New Exploration of Cross-Chain DeFi in the Polkadot Ecosystem: How Gigadot Enhances Asset Efficiency?

In the Polkadot ecosystem, cross-chain liquidity and asset efficiency have always been core challenges faced by DeFi applications. As a cross-chain staking protocol focused on liquidity release, Bifrost is dedicated to providing users with a more flexible way to use staking assets. Meanwhile, Hydration has built a full-chain DeFi infrastructure covering modules such as exchange, lending, and stablecoins based on the Polkadot SDK, and has unified them into a scalable Appchain architecture.

Recently, these two projects jointly launched an innovative DeFi product called Gigadot, which provides DOT users with a more efficient way to utilize funds through a one-click operation and multiple income mechanisms, while also embarking on a new exploration of cross-chain DeFi on Polkadot. After the product went live, the market response was enthusiastic, with the TVL briefly exceeding $35 million, making it one of the most watched experimental projects within the ecosystem.

During the online event on May 22, the relevant person in charge deeply analyzed the product logic, technical implementation, and ecological significance of Gigadot, allowing us to gain a comprehensive understanding of this new composite DeFi product on Polkadot.

The Philosophy and Original Intention of Gigadot

The core concept of Gigadot is "one deployment, multiple returns". Traditionally, users had to separately stake DOT, lend it, or put it into liquidity pools, which was cumbersome and led to low asset utilization. The emergence of Gigadot has streamlined these complex operational paths, allowing users to achieve multiple sources of income through simple operations.

In the Polkadot ecosystem, DOT is the primary staking asset. In the past, once DOT was staked, that portion of the asset could not be used for other purposes. The vDOT launched by Bifrost solves this problem and builds a dedicated application chain to provide liquidity support. Hydration tried to encourage users to provide liquidity for DOT/vDOT through incentive mechanisms, but the high incentive costs limited the effectiveness. To address this, they designed a new mechanism similar to stablecoin pools, but without requiring a 1:1 fixed peg, allowing DOT and vDOT to be freely exchanged at real-time rates, enhancing liquidity and enabling vDOT to be used as collateral for borrowing.

Gigadot has further connected the liquidity pool with the lending module on this basis. Users stake DOT as vDOT, form an LP with aDOT, and then use the LP as collateral to borrow funds, achieving a cycle of use and obtaining dual returns from staking and lending.

How does Gigadot solve the cross-chain liquidity problem?

One of the goals of Gigadot's design is to integrate and amplify the revenue pathways. Looking back at the early days of the Polkadot ecosystem, many teams developed LSTs, built liquidity pools, and distributed incentives, resulting in a series of fragmented product lines.

Hydration hopes to avoid reinventing the wheel by directly integrating Bifrost's mature vDOT, utilizing XCM cross-chain communication and Polkadot's shared security mechanism, saving on development and incentive costs, and showcasing the advantages of Polkadot's modular collaboration.

Currently, if users want to use vDOT on Hydration, they must first stake DOT on Bifrost to obtain vDOT, and then transfer it to Hydration via XCM, which is somewhat complicated. In the future, Hydration will support "one-click staking", allowing users to complete the operation directly on its platform, with the system automatically communicating with Bifrost via XCM to return vDOT, thereby significantly enhancing the user experience.

The on-chain price anchoring of vDOT does not rely on traditional oracles, but instead synchronizes Bifrost data in real-time through XCM, making it safer and resistant to manipulation. Recently, the surge in XCM message volume between Hydration and Bifrost also indicates that this cross-chain mechanism is operating stably.

Technical Architecture and Security Assurance

Gigadot is a very complex product that includes multiple functional layers. The early user interface was criticized for its lengthy processes and numerous steps. It has now been simplified so that users only need to hold DOT or USDT to "obtain Gigadot with one click."

Gigadot consists of two types of assets: one type is DOT derivatives (such as vDOT) from other chains, and the other type is ERC-20 form DOT derivative assets from Hydration's own lending market. These assets are collectively added to the stability pool as collateral to participate in the lending market.

Gigadot is an ERC-20 token based on the Rebase mechanism, and its value automatically adjusts with the underlying asset's yield. Typically, cross-chain assets need to be wrapped, but Gigadot has streamlined this complex process with a one-click design. With the advancement of the Polkadot Asset Hub, future Hydration will further optimize cross-chain support, maintaining a simple user experience.

