Who is the bifrost counterparty?

Question

From what I read, Bifrost is like a kind of distributed exchange, allowing BTC/ETH to become XLM or Stellar-based tokens. It also enables the reverse flow.

If I use a bifrost enabled service (or build my own), who is the counterparty? Who is setting the price for my BTC/ETH? Does it rely on a volume of other bifrost users? How popular is the service? Can I see market depth?

On the other hand, if I've completely misunderstood the purpose of Bifrost, can anyone please enlighten me?

Answer 1

Bifrost was developed to help companies who want to issue token on Stellar (ex. ICO) but:

• want to accept payments not only using XLM but also BTC and ETH and
• want to be in full control of received funds and don't want to use existing BTC/ETH anchors on Stellar.

Bifrost is a web application written in Go programming language. Developers can download it and run on their own server(s). It isn't a centralised service.

Bifrost works like this:

• It generates a BTC/ETH wallet address for each user who want to participate (the company who runs Bifrost is in full control of the funds sent to these addresses).
• When BTC/ETH is received in a given address, Bifrost sends equivalent of the amount sent by the user as BTC/ETH token in the Stellar blockchain.
• Finally user can exchange BTC/ETH token to a final token being sold by the company (it's configurable if it's done automatically or manually by the user).

The price of the token (purchased using BTC/ETH) is set by the company which sells it. It's set directly on Stellar Distributed Exchange using manage_offer operation or one of Stellar wallets/clients.

Answer 2

Bifrost is an application to bridge Ehereum or Bitcoin blockchain to Stellar to do an initial coin offiering (ICO) or build an anchor/exchange for these coins for example.

So the counterpart is always you. Bifrost is watching the Ethereum and Bitcoin blockchain for transactions matching a derived key [BIP32]. When the tokens are transfered it sends a matching amount of assets issued by you on the Stellar network to the sender (anchor/ exchange case).

The next step is to exchange them into your your_ico_token asset on the stellar network when you use bifrost for an ICO. This is done via an sell offer on the distributed exchange (that you created before).

These are only the high level steps of course. It's important to note that bifrost has a client and a server side. The client is responsible for creating a key pair for the stellar network, setting trustlines and sending the buy offer for the your_ico_token. The server side watches the networks and sends the asset amounts. There are also steps involved to assure tokens are not lost. You may want to read the Design Document for all the details.

There is an online bifrost demo running that you can use to play a bit on the testnet.

To setup your own bifrost instance, follow the official docs and maybe my notes are helpful.