On Friday, Bifrost, a Web 3.0 derivative protocol that provides decentralized cross-chain liquidity for staked assets, launched an updated Slot Liquidity Auction Protocol dubbed “SALP 2.0.” Projects such as Moonbeam, Unique network, OAK network, Polkadex, and others, undertake parachain loans in Kusama and Polkadot through the original SALP. A total of 177,690 vsKSM ($ 439 million) and 3,045,564 vsDOT ($ 21 million) were printed through the protocol.
The SALP protocol works by releasing the liquidity of tokens purchased during the auction; Liquid derivatives such as vsDOT and vsKSM are issued on a 1: 1 basis for staked tokens. Both vsDOT and vsKSM can be used for decentralized finance, or DeFi, applications, and rewards throughout the ecosystem as long as the original token remains locked during the parachain lease.
This avoids the opportunity cost of locking coins. However, the new SALP 2.0 allows users to earn liquid tokens through direct investment, not just through crowdloan participation. Tyrone Pan, head of development at Bifrost, comments:
“Upgrading to SALP 2.0 expands the Bond market for Crowdloan assets, improving vsToken & vsBond liquidity efficiency while lowering the threshold for users. This model not only makes it easier for Crowdloan users to manage derivatives, but also intelligently integrates Crowdloan with DeFi.”
The staking fluid is a a relatively new phenomenon in the realm of DeFi, it was created primarily to allow users to recover potential opportunity costs while staking their assets. A potential disadvantage is the vulnerability to changes in the underlying asset because it is classified as a DeFi derivative.