Author: Tyrone, Thibault

Created: 2022-09-22

# Simple Summary

Adding Bifrosts’ liquid derivative for staked KSM - vKSM into Moonriver XC asset for initiating further use case scenarios and liquidity in EVM protocols and applications.

# Motivation

[vKSM](https://wiki.bifrost.finance/learn/mechanism/slp/vksm) is a Substrate-based asset issued from the Bifrost Staking Liquidity Protocol ([SLP](https://github.com/bifrost-finance/bifrost/tree/develop/pallets/slp)) pallet, which is compatible with EVM, WASM and Substrate multi-environment assets. As Moonriver has a comprehensive EVM ecosystem, Bifrost intends to launch vKSM into the Moonriver EVM ecosystem.

# Why vKSM?

vKSM is Bifrosts' first staking liquidity derivative for staked KSM. Since its official launch on May 16th, approximately 217,000 vKSM (roughly USD 10.85M) have already been minted on the Bifrost chain. In addition we have successfully applied for a [50,000 KSM liquidity loan from the Kusama treasury](https://kusama.polkassembly.io/post/1606).

Bifrost vKSM dapp dashboard - snapshot:

![|602x448](https://lh6.googleusercontent.com/43wqbO6sh5y4dGO52J2nnahDDdh8CJL-Yf78yrtC4UOpfjWaQ2jTyJzO0PYsNvkIsWZsIz1gDx-66HvlRj8DS9nSCs0-LCK79oHQbk9UHmAcfQaAllGsydBRNiu6GQ9K2_bJatSqtoTlaFPbzBaLliED65sgUnY_AN-zI22KQTAT2JcyAtpZwhCsfA)

Image source: https://bifrost.app/vstaking/vKSM?tab=vKSM

## SDK and middle layer objectives for Bifrost

Bifrosts’ middle layer objective is to push multi-chain KSM & vKSM functional calling from other sides to the Substrate side. To achieve this, Bifrost is developing the SLP pallet (the pallet controls the logic of vKSM minting) SDK for cross-chain vKSM mint/redeem calling.

vKSM has its native advantages: yield bearing from staking and its pegged price with KSM, which are suitable characteristics for vKSM being a collateral asset in lending and borrowing protocols. Bifrost would push SDK integrations which would allow via XCM for remote minting and liquidation.

Currently, Bifrost is preparing Oracle price feed for vKSM by collaborating with [DIA](https://www.diadata.org/), an institutional-grade cross-chain end-to-end, open source data and oracle platform for Web3.

# Specification

## 1. add xc-vKSM

Since Bifrost and Moonriver have already opened an HRMP channel, vKSM is ready to be added to Moonriver asset pallet for xc-vKSM switching. It will take a Runtime upgrade for vKSM and xc-vKSM asset mapping on both sides.

## 2. vKSM utility “implementation plan”

This proposal will follow the plan that Bifrost proposed in ‘[Treasury propoal: KSM initial liquidity subsidy for KSM staking liquidity derivative - vKSM](https://kusama.polkassembly.io/post/1606)’ check Motivation- vKSM utility “implementation plan' ' for more details. We are in continuous discussion with the following projects and protocols deployed on Moonriver for xc-vKSM potential usecases: Solarbeam, Moonwell, Qidao, Linear and Chaotic finance as examples.

Furthermore, regarding the progress of vKSM on Substrate and how vKSM will step forward in the Kusama ecosystem, click [here](https://forum.bifrost.finance/t/kusama-treasury-fund-roadmap/1758).

# XC-Security of vKSM

vKSM is a Bifrost parachain-token that can be only issued by the Bifrost [vtokenMinting](https://github.com/bifrost-finance/bifrost/tree/develop/pallets/vtoken-minting) pallet, which has its own Multi-location and is non-related with the KSM token. As soon as vKSM crosses to Moonriver, the reserve asset of xc-vKSM is still vKSM in the Bifrost sovereign account (VkGT6KvUFi8gF6iYQLZfnLeCVzdbTyFrXMuNbAL7p2SyBTPAR).

Regarding the token risks of vKSM. Technically, the total issuance of vKSM is minted by the ratio between KSM and vKSM amount stored in the [token_pool](https://github.com/bifrost-finance/bifrost/blob/develop/pallets/vtoken-minting/src/lib.rs#L222-L224), each vKSM reserved by 1 staked KSM and its staking reward. The token_pool storage comes from transferred KSM from users and relay-chain interest.

## Minting Infos around KSM versus vKSM versus xc-vKSM

### KSM staking versus vKSM minting

Bifrost SLP executing KSM staking by three parachain sub-address:

[Bifrost parachian address](https://kusama.subscan.io/account/F7fq1jMmNj5j2jAHcBxgM26JzUn2N4duXu1U4UZNdkfZEPV)

[Sub-address #1](https://kusama.subscan.io/account/EckcmXbCj4huvNLP5btMFmJz8SzEt5s8hgKcL6LM8BtZeAf)

[Sub-address #2](https://kusama.subscan.io/account/J3Kp9LPQpRvVmJmmEuYJjW2UFnSQptZ3pbpSZbFLLgWF7WR)

[Sub-address #3](https://kusama.subscan.io/account/DFw6MtEaT5PSZHzd43UW2YnEx4GNzAfCzejruhBt1tnBJaF)

Go to [Kusama relay-chain chainstate](https://polkadot.js.org/apps/?rpc=wss%3A%2F%2Fpublic-rpc.pinknode.io%2Fkusama#/chainstate), call pallet staking, select function leager, input any Sub-address to check total KSM in staking.

