Summary

1. About this Report
2. Referendum-Info
3. ANALYSIS
1. ■Impact on the Ecosystem
2. ■Governance Compliance
3. ■Cost-Benefit Ratio
4. ■Transparency and Traceability
5. ■Track Record and Credibility
4. Sources
5. Evaluation
6. Voting

About this Report

vonFlandern has developed a methodology to analyze OpenGov proposals as objectively and transparently as possible, and to evaluate them based on the central question:

Does the proposal contribute to Polkadot’s long-term success?

Referendum-Info

Title: Bifrost DOT liquidity loan for vDOT liquidity for one year; repay in full with approximately 6% interest.

Track: 34 | Origin: BigSpender | Amount: 1.000.000 DOT

Status: Executed

Summary of the proposal

Bifrost has proposed a liquidity loan to the Polkadot treasury, requesting a loan of 1,000,000 DOT (about $4,000,000) to be repaid with 6% interest. This loan aims to increase vDOT-DOT liquidity, support vDOT growth, and expand its use in DeFi applications within the Polkadot ecosystem. Bifrost has a good track record of repaying treasury loans with interest, having brought a total income of 8,370.5523 KSM to the Kusama Treasury. The loan will be used to mint vDOT, diversifying the Polkadot treasury's DOT capital and earning staking rewards. Bifrost is a liquid staking app-chain for all blockchains, allowing users to earn staking rewards and DeFi yields across multiple chains. The loan's success will be measured by tracking vDOT minting TVL, DOT-vDOT liquidity growth, unique address growth rate, and new vDOT ecosystem integrations.

ANALYSIS

■Question 1 of 19

Does the proposal measurably contribute to the long-term development, adoption, resilience, or relevance of Polkadot?

The proposal significantly enhances Polkadot’s long-term development by increasing vDOT liquidity, which facilitates smoother DeFi interactions. This reduces trading friction, making Polkadot more attractive to users and developers, thus driving adoption. By enabling staked DOT to be used in DeFi, it encourages higher staking participation, bolstering network security and resilience. The cross-chain functionality of vDOT reinforces Polkadot’s relevance as an interoperable blockchain hub. Measurable outcomes include increased total value locked (TVL), liquidity pool growth, and user address expansion, all supporting sustained ecosystem growth.

Justification

Bifrost’s role as a leading liquid staking platform is evidenced by vDOT’s integration into protocols like Hydration and Interlay. Low liquidity in the vDOT-DOT pair has been a barrier to DeFi efficiency, which this proposal directly addresses. The proposal’s key performance indicators (KPIs) provide a clear framework for tracking long-term impact, ensuring contributions to Polkadot’s growth are quantifiable.

Score: 9/10

■Question 2 of 19

What sustainable added value does the proposal bring to the Polkadot ecosystem in the long term, beyond the immediate project duration?

The proposal fosters a sustainable liquid staking ecosystem by enhancing vDOT liquidity, which supports higher TVL and broader DeFi protocol integration. This drives ongoing economic activity and innovation, as more users and developers engage with Polkadot’s DeFi landscape. The treasury’s return of 1,000,000 DOT plus approximately 60,000 DOT in interest provides resources for future ecosystem initiatives. Bifrost’s proven repayment history suggests these benefits will endure, positioning vDOT as a cornerstone of Polkadot’s DeFi infrastructure.

Justification

Liquid staking is critical for blockchain ecosystems to maximize capital efficiency. vDOT’s growing adoption across parachains indicates its potential to sustain economic activity. The financial return to the treasury ensures long-term support for ecosystem development, making the proposal’s impact durable beyond the loan’s duration.

Score: 8/10

■Question 3 of 19

Is an existing structural weakness addressed?

The proposal effectively addresses the structural weakness of low liquidity in the vDOT-DOT pair, which causes high slippage and hinders DeFi usability. By injecting 1,000,000 DOT into the liquidity pool, it improves trading efficiency, enhancing user experience. It also mitigates the underutilization of staked DOT by enabling its use in DeFi via vDOT, thereby increasing capital efficiency. This strengthens Polkadot’s DeFi ecosystem and removes barriers to broader adoption.

Justification

Low liquidity in the vDOT-DOT pair has been identified as a significant obstacle to DeFi efficiency. Liquid staking addresses the trade-off between staking and liquidity, a common challenge in proof-of-stake networks. By resolving these issues, the proposal enhances Polkadot’s competitiveness and usability.

Score: 7/10

■Question 4 of 19

Does the proposal promote interoperability, user retention, or parachain development?

