across different blockchains.This is achieved through a combination of innovative technologies and a unique architecture.

BiFi pioneered permissionless cross-chain lending by connecting native BTC to the Ethereum market. With the rise of cross-chain platforms, the demand for tokens that enable these interactions has increased, positioning cross-chain tokens as essential assets within the blockchain space. In this article, we will explore some of the top cross-chain tokens that investors should consider for their portfolios in 2025.Now, BIFROST is expanding its reach to support lending services across Ethereum, Avalanche, BNB Chain, and Klaytn networks with native tokens.

How BIFROST Achieves Native Cross-Chain Lending

BIFROST leverages several key technologies to facilitate native cross-chain lending:

• vTokens: In Bifrost, all vTokens official liquidity pools are deployed on the Bifrost chain, enabling cross-chain accessibility.Users can swap vToken/Token on other chains while utilizing the liquidity on the Bifrost chain.Suppose a lending protocol on a particular chain integrates vToken as one of the collateral assets. Under the cross-chain architecture, instead of deploying SLP modules on multiple chains, Bifrost allows other chains to utilize the existing SLP modules on the Bifrost-Polkadot, Bifrost-Kusama, and Ethereum chains through cross-chain remote calls. For instance, to mint vGLMR, users only need to initiate a minting request on Moonbeam.For example, HydraDX transferred 1,000,000 DOT to Bifrost to complete cross-chain minting of vDOT.
• Cross-Chain Messaging: BIFROST utilizes native cross-chain messaging to enable seamless communication and asset transfers between blockchain networks.This allows for the secure and efficient transfer of information and value without the need for intermediaries.
• Decentralized Money Market (BiFi): At its core, BIFROST's BiFi platform acts as a decentralized money market connecting various chains, supporting lending and borrowing with native tokens.

Example of Cross-Chain Lending with BIFROST

Let's illustrate how cross-chain lending works on BIFROST with a practical example:

1. A user wants to borrow USDC on the BNB Chain using their BFC tokens as collateral.The BFC tokens are held on the Bifrost Mainnet.
2. The user supplies their BFC tokens to the BIFROST platform.
3. Using BIFROST's cross-chain capabilities, the supplied BFC serves as collateral, allowing the user to borrow USDC on the BNB Chain.
4. The borrowed USDC can then be used within the BNB Chain ecosystem for various purposes, such as trading or participating in other DeFi protocols.

This process is streamlined and efficient, eliminating the need for wrapping and unwrapping tokens and reducing the associated risks and costs.

The Benefits of Eliminating Wrapped Tokens

The elimination of wrapped tokens through native cross-chain lending offers numerous advantages for the DeFi ecosystem:

• Enhanced Security: By eliminating the need for custodians and wrapped tokens, BIFROST reduces the risk of hacks and exploits. Due to its cross-chain compatible modern multi-chain infrastructure, Polkadot (DOT) is one of the edges leaders of the cross-chain tokens and has tremendous growth potential. Rather than single blockchains, Polkadot implements multiple independent blockchains which can transfer data and assets to one another, thus forming a connected network.Users retain control of their native assets, minimizing counterparty risk.
• Improved Efficiency: Native cross-chain lending streamlines the lending and borrowing process, reducing gas fees and transaction times. CCTs are cross-chain native tokens secured by CCIP. CCTs support self-serve deployments, full control and ownership for developers, enhanced programmability, and zero-slippage transfers all backed by CCIP s industry-standard defense-in-depth security.Users can access liquidity and utilize their assets across different blockchains more efficiently.
• Increased Liquidity: By connecting disparate liquidity pools across different blockchains, BIFROST increases overall liquidity in the DeFi ecosystem.This leads to tighter spreads, reduced slippage, and more efficient trading.
• Enhanced User Experience: Native cross-chain lending simplifies the user experience by eliminating the need for complex wrapping and unwrapping procedures. A vulnerability in the smart contract would lead to enormous losses, whether it is stealing funds or loss of wrapped tokens. Other Types of Wrapped Tokens. Wrapped tokens are not just about WBTC and WETH; they come as other wrapped tokens designed to make cross-chain usability and interoperability solutions across blockchains. 1.This makes DeFi more accessible to a wider audience.
• Greater Interoperability: BIFROST fosters greater interoperability between different blockchain ecosystems, enabling seamless asset transfers and cross-chain DeFi applications. Moving towards a multi-chain future, the BIFROST decentralized money market (BiFi) aims to provide lending services across Ethereum, Avalanche, BNB Chain, and Klaytn networks with native tokensThis promotes innovation and collaboration within the DeFi space.