Check total KSM staking by SLP:

Go to [Bifrost-Kusama chainstate](https://polkadot.js.org/apps/?rpc=wss%3A%2F%2Fbifrost-rpc.liebi.com%2Fws#/chainstate), call pallet vtokenMinting, select function token_pool, select parameters Token and KSM.

![|602x168](https://lh3.googleusercontent.com/GcdDTd4vAteXwQV-5ZhIqFdq5joljXMU3vqnbFw-CyKYsF0KL8Uv1ZzL4Ax_LuHQfaJU8abIh5a0eDpRhRi9CA7FHNk2rxwhB8XGHabpBq92TPNh1DWeau-eyXiyxC7deKmFtGuZkKvphNQ5AN8VqnnJYUl9t28lw78rNGyxZj8IWSD0GF3UERkYow)

Check total vKSM minting:

Go to [Bifrost-Kusama chainstate](https://polkadot.js.org/apps/?rpc=wss%3A%2F%2Fbifrost-rpc.liebi.com%2Fws#/chainstate), call pallet tokens, select function total_Issuance, select parameters VToken and KSM.

![|602x167](https://lh3.googleusercontent.com/StFOnSDAZ-8gs15VblD302IOBJImR93bhD8QXLU146Bo8I-je7Uf6FNp2830ka19br6D20P63-ceHJD-STv81Qt1YmoIbMt3_v8PIAEsS44NO-RiiMdxG7h7wdx5i6fGY1u2mrSB785j9-V4cTzF9Zbvx5WobafCGu70q23IAovDOtjVhjXH5C0wNw)

### vKSM staking versus xc-vKSM issuance

xc-vKSM can be over-issued only if:

1. xc-vKSM owner account doing malicious over-issue.

The xc-vKSM owner account is Bifrost parachain sovereign address (para-address has no private key), which has reserved cross-chain vKSM balance and mint the same amount xc-vKSM. Thus, the safety of xc-vKSM is protected by Moonriver governance.

2. vKSM over-issued on Bifrost.

vKSM is minted on Bifrost, protected by Bifrost runtime (SLP pallet and vTokenMinting), Bifrost team monitors total KSM staking on relay-chain, total KSM staking of vKSM Minting and total vKSM minting volume to protect vKSM safety.

### Conclusion

1. The total staking KSM on relay-chain (Sub-address 1+2+3) equals to the total volume of KSM vtoken_minting, which means the KSM staking of vKSM is fully reserved. (There is lag when new vKSM minting or Staking reward is released from relay-chain, so vtoken_minting-token_pool may temperary be less than relay-chain total KSM staking.)
2. Go to https://bifrost.app/vstaking/vKSM and check the vKSM/KSM ratio, so you can verify vtoken_minting_token_pool is fully reserved.

![|602x556](https://lh4.googleusercontent.com/nkRnjHegOVk7-Pyq4UMvW6tOM_MxqTwh5RoGwFuv2Q4oy7oPi27kHKr6ZtLRT_Ox1aDB7XgjPBpSUmnZI-jRb4NLeIYYYvOoKZZrdm7Er0r061xNwAukjGED0IWGX3o416MoScx4PeEBYHZpUDgRiTFeWW3IYvN2p30eZxk--BVE5Zi_MecbcGTDlA)

3. Check vKSM balance in Bifrost parachain account (F7fq1jMmNj5j2jAHcBxgM26JzUn2N4duXu1U4UZNdkfZEPV) and xc-vKSM balance in Bifrost parachain sovereign account (VkGT6KvUFi8gF6iYQLZfnLeCVzdbTyFrXMuNbAL7p2SyBTPAR), so verify the balance is equal.

### Audit

Bifrost Runtime Audited by SlowMist:

https://github.com/bifrost-finance/bifrost-wiki/blob/master/slowmist-rep-bifrost-2022-02-23.pdf

Register a new local asset
No information is stored in this pallet about the local asset
The reason is that we dont need to hold a mapping between the multilocation
and the local asset, as this conversion is deterministic
Further, we dont allow xcm fee payment in local assets

- Bifrost wants to add vKSM to the Moonriver EVM ecosystem.
- vKSM is a derivative of staked KSM and has already been minted on the Bifrost chain.
- Bifrost is working on integrating vKSM into lending and borrowing protocols.
- They are also collaborating with DIA for an Oracle price feed for vKSM.
- The proposal includes adding xc-vKSM to Moonriver and exploring potential use cases with projects like Solarbeam, Moonwell, Qidao, Linear, and Chaotic finance.

#114 Proposal: Add xc-vKSM in Moonriver

No Active Proposals