The proposal strongly promotes interoperability, user retention, and parachain development. vDOT’s XCM-enabled cross-chain functionality supports seamless asset transfers across parachains, aligning with Polkadot’s interoperability goals. By allowing users to earn staking rewards while engaging in DeFi, it incentivizes retention. Enhanced vDOT liquidity makes it an attractive asset for parachains, encouraging developers to build new protocols and applications, as seen in its integration with Hydration and Interlay.

Justification

Bifrost’s technology enables vDOT’s cross-chain use, reinforcing Polkadot’s interoperable architecture. The dual benefit of staking and DeFi participation enhances user engagement, while vDOT’s utility drives parachain innovation. Increased liquidity amplifies these effects, fostering a vibrant ecosystem.

Score: 9/10

■Result category 1

Total score: 33/40 | Average: 8.25/10 (83%)

■Question 5 of 19

Does the proposal clearly fall within the scope of the chosen origin (Treasury, Tipper, Spender)?

The proposal clearly aligns with the scope of Track 34: Big Spender, as it requests a 1,000,000 DOT loan from the Polkadot treasury, which falls precisely within the track’s limit for expenditures up to 1,000,000 DOT. By utilizing the Treasury::propose_spend method, the proposal adheres to the procedural requirements for large treasury transactions, ensuring it fits the governance framework designed for significant financial requests.

Justification

The Polkadot OpenGov documentation specifies that Track 34, Big Spender, is designated for treasury spends up to 1,000,000 DOT. The proposal’s request for a 1,000,000 DOT loan, structured as a treasury spend with a repayment commitment, matches this limit and follows the correct method, confirming its appropriateness for the Big Spender track.

Score: 10/10

■Question 6 of 19

Are there previous proposals with comparable content, and if so, what were their outcomes?

Bifrost has a history of comparable treasury loan proposals, all of which were successfully repaid with interest. In 2022 and 2023, Bifrost secured 50,000 KSM loans from the Kusama treasury for vKSM liquidity, repaying them with 3,745.5028 KSM and 4,625.0495 KSM in interest, respectively. In early 2024, a 500,000 DOT loan from the Polkadot treasury (Referendum #432) was repaid in March 2025 with 42,723.02 DOT in interest, totaling 542,723.02 DOT. These outcomes demonstrate Bifrost’s reliability in managing treasury loans.

Justification

The proposal provides detailed references to these past loans, including links to referenda and transaction records, verifying their successful execution and repayment. This track record supports the governance compliance of the current proposal by showing that similar initiatives have been responsibly handled, reducing risk concerns for voters.

Score: 10/10

■Question 7 of 19

Is the governance system being used meaningfully or burdened?

The proposal uses the governance system meaningfully, presenting a comprehensive and transparent submission that respects the OpenGov process. Bifrost’s detailed explanation of fund usage, repayment terms, and past performance facilitates informed decision-making without overburdening the system. The proposal’s scale is justified by its potential ecosystem impact, and there is no evidence of excessive or frivolous submissions by Bifrost.

Justification

The proposal adheres to governance protocols by selecting the appropriate track and providing ample information for voters. Bifrost’s history of responsible treasury interactions and the proposal’s alignment with ecosystem goals indicate a constructive use of the system. The governance framework is designed to handle such significant proposals, and this submission does not appear to strain its capacity.

Score: 9/10

■Result category 2

Total score: 29/30 | Average: 9.67/10 (97%)

■Question 8 of 19

Is the requested amount proportionate to the potential or demonstrated benefit?

The 1,000,000 DOT loan appears proportionate to the anticipated benefits, as it significantly increases vDOT-DOT liquidity, currently at ~$2.8 million, enabling smoother DeFi transactions and broader adoption. The treasury’s expected return of ~60,000 DOT in interest provides a direct financial benefit, while enhanced liquidity drives ecosystem growth through increased total value locked (TVL) and user engagement. Bifrost’s proven repayment history mitigates risk, justifying the loan’s size relative to its potential to strengthen Polkadot’s DeFi infrastructure.

Justification

The vDOT-DOT StableSwap pool’s current liquidity is ~679,429 DOT at $4.12 per DOT. Adding 1,000,000 DOT (400,000 DOT and vDOT worth 600,000 DOT) would nearly double the pool’s depth, reducing slippage and supporting larger DeFi transactions. The ~60,000 DOT interest (~$247,200) offers a ~6% return, competitive for treasury investments. Bifrost’s repayment of 542,723.02 DOT in 2024 demonstrates reliability, ensuring the loan’s benefits outweigh its costs.

Score: 8/10

■Question 9 of 19

Is the budget framework reasonable compared to similar proposals?

The 1,000,000 DOT loan is reasonable when benchmarked against similar proposals. Bifrost’s prior 500,000 DOT loan from Polkadot and 50,000 KSM loans from Kusama, all repaid with interest, provide a reliable reference. Polkadot’s market capitalization, significantly larger than Kusama’s, supports scaling the loan size proportionally. The framework aligns with these successful precedents, ensuring the budget is appropriate for the intended ecosystem impact.