BIFROST and the Future of Cross-Chain DeFi

BIFROST is playing a pivotal role in shaping the future of cross-chain DeFi. Crosschain interoperability flips the script by breaking down barriers between chains, allowing assets to flow between them freely and efficiently. Imagine a DeFi protocol tapping into liquidity pools across Ethereum mainnet and every EVM L2 chain without requiring wrapped tokens or clunky bridges.By pioneering native cross-chain lending and eliminating the need for wrapped tokens, the platform is unlocking a new era of interoperability, efficiency, and security in the decentralized financial landscape.

The Broader Implications

The success of BIFROST's approach could pave the way for a more unified and interconnected DeFi ecosystem.Imagine a future where users can seamlessly access and utilize their assets across any blockchain, without the limitations and risks associated with wrapped tokens.This would lead to:

• A More Efficient Capital Allocation: Capital would flow freely between different blockchains, seeking the most attractive yields and opportunities.
• Increased DeFi Adoption: The simplified user experience would attract more users to the DeFi space, driving adoption and growth.
• Greater Innovation: Developers would be able to build more complex and innovative cross-chain DeFi applications, leveraging the unique capabilities of different blockchains.

BIFROST's Role in a Multi-Chain World

BIFROST's vision aligns perfectly with the growing trend towards a multi-chain future. HydraDX has finalized the Polkadot Treasury liquidity application this month and transferred 1,000,000 DOT to Bifrost to complete cross-chain minting of vDOT. This marks the third interoperableAs more and more blockchains emerge, the need for seamless cross-chain interoperability becomes increasingly critical.BIFROST is positioned to become a key player in this multi-chain world, enabling users to connect and interact with different blockchain ecosystems in a secure and efficient manner.

How Does BIFROST Compare to Other Cross-Chain Solutions?

While several cross-chain solutions exist, BIFROST's approach stands out due to its focus on native cross-chain lending and the elimination of wrapped tokens.Let's compare BIFROST to some other popular cross-chain solutions:

• Cross-Chain Bridges (e.g., Multichain, cBridge): These bridges facilitate the transfer of assets between different blockchains, often relying on wrapped tokens.While useful, they can be vulnerable to attacks and incur high fees.BIFROST aims to bypass the need for these bridges by enabling native cross-chain lending.
• Cross-Chain DEXs (e.g., Thorchain): These decentralized exchanges allow users to swap native tokens across different blockchains.However, they often require significant liquidity and can be complex to use.BIFROST complements cross-chain DEXs by providing a lending and borrowing platform that can further enhance liquidity and efficiency.
• Layer-2 Scaling Solutions (e.g., Polygon, Arbitrum): While Layer-2 solutions improve scalability and reduce fees within a single blockchain ecosystem, they don't address the issue of cross-chain interoperability. Equivalent wrapped tokens are minted on the destination chain (e.g, locking ETH on Chain A to mint wrapped ETH (WETH) on Chain B). To reverse the process, users burn the wrapped tokens on the destination chain to unlock the original assets on the source chain.BIFROST complements Layer-2 solutions by enabling users to move assets between different Layer-2 networks and other blockchains.

BIFROST's unique approach of native cross-chain lending positions it as a distinct and valuable solution within the broader cross-chain landscape.

