List BNC/kUSD pair via Bootstrap on Karura Swap

TL:DR

This is to propose opening a BNC/kUSD pool on Karura Swap. BNC is the native token of Bifrost.

References

Links to

Description

There will be multiple on-chain proposals including open HRMP cross-chain communication between Bifrost and Karura parachain and listing token pair. On-chain proposal will be posted once it’s ready

Motivation

After two years of development, Bifrost parachain has finally launched mainnet on Kusama (and later Polkadot); transfer of its mainnet token (BNC) will be enabled thereafter. The Bifrost team attempts to list BNC first and foremostly in a decentralized manner. Hence listing on the decentralized exchange - Karura Swap on the Karura network - Kusama’s DeFi center, fits well with the Bifrost DeFi protocol. BNC Listing on Karura will also be one of the first-of-its-kind cross-chain listing and application in the Kusama ecosystem.

Author

Lurpis - Co-founder of Bifrost
Tyrone Pan - Product Manager of Bifrost

Evaluation of the Liquidity Pool

  • Trading pair: kUSD/BNC
  • Motivations for creating the pool: Initial listing of BNC in a decentralized manner within the Kusama ecosystem.
  • Mechanisms for listing new pool: Bootstrap listing, with liquidity mining.
  • List Bootstrap parameters: No trading is allowed during Bootstrap, and trading can only be enabled once the following criteria are met:

a. The Not Before block #TBD has passed AND
b. Either the pool has 20,000 BNC OR 100,000 kUSD in liquidity

  • Timing: Since the creation of this pool is related to the upgrade of the Bifrost runtime, the timeline is as follows:
  1. The kUSD/BNC pool will be created if this proposal paseed, and bootstrap starts. (BNC is cross-chainable at this stage)
  2. Bifrost proposes a motion to enable BNC transfer, which will be enacted 6 hours before the end of bootstrap.
  3. Bootstrap ends, kUSD/BNC starts trading.
  • Liquidity Bootstrap Rules:

a. It will start block #TBD till #TBD (roughly 48 hours)
b. NO trading is allowed during this period
c. You can contribute liquidity for BNC, or kUSD, or BNC & kUSD at the same time. The actual exchange rate of BNC/kUSD can only be known once the Bootstrap is completed.
d. At the time of your contribution, you are allocated a number of LP tokens, and indicative LP shares of the pool, which are subject to change as more liquidity is added.
e. You should only participate if you want to become a liquidity provider for the pool. Please be aware of various risks 2 associated with being a liquidity provider.

Note: Please read carefully how the Bootstrap works, and various risks associated with being a liquidity provider.

  • kUSD-BNC Pool Incentives

a. Total 200,000 BNC rewards in 3 months (precisely 1.54 BNC per period or every 5 blocks) to those who staked kUSD/BNC LP tokens.
b. Loyalty Bonus: 30%
c. The program is expected to run for three months.
d. Reward amount is expected to be adjusted on a monthly basis.
e. APY expected curve

Pool Size ($) APR LM APR No Loyalty
$777,600 514.40% 360.08%
$1,296,000 308.64% 216.05%
$2,160,000 185.19% 129.63%
$3,600,000 111.11% 77.78%
$6,000,000 66.67% 46.67%
$10,000,000 40.00% 28.00%

Read more on Liquidity Program and Loyalty Bonus here.

Risks and disclaimers

You can find them on the first page of the Bifrost whitepaper

Security Considerations

As a parachain, Bifrost enjoys the shared security of Polkadot and only one mainnet deployed in Polkadot and Kusama. The important reason for not issuing Canary Network is that the two sets of community consensus may cause the separation of the Defi protocol, which is detrimental to accumulated liquidity. When Bifrost uses the bridge solution to connect to Ethereum, the total value accumulated in the Bifrost parachain may affect the security of the bridge (It depends on what chain bridge that Bifrost integrated with).
Therefore, Bifrost will completely migrate from Kusama to the Polkadot parachain in the future.

Technical Specifications

Add parameters and call data details once they are available.

11 Likes

Thanks for the proposal! I am glad to see it. I only have one concern, but it is a significant one.

What is the reason for waiting until the very end of the bootstrap period before enabling BNC transfer? As a potential liquidity provider, I would strongly prefer to start bootstrapping liquidity after transfers have been enabled.

The purpose of the bootstrap period is to allow time for the supply to consolidate around a rational price. That process can’t occur while only one of the two tokens can be added to the pool. Liquidity providers supplying kUSD prior to BNC transfers being enabled will be blindly dumping tokens into the pool without any idea what price they’ll end up paying to convert half of their kUSD to BNC at the start of trading.

This seems like an unnecessary risk to ask liquidity providers to take, and I think it sets a bad precedent if future parachain teams take this approach with the listing of their tokens.

Aside from that point, the proposal looks great and I can’t wait to see BNC trading on Karura Swap!

4 Likes

Thanks for your advice.

The purpose of not opening BNC transfer during Bootstrap is to prevent other centralized exchanges from list BNC first. We hope to be able to trade and price in DEX first. But we will refer to your concerns, and I think I will reply to you after discussing them with the team.

5 Likes

Ah, I see. That makes sense, and it is a worthy goal. I appreciate the intent behind it.

Perhaps my concern could be alleviated with a minimum BNC requirement for trading to begin. That would give liquidity providers a lot more certainty and mitigate the most significant risk.

1 Like

Yeah, I get your point. @bacchist

BNC Listing on Karura will also be one of the first-of-its-kind cross-chain listing and application in the Kusama ecosystem.

That’ll make it exciting. I’m looking forward to see, if the Exchanges and CEX Trading will put it at the same value than the ratio of the bootstrapped pool. If not we get a least some nice Arbitrages. :ok_hand:

3 Likes

this is a great goal! hope it works. thanks for the proposal!

Ah, I see. That makes sense, and it is a worthy goal. I appreciate the intent behind it.

Perhaps my concern could be alleviated with a minimum BNC requirement for trading to begin. That would give liquidity providers a lot more certainty and mitigate the most significant risk.

Yes, it needs to be emphasized here that we have implemented that before BNC enabled the transfer, it can cross-chain between Bifrost and Karura and can participate in Bootstrap freely.

this is a great goal! hope it works. thanks for the proposal!

We hope to achieve the first real cross-chain combination through XCM. Acala (Karura) is a great partner.

1 Like

Very excited about this information. I’m fan of Acala/Karura and I wanna see many asset list on Karura. please do it.

Very excited about this information. I’m fan of Acala/Karura and I wanna see many asset list on Karura. please do it.

A new era of cross-chain combination through XCM is coming, let’s ship it!

2 Likes

So happy to see that cross-chain listing! But I assume that the award of early participants can be more aggressive.,

1 Like