## **Proposal Overview**

This proposal consists of two core initiatives:

1. **Raising the vDOT Borrow Cap**: The current vDOT borrow cap on Hydration protocol has reached its limit, restricting users' leverage opportunities. We propose increasing the cap to unlock additional liquidity.
2. **3.14 DOT Halving Joint Marketing Campaign**: Around the upcoming **DOT Staking reward halving (March 14)** critical window, Bifrost will provide **100,000 BNC** to incentivize users to mint vDOT and deposit into Giga DOT, and invites Hydration to contribute **HDX equivalent to 1,000 USD** to match Giga DOT mining incentives, capturing migrating user flow together.

**Additional Support**: Bifrost Dapp's vDOT minting page will add Hydration price reference, making it convenient for users to jump to Hydration for vDOT purchases when better prices are detected.

## **Background & Opportunity**

### **1. DOT Reward Halving Window**

The Polkadot network will undergo **DOT Staking reward halving on March 14, 2026**, presenting a **historic opportunity** to attract native stakers to migrate to vDOT. A significant number of users currently staking DOT natively will face reduced yields, creating strong migration incentives.

### **2. vDOT Borrow Cap Has Reached Limit**

The vDOT borrow cap on Hydration protocol has **hit its ceiling**, limiting users' leverage operation space. Specifically:

- Users cannot further borrow DOT to re-mint vDOT
- This constrains the vDOT → borrow DOT → re-mint vDOT → deposit into Giga DOT looping strategy
- It impacts advanced users' capital efficiency and yield amplification needs

## **Proposal Details**

### **Part 1: Raising the vDOT Borrow Cap**

**Proposal**: We recommend that Hydration protocol raise the vDOT borrow cap from **2.222M vDOT to 3.333M vDOT**.

**Strategic Significance**:

| Dimension | Description |
| --- | --- |
| **User Side** | Unlocks leverage space, enabling users to amplify yields through the "vDOT collateral → borrow DOT → mint vDOT → deposit into Giga DOT" strategy |
| **Protocol Side** | Increases Hydration lending pool activity and protocol revenue |
| **Ecosystem Side** | Promotes deep integration of vDOT into the Hydration ecosystem, forming a "mint-borrow-reStake" closed loop |

**Connection to This Campaign**:

While the 3.14 campaign directly incentivizes vDOT minting and depositing into Giga DOT, **raising the borrow cap can indirectly amplify campaign effectiveness**:

- Advanced users can leverage borrowed funds to mint more vDOT for Giga DOT mining with the same principal
- Creates a triple effect of "minting incentives + leverage amplification + LP yields"
- Enhances overall campaign participation depth and capital volume

### **Part 2: Hydration Joint Marketing Campaign Contribution**

**Proposal**: We invite Hydration to contribute to Bifrost's 3.14 DOT halving marketing campaign, **contribution amount: HDX equivalent to 1,000 USD**.

### **Campaign Core Framework**

**Campaign Name**: **「DOT Pi Day: Yield Defense」**

**Campaign Period**: March 14 - April 14, 2026

**Core Objectives**:

- Primary objective: Attract Polkadot native DOT stakers to migrate to vDOT
- Secondary objective: Guide vDOT holders to deposit into Hydration Giga DOT, forming a yield closed loop

### **Bifrost's vDOT Minting Incentives (Campaign Background)**

As background information, Bifrost will provide the following vDOT minting incentives for this campaign:

**Fee Reduction**

- **Unstake Fee**: Reduced to **0%** during the campaign
- **Commission Fee**: Reduced from 10% to **5%**

**BNC Prize Pool Allocation**

- **Total Prize Pool**: 100,000 BNC
- **70,000 BNC**: Incentives for users minting vDOT on Bifrost
- **30,000 BNC**: Incentives for users depositing vDOT into Hydration Giga DOT

### **Hydration Contribution Allocation**

| **Item** | **Description** | **Budget** |
| --- | --- | --- |
| **Giga DOT LP Mining Incentives** | Match Bifrost's BNC rewards with HDX incentives | HDX equivalent to 1,000 USD |

### **Incentive Distribution Plan**

**Giga DOT Mint-to-Earn** 

- **Period**: March 14 - April 14, 2026
- **Incentive Pool**:
    - Bifrost provides: 30,000 BNC
    - Hydration provides: **HDX equivalent to 1,000 USD**

| **Period** | **Timeframe** | **BNC Pool** | **HDX Pool** | **Distribution Date** |
| --- | --- | --- | --- | --- |
| Weeks 1-2 | Mar 14 - Mar 27 | 15,000 BNC | HDX equivalent to 500 USD | Mar 28 |
| Weeks 3-4 | Mar 28 - Apr 14 | 15,000 BNC | HDX equivalent to 500 USD | Apr 15 |

**Qualified Address Definition**: Only addresses that mint vDOT on Bifrost **AND** deposit into Hydration Giga DOT during the campaign period (Mar 14 - Apr 14) are eligible for rewards.

## **Bilateral Benefit Analysis**

### **Bifrost Benefits**

- Expand vDOT minting volume, solidifying LST (Liquid Staking Token) market position
- Enhance vDOT utility and stickiness through Hydration's Giga DOT use case

### **Hydration Benefits**

- **Direct benefits**: Giga DOT TVL growth during campaign, increased protocol revenue
- **Indirect benefits**:
    - Raising vDOT borrow cap → increased lending pool activity → increased protocol revenue
    - Capture high-quality DeFi users referred by Bifrost
    - Establish long-term strategic partnership with Bifrost

## **Execution Timeline**

| **Date** | **Milestone** |
| --- | --- |
| **Before Mar 7** | Hydration confirms proposal, completes HDX allocation |
| **Mar 10** | Joint announcement from both parties, warm-up begins |
| **Mar 11-13** | Warm-up period: Early migration window opens |
| **Mar 14** | **DOT Pi Day: Yield Defense launches** (DOT halving day) |
| **Mar 14-27** | Weeks 1-2: Giga DOT mining |
| **Mar 28** | First round reward distribution |
| **Mar 28 - Apr 14** | Weeks 3-4: Giga DOT mining |
| **Apr 15** | Second round reward distribution, campaign ends |

## **Conclusion**

This proposal represents a significant opportunity for deep collaboration between Bifrost and Hydration. Through the dual-drive of **raising the vDOT borrow cap** and **joint marketing campaign**, we can:

1. **Seize the historic DOT halving window** to capture migrating users together
2. **Form a "mint-borrow-reStake" closed loop** to enhance both protocols' performance metrics
3. **Establish a foundation for long-term strategic partnership** to enable future collaborations

We look forward to a positive response from the Hydration team.

**Proposed by: Bifrost Team**


#256 Bifrost × Hydration Ecosystem Collaboration Proposal: Raising vDOT Borrow Cap & 3.14 DOT Halving Joint Campaign