Addressing Common Questions about BIFROST and Cross-Chain Lending

Here are some frequently asked questions about BIFROST and cross-chain lending:

Is BIFROST secure?

BIFROST prioritizes security by utilizing advanced cryptographic techniques and a decentralized architecture. Wrapped tokens play a crucial role in unlocking interoperability and cross-chain functionality between various blockchain networks. By creating pegged versions of digital assets, these tokens can interact with multiple platforms and protocols, enhancing the overall utility and versatility of the underlying assets.The platform undergoes regular security audits to identify and address potential vulnerabilities.However, as with any DeFi protocol, users should exercise caution and conduct their own research before participating.

What tokens are supported on BIFROST?

BIFROST initially supports a range of popular cryptocurrencies, including BTC, ETH, DOT, and various stablecoins.The platform plans to expand its support to include more tokens in the future.

What are the fees associated with using BIFROST?

BIFROST charges fees for lending and borrowing activities.These fees are designed to be competitive with other DeFi platforms and are subject to change based on market conditions.

How can I participate in BIFROST's ecosystem?

Users can participate in BIFROST's ecosystem by lending or borrowing assets on the BiFi platform. Synapse Protocol Facilitates cross-chain liquidity provisioning, allowing users to swap tokens between different blockchains. Use Cases of Cross-Chain Liquidity. Cross-Chain Swaps Users swap native BTC for ETH without using wrapped tokens or centralized exchanges. Multi-Chain Yield Optimization Liquidity providers allocate assetsThey can also contribute to the platform's governance and development by participating in community forums and voting on proposals.

What is the BFC token?

BFC is the native token of the Bifrost network. A lock and mint token transfer involves having native tokens locked on the source chain (e.g, BTC), while a wrapped version of the token (e.g, WBTC) is minted on the destination chain. This transfer in reverse, from a wrapped token to the native token, is known as burn and unlock.It may serve various purposes within the ecosystem, such as governance, staking, and rewarding users. BIFROST pioneered permissionless cross-chain lending with its lending platform BiFi, which connects native BTC to the Ethereum market. Users can borrow ETH and ERC-20 tokens against theirSpecific functionalities and utilities of the BFC token should be verified in the official Bifrost documentation.

Conclusion: A New Era of Cross-Chain Interoperability

BIFROST's approach to native cross-chain lending marks a significant step forward in the evolution of DeFi.By eliminating the need for wrapped tokens, BIFROST is creating a more secure, efficient, and user-friendly cross-chain experience.As the DeFi space continues to mature and the multi-chain future unfolds, BIFROST is well-positioned to play a leading role in connecting disparate blockchain ecosystems and unlocking the full potential of decentralized finance.The key takeaways include:

• Wrapped tokens introduce security risks and inefficiencies.
• BIFROST's native cross-chain lending eliminates the need for wrapped tokens.
• This leads to enhanced security, improved efficiency, and increased liquidity.
• BIFROST is paving the way for a more unified and interconnected DeFi ecosystem.

As platforms like BIFROST continue to innovate and push the boundaries of cross-chain interoperability, the future of DeFi looks increasingly bright. A blockchain bridge, also known as a crypto bridge or cross-chain bridge, is a protocol that connects two different blockchains. It enables users to transfer cryptocurrency from one chain to another. You can also transfer assets to another blockchain using a crypto exchange, such as selling bitcoin (BTC) for ether (ETH). However, depending onBy facilitating the seamless flow of assets and information between different blockchains, these platforms are creating a more accessible, efficient, and secure decentralized financial landscape for all. In the near future, we can expect more sophisticated tools that combine scalability, security, and ease of use to make cross-chain swaps a mainstream feature of Web3. Conclusion. Cross-chain swaps represent a transformative leap in blockchain interoperability, bridging the gaps between isolated networks and enabling a unified decentralizedThe potential impact of BIFROST's native cross-chain lending eliminating the use case for wrapped tokens is truly transformative, and we are only beginning to see the possibilities.