Innovation in the Polkadot Ecosystem: How Gigadot Will Revolutionize Cross-Chain DeFi

The Polkadot ecosystem has always faced challenges in cross-chain liquidity and asset efficiency. As a cross-chain staking protocol focused on liquidity release, Bifrost is dedicated to providing users with a more flexible way to utilize staking assets. Meanwhile, Hydration has built a full-chain infrastructure covering multiple Decentralized Finance modules based on the Polkadot SDK, integrating it into a scalable Appchain architecture.

Recently, these two projects have joined forces to launch the innovative DeFi product Gigadot. By simplifying the operation process and offering multiple yield mechanisms, Gigadot provides DOT holders with a more efficient way to utilize their funds, while also opening a new chapter in Polkadot cross-chain DeFi. After the product went live, the market responded enthusiastically, with the total locked value once exceeding $35 million, making it one of the most notable experimental projects within the ecosystem.

The Concept and Origin of Gigadot

The core concept of Gigadot is "one deployment, multiple returns." Traditionally, users need to separately stake, lend, or provide liquidity for DOT, a process that is cumbersome and results in low asset utilization. The emergence of Gigadot streamlines these complex operational paths, allowing users to obtain multiple sources of returns through simple operations.

In the Polkadot ecosystem, DOT is the main 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 previously attempted to encourage users to provide liquidity for DOT/vDOT through incentive mechanisms, but the high costs limited the effectiveness.

To this end, they designed a new mechanism similar to a stablecoin pool, but without requiring a 1:1 fixed peg. Instead, it allows for the free exchange of DOT and vDOT at real-time rates, enhancing liquidity and enabling vDOT to be used as collateral for lending. Based on this, Gigadot further connected the liquidity pool with the lending module, achieving the cyclical use of assets and providing users with dual benefits of staking and lending.

How Gigadot Solves the Cross-Chain Liquidity Dilemma

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

Hydration chooses to directly integrate Bifrost's mature vDOT, leveraging XCM cross-chain communication and Polkadot's shared security mechanism to save on development and incentive costs, demonstrating the advantages of Polkadot's modular collaboration.

Currently, if users want to use vDOT on Hydration, they need to first stake DOT on Bifrost to obtain vDOT, and then transfer it to Hydration via XCM. 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 through XCM and returning vDOT, thereby significantly enhancing the user experience.

It is worth noting that 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. The recent surge in XCM message volume between Hydration and Bifrost also indicates that this cross-chain mechanism is now operating stably.

Technical Architecture and Security Assurance

Gigadot is a complex product that includes multiple functional layers. The early user interface was criticized for having too long a process and too many steps. It has now been simplified so that users only need to hold DOT or USDT to "get 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 DOT derivative assets in ERC-20 form from Hydration's own lending market. These assets collectively enter 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 yield. Typically, cross-chain assets require wrapping, 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 achieved 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: Adding aDOT and vDOT to the stable pool generates fee income.
• Incentive tokens: Users holding Gigadot can receive three types of incentives: Gigadot, HDX, and BNC.
• Asset appreciation: The appreciation of underlying assets and fee income drive the price increase of Gigadot.

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

Due to the high correlation in price among the four assets vDOT, aDOT, Gigadot, and DOT, they tend to fluctuate synchronously during market volatility, which results in relatively low liquidation risk. Additionally, Bifrost has established a transparent asset monitoring dashboard, allowing users to check the reserve ratio, staking status, and other information of vDOT at any time, ensuring that each asset has 100% on-chain reserve backing.

The Impact of Polkadot Mechanism Evolution on Gigadot

Both Hydration and Bifrost have very active development teams behind them. They closely monitor each SDK upgrade and assess the impact on the existing systems. While certain upgrades may bring significant changes, there are currently no updates that would 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 to participate in LP and DeFi products. Gigadot is a typical example, as it provides new use cases for DOT and brings richer ways to participate in the ecosystem.

Currently, Bifrost is working with Parity to migrate the staking system from the Relay Chain to the Asset Hub. Additionally, Polkadot has recently been advancing some significant upgrades, such as async backing, reducing block time to 6 seconds, and adjusting the staking mechanism. Despite frequent technical updates, Bifrost's staking mechanism remains stable and actively adapts to the new system, thus maintaining confidence in the future development of Gigadot.

The Future and Product Planning of Gigadot

The collaboration between Hydration and Bifrost is very close, and there will be more GIGA series products 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. This mechanism is also expected to drive the emergence of more new use cases, such as using Hollar as a transaction fee or a stable settlement asset for integrated use, with the specific implementation depending on the system design of each chain.

Funding Mechanism 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, which is intended to protect the resources on the chain from being abused.

In terms of funding, Hydration's treasury adopts the OpenGov mechanism. It is recommended that developers initiate discussions in the community before formal development to understand whether project holders are interested in the idea, to avoid spending a lot of time only to find out that the community is not willing to support it. In short, if there is an idea, it can definitely be started from here, as there are clear rewards and support pathways 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 yields, 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 DeFi, and driving the entire ecosystem towards a more open and efficient financial future.