Justification

Polkadot’s market cap (~$6.47 billion) is ~23.78 times Kusama’s (~$272 million). Scaling a 50,000 KSM loan yields ~1,189,000 DOT, validating the 1,000,000 DOT request. The 500,000 DOT loan’s repayment in 2024 confirms Bifrost’s capacity for large loans. The treasury’s ~31 million DOT balance accommodates the loan without undue strain, reinforcing the framework’s reasonableness.

Score: 8/10

■Question 10 of 19

What specific added value does the Treasury or network gain in return for this expenditure?

The treasury gains ~60,000 DOT in interest, a tangible financial return. The network benefits from enhanced vDOT-DOT liquidity, which reduces trading friction, increases DeFi adoption, and boosts TVL, as evidenced by vDOT’s current ~2.76 million DOT cross-chain volume. Measurable KPIs, including liquidity growth, unique address expansion, and XCM transfers, track the proposal’s impact, ensuring it strengthens Polkadot’s ecosystem by supporting parachain integrations and user engagement.

Justification

The ~60,000 DOT interest (~$247,200) enhances treasury resources. vDOT’s integration into Hydration’s $6 million TVL Omnipool and Interlay’s lending markets demonstrates its ecosystem value. The proposal’s KPIs provide a robust framework for monitoring benefits, ensuring the network’s growth in DeFi activity and resilience is quantifiable and significant.

Score: 9/10

■Question 11 of 19

Were cheaper alternatives considered?

The proposal does not explicitly discuss cheaper alternatives, but the loan structure is inherently cost-effective compared to grants, preserving treasury capital while generating ~60,000 DOT in interest. This approach leverages Bifrost’s proven repayment model, as seen in prior loans, to maximize financial and ecosystem benefits. Non-repayable incentives would likely offer less value, making the loan a prudent choice for achieving the desired impact.

Justification

The loan ensures capital preservation and a financial return, unlike grants that permanently reduce treasury funds. Bifrost’s repayment of 542,723.02 DOT in 2024 validates this model’s efficiency. While smaller loans or incentives could reduce capital allocation, they may not achieve the same liquidity or ecosystem impact, supporting the chosen structure’s cost-effectiveness.

Score: 7/10

■Result category 3

Total score: 32/40 | Average: 8.00/10 (80%)

■Question 12 of 19

Is it clearly communicated how and for what purposes funds will be used—including KPIs, milestones, metrics?

The proposal clearly articulates that the 1,000,000 DOT loan will enhance vDOT-DOT liquidity by minting 600,000 DOT into vDOT and providing 400,000 DOT plus vDOT equivalent to 600,000 DOT to the Bifrost StableSwap pool. It outlines KPIs such as vDOT minting total value locked (TVL), DOT-vDOT liquidity growth, unique address growth, XCM transfers, and ecosystem integrations to track impact. However, it lacks specific numerical targets or milestones for these KPIs, which could hinder precise evaluation of non-financial outcomes.

Justification

The detailed breakdown of fund allocation ensures transparency on usage, meeting auditor expectations. The inclusion of KPIs reflects an intent to enable evidence-based tracking, but the absence of defined targets limits their utility for rigorous evaluation. The financial goal of repaying 1,000,000 DOT plus ~60,000 DOT interest is explicit, providing a clear metric for treasury accountability.

Score: 8/10

■Question 13 of 19

Are budgets, timelines, and work packages clearly specified?

The budget is precisely defined as a 1,000,000 DOT loan, and the timeline is set for one year, with repayment due at maturity. Although traditional work packages are not applicable, the proposal specifies a clear operational sequence: issuing 1,000,000 DOT to the Bifrost treasury, minting 600,000 DOT into vDOT, providing liquidity to the StableSwap pool, and repaying via XCM. This structured plan ensures transparency and traceability in fund execution.

Justification

The explicit budget and timeline meet high transparency standards. The operational sequence serves as a functional equivalent to work packages, detailing each step with sufficient clarity for auditors to track progress. The use of on-chain mechanisms like XCM further enhances traceability, ensuring all actions are verifiable.

Score: 9/10

■Question 14 of 19

Are there success criteria for later evaluation?

The proposal defines financial success as repaying 1,000,000 DOT with ~60,000 DOT interest, a clear and verifiable criterion. For ecosystem impact, it lists KPIs such as vDOT minting TVL, liquidity growth, and XCM transfers but does not specify quantitative thresholds or success benchmarks for these metrics. This omission reduces the ability to objectively evaluate non-financial outcomes, though the KPIs provide a framework for assessment.