In terms of security, Gigadot benefits from the shared security mechanism of the Polkadot main chain, eliminating concerns about the security of underlying assets.

How to Maximize Gigadot Earnings?

Gigadot has achieved the aggregation of multiple sources of revenue, currently including:

• Lending interest: aDOT invested in the lending market to earn interest;
• Staking rewards: vDOT continuously generates staking rewards;
• Transaction fee: aDOT and vDOT added to the stable pool generate fee income;
• Incentive Tokens: Users holding Gigadot can receive three types of incentives - Gigadot, the native token HDX of Hydration, and the native token BNC of Bifrost;
• Asset appreciation: The appreciation of underlying assets and income from transaction fees drive the increase in Gigadot price.

Users can also amplify their returns through the "Looping" strategy: by using Gigadot as collateral, borrowing DOT, and then exchanging it for more Gigadot, repeating the process multiple times to accumulate returns. As long as the yield on Gigadot is higher than the borrowing interest rate, this method can continuously amplify returns.

Due to the high correlation in price among vDOT, aDOT, Gigadot, and DOT, they tend to fluctuate in sync during market volatility, thus the risk of liquidation is relatively low.

In addition, Bifrost has established a transparent asset monitoring dashboard, where users can view the reserve ratio, staking status, and other information of vDOT at any time, ensuring that each asset has 100% on-chain reserve support.

The Impact of Polkadot Mechanism Evolution on Gigadot

Both Hydration and Bifrost have very active development teams behind them. The teams closely monitor each SDK upgrade and assess the impact on existing systems. While certain upgrades may bring significant changes, there are currently no updates that pose a destructive impact on Gigadot, and the overall architecture has good resilience.

Currently, the entire Polkadot DeFi ecosystem is still relatively early, with most users only satisfied with staking DOT to obtain basic returns. However, in the past year, more and more people have started participating in LP and DeFi products. Gigadot is a typical example as it provides new uses for DOT, bringing richer ways to participate in the ecosystem.

Bifrost is currently working with Parity to advance the migration of the staking system from Relay Chain to Asset Hub. Additionally, Polkadot is also promoting some significant upgrades recently, such as async backing, reducing block time to 6 seconds, and adjustments to the staking mechanism.

Despite frequent technological updates, Bifrost's staking mechanism remains stable and actively adapts to new systems, thus maintaining confidence in Gigadot's future development.

The Future and Product Planning of Gigadot

The collaboration between Hydration and Bifrost is very close, and more GIGA series products will be launched in the future. Currently in planning is the introduction of Bifrost's vBNC into the Hydration stable pool, using a mechanism similar to Gigadot to enhance its liquidity.

In addition, Gigadot can also serve as an important collateral asset for the Hollar stablecoin. There are many ways to implement this, and it is not limited to looping; users can also use it to lend out other assets.

Hollar is an over-collateralized stablecoin with a fixed annual interest rate, which is more suitable for users' cost estimation compared to floating rate assets like USDT/USDC. This mechanism is also expected to drive the emergence of more new use cases, such as integrating Hollar as a transaction fee or stable settlement asset, with the specific implementation depending on the system design of each chain.

What funding mechanisms are available for developers?

Hydration is built on Substrate, but it also integrates an EVM environment. However, deploying smart contracts on-chain requires approval through a whitelist mechanism, which is designed to protect on-chain resources from being abused.

In terms of funding, the treasury of Hydration also adopts the OpenGov mechanism, which is consistent with projects like Bifrost. It is recommended that developers initiate discussions on Discord or forums before formal development to see if HDX holders are interested in this idea, to avoid investing a lot of time only to find that the community is not willing to support it.

In short, if you have ideas, you can definitely start here, as there are clear rewards and support paths within the ecosystem.

Conclusion

Gigadot is not just an attempt at functional integration, but a deep exploration and productization practice of Polkadot's cross-chain collaboration potential. Through one-click combinations, cross-chain integration, and multiple benefits, it brings true DeFi composability to Polkadot.

In the future, Polkadot will demonstrate its unique value of modularity and composability, continue to inject new momentum into the development of multi-chain DeFi, and promote the entire ecosystem towards a more open and efficient financial future.