New Exploration in the Polkadot Ecosystem: How Gigadot Enhances Decentralized Finance 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 more flexible ways to utilize staking assets. Hydration, on the other hand, has built a full-chain DeFi infrastructure covering modules such as exchange, lending, and stablecoins based on the Polkadot SDK, and has integrated it into a scalable Appchain architecture.

Recently, these two projects have teamed up to launch the innovative DeFi product Gigadot. Through one-click operation and multiple revenue mechanisms, Gigadot offers DOT users a more efficient way to utilize funds, while also initiating a new exploration of cross-chain DeFi on Polkadot. After its launch, the market response was enthusiastic, with the total locked value once exceeding $35 million, making it one of the most attention-grabbing experimental projects in the ecosystem.

During the second Polkadot Open Call online event held on May 22, the two project leaders jointly delved into the product logic, technical implementation, and ecological significance of Gigadot, providing a comprehensive introduction to this new type of composite Decentralized Finance product on Polkadot.

The Philosophy and Original Intention of Gigadot

The core concept of Gigadot is "one deployment, multiple earnings." Traditionally, users needed to stake, lend, or provide liquidity for DOT separately, a cumbersome process with low asset utilization. The emergence of Gigadot has streamlined these complex operational paths, allowing users to obtain multiple sources of income through simple actions.

In the Polkadot ecosystem, DOT is the primary staking asset. In the past, once DOT was staked, this portion of the asset could not be used for other purposes, such as lending or providing liquidity. Bifrost's vDOT solves this problem and builds a dedicated application chain to provide liquidity support.

Hydration attempted 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. Instead, it allows DOT and vDOT to be exchanged freely at real-time exchange rates, enhancing liquidity and enabling vDOT to be used as collateral for lending.

Gigadot has further integrated the liquidity pool with the lending module. Users can stake DOT as vDOT, combine it with aDOT to form an LP, and then use the LP as collateral to borrow funds, achieving circular usage 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 independently, resulting in a series of fragmented product lines.

Hydration hopes to avoid reinventing the wheel by directly integrating Bifrost's mature vDOT, leveraging XCM cross-chain communication and Polkadot's shared security mechanism, saving 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 makes the process 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 and returning vDOT, thereby significantly improving 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 more secure and resistant to manipulation. Recently, the surge in XCM message volume between Hydration and Bifrost also indicates that this cross-chain mechanism has been operating stably.

Technical Architecture and Security Assurance

Gigadot is a complex product that contains multiple functional layers. The early user interface was criticized for being too lengthy and having too many 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 is DOT derivatives (such as vDOT) from other chains, and the other is ERC-20 format DOT derivative assets from Hydration's own lending market. These assets are collectively added to the stable 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 returns. Usually, cross-chain assets need to be wrapped, but Gigadot has simplified this complex process with a one-click design. With the advancement of the Polkadot Asset Hub, future Hydration will further optimize cross-chain support while maintaining a streamlined 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 Returns?

Gigadot has implemented the aggregation of multiple sources of income, currently including:

• Lending interest: aDOT invested in the lending market to earn interest;
• Staking Rewards: vDOT continuously generates staking rewards;
• Trading Fees: 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 of Hydration HDX, and the native token of Bifrost BNC;
• Asset Appreciation: The appreciation of underlying assets and fee income drive the increase in Gigadot prices.

Users can also amplify their returns through the "Looping" strategy: using Gigadot as collateral, borrowing DOT, and then converting it into more Gigadot, repeatedly performing multiple rounds to compound the 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 price correlation among vDOT, aDOT, Gigadot, and DOT, they fluctuate in sync during market volatility, which results in a relatively lower risk of liquidation.

In addition, Bifrost has established a transparent asset monitoring dashboard where users can view the reserve rate, 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 the existing system. Although 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.

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

Currently, Bifrost is working with Parity to migrate the staking system from the Relay Chain to the Asset Hub. In addition, Polkadot has also been promoting some major upgrades recently, such as async backing, shortening the 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 being planned 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 one of the important collateral assets 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 that sets a fixed annual interest rate, making it more suitable for users' cost estimation compared to floating rate assets like USDT/USDC. This mechanism is also expected to lead to the emergence of more new use cases, such as integrating Hollar as a trading 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 also integrates the EVM environment. However, deploying smart contracts on the chain requires approval through a whitelist mechanism to protect the resources on the chain 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 strongly 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 from here; there are clear rewards and support paths within the ecosystem.

Conclusion

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

In the future, Polkadot will showcase its unique value of modularity and composability, continuously injecting new momentum into the development of multi-chain Decentralized Finance, driving the entire ecosystem towards a more open and efficient financial future.