Justification: The financial repayment criterion is robust, aligning with treasury oversight needs. However, the lack of explicit success thresholds for KPIs weakens the proposal’s evaluability for ecosystem benefits. The presence of KPIs shows intent, but clearer criteria would enhance accountability.

Score: 6/10

■Question 15 of 19

Is documentation or reporting planned?

The proposal does not explicitly commit to a formal reporting schedule but emphasizes a fully transparent process using Polkadot and Bifrost governance and XCM for trust-minimized transactions. On-chain XCM transfers ensure public verifiability, and Bifrost’s history of documenting repayments for prior loans suggests similar transparency will be maintained. However, a defined reporting plan would strengthen accountability.

Justification

The reliance on on-chain transparency via XCM meets traceability standards, as transactions are publicly accessible. Bifrost’s past repayment records demonstrate a precedent for documentation. The absence of a specific reporting commitment is a minor gap, as auditors would prefer explicit plans to ensure regular updates on KPIs and progress.

Score: 7/10

■Result category 4

Total score: 30/40 | Average: 7.50/10 (75%)

■Question 16 of 19

Have the proposers or involved organizations made verifiable, traceable contributions to the ecosystem?

he Bifrost Foundation has made significant, verifiable contributions to the Polkadot and Kusama ecosystems through its liquid staking solutions. They repaid a 500,000 DOT loan to the Polkadot treasury in 2024, including 42,723.02 DOT interest, totaling 542,723.02 DOT. For Kusama, Bifrost repaid two 50,000 KSM loans in 2022 and 2023, contributing over 8,370 KSM in interest. Their vDOT token is integrated into DeFi protocols across parachains, with ~2.76 million DOT in cross-chain volume and $6 million TVL in Hydration’s Omnipool, enhancing ecosystem liquidity and functionality.

Justification

On-chain records confirm Bifrost’s loan repayments, demonstrating financial reliability. vDOT’s adoption metrics, including a near doubling of holders from 2,820 to over 5,000, and its role in DeFi applications, validate their impact. These contributions are traceable via public blockchain data, meeting the scrutiny of community members seeking evidence of ecosystem value.

Score: 10/10

■Question 17 of 19

What projects have been successfully implemented so far?

Bifrost has successfully delivered its liquid staking protocol, enabling vDOT for Polkadot and vKSM for Kusama, alongside StableSwap pools for efficient token swaps. They implemented cross-chain integrations, allowing vDOT usage on parachains like Hydration and Interlay, and EVM chains via Hyperbridge and Snowbridge. The Revenue Sharing Program (RSP) has partnered with 13 entities, accumulating $4 million TVL. These projects have driven vDOT’s growth to over 5,000 holders and $6 million TVL in Hydration’s Omnipool, showcasing significant ecosystem impact.

Justification: The proposal quantifies project outcomes, such as vDOT holder growth and TVL, supported by on-chain data. Successful loan repayments, including 542,723.02 DOT, reflect effective project management. These achievements demonstrate Bifrost’s ability to deliver impactful initiatives.

Score: 10/10

■Question 18 of 19

Are there publicly accessible references (e.g., code repositories, publications) or community feedback supporting the proposers’ credibility?

Bifrost provides extensive public references, including an open-source code repository, detailed documentation, and security audit reports. Their identity is verified on Subscan as the Bifrost Foundation with a “Reasonable” judgment. Successful governance proposals, such as the 2024 Polkadot loan and Kusama loans, indicate community trust through prior approvals. While direct community feedback is not cited, the governance process and repayments suggest positive reception, reinforcing Bifrost’s credibility.

Justification

Open-source code and audited smart contracts are critical for blockchain credibility, meeting community standards. The verified identity and history of approved referenda provide strong evidence of trustworthiness. The minor limitation is the lack of explicit community feedback, but governance successes imply broad support.

Score: 9/10

■Question 19 of 19

Is the team capable of delivering the promised outcomes?

Bifrost demonstrates strong capability to deliver the proposed liquidity enhancement, leveraging their experience with similar treasury loans and vDOT integrations. They repaid a 500,000 DOT loan and multiple Kusama loans, showcasing financial and operational expertise. The proposal’s plan to mint vDOT, provide liquidity, and repay via XCM utilizes existing infrastructure, ensuring feasibility. Their expansion of vDOT to multiple parachains and EVM chains further supports their ability to execute.

Justification

Bifrost’s track record of managing large loans and growing vDOT’s ecosystem presence, with integrations like Hydration and Interlay, confirms their technical and operational capacity. The structured plan aligns with their proven expertise

Score: 9/10

■Result category 5

Total score: 38/40 | Average: 9.50/10 (95%)