How to contribute in a Polkadot crowdloan
There’s currently a referendum being held by the Polkadot governance that will finally enable registration for crowdloans on the 4th of November. This means that first crowdloan campaigns are right behind our doors so we decided to give community an overview of what options we have for making the contribution itself.
There are probably more ways to contribute than you would have expected which just underlines great diversity of our favorite ecosystem. Some of these options offer interesting bonuses, others just make user experience more pleasant. So let’s have a look at all of them so you can make an educated choice which to use!
- Polkadot JS
- Acala crowdloan
- Equilibrium xDOT
- Parallel Finance auction loan
- What about exchanges?
Plain old’ Polkadot JS
This is probably the safest option because you don’t need to trust any 3rd party and it’s already familiar to those who have participated in the Kusama crowdloan. Process is pretty simple, just go to this link, click on the +Contribute button, enter amount of the DOT tokens and you are done! Although user interface can be a bit confusing, it is as simple as this very single step.
However, downside is that you won’t get any interesting benefits like receiving a derivative DOT tokens for your contribution or using referrals.
Custom project website
This choice is very similar to the contribution via Polkadot JS, the only difference here is that you contribute via project’s website — for example Astar, Moonbeam or Acala. The main goal here is to make user experience as pleasant as possible so it’s a good option for those who don’t like Polkadot JS user interface. Also it allows a usage of referrals, a popular way for projects how to promote themselves and give users extra benefits.
Here are some examples
- Moonbeam — https://crowdloan.moonbeam.foundation
- Acala — https://acala.network/acala/quests
- Litentry — https://crowdloan.litentry.com/
Just one note to the Moonbeam supporters — you actually have to use their website for contribution otherwise you won’t be able to receive the GLMR tokens (so don’t contribute via Polkadot JS).
Besides the reward that is manifested in the ACA token itself, Acala also offers its contributors a lcDOT token as well. lcDOT is a token that serves as a replacement of the DOTs you have contributed and it is also a ticket for which you can exchange your DOT back after 2 years.
In a nutshell, it’s a process very similar to the liquid staking that we have already described in our article.
However, the main benefit is that you can use this derivative token in Acala’s DeFi protocols. You will be able to trade lcDOT in the AMM exchange, provide liquidity or use it as a collateral for minting aUSD stablecoin. So, while your DOT will still be locked for 2 years, you can utilize lcDOT for making a profit in the DeFi space in the meantime.
However, this option is only available for the Acala crowdloan itself — if you want to know how to contribute to other projects and receive a derivative DOT in exchange as well, have a look at the next three options in this article.
Equilibrium is an innovative DeFi protocol that is being built on Polkadot and it has xDOT staking with support for multiple crowdloans. Equilibrium’s xDOT staking solution actually offers a lot more features that the aforementioned lcDOT so let’s see what they got.
xDOT is already working on the Kusama version of Equilibrium called Genshiro. Project is already running and you can try its lending platform or AMM exchange. Access is in a closed beta mode now but you can ask for permission on the teams Telegram.
Contribution from the Ledger
Hardware wallets are not currently supported by the Polkadot crowdloans so Equilibrium is actually the only way how to contribute from your Ledger. This is because your DOT will be kept in their custodial multisig account that is held by the Equilibrium team together with a trusted counterparties. This option only works for contribution to the Equilibrium crowdloan itself! Other projects will be supported later on.
- Provide liquidity with xDOT (current APR around 25%)
- Take a loan against xDOT
- Actually, you can take a loan in any asset available on the platform!
- Use the Balancer LP token in Equilibrium’s parachain or on the Genshiro DeFi platform
At the moment, Equilibrium is supporting projects in the following screenshot from their webpage.
As you can see, this a really interesting option for the crowdloan users to contribute while keeping most of the crowdloan benefits.
Parallel is a money market and lending protocol built on the Polkadot platform. One of the features is called auction loans that will offer users a derivate cDOT token with additional benefits and, in similar fashion to Equilibrium, auction loans can be used with any Polkadot project.
Let’s give you an example — if you contribute to Astar via Parallel, you will get 4 PARA tokens for each contributed DOT token. So not only that you will received tokens of the parachain you are contributing to, you will receive some PARA tokens as well! Who doesn’t like double rewards, right? :-)
You can get up to 10% bonus if you contribute via the Parallel Finance interface. For instance, Litentry will give you from 2–10% of LIT token bonus for such a contribution.
Like a xDOT or lcDOT, cDOT will serve as a liquid counterpart to your DOT tokens that will be usable in the DeFi ecosystem of the Parallel Finance platform.
Parallel Fi is another example how you can boost your crowdloan profits via a 3rd party platform. So far, confirmed partners are Astar and Litentry with more coming in the future.
Although Bifrost will not be competing for a slot in the 1st batch of auctions, it’s still worth mentioning because most of the projects on Kusama have used the SALP protocol for their crowdloans.
Also, out of the all 3rd solutions we mentioned here, Bifrost is the most sophisticated one and the sole purpose of this parachain is to unlock liquidity from bonded tokens (whether it comes from staking or crowdloan contributions).
As you can see, we will have a really comprehensive liquid DOT solution when Bifrost wins its parachain slot (hopefully during the 2nd batch).
EDIT — Bifrost announced that SALP will be supporting Polkadot projects in the 1st batch of auctions.
While this may seem as the most user-friendly option, it actually has a lot of downsides. So let’s have a look on why you shouldn’t contribute via the exchange.
Not your keys, not your crypto
Remember, you are locking DOT tokens for two years when you contribute. Are you 100% sure that the exchange will still be here in two years and they will still posses your DOT tokens? Participation in the DOT ecosystem is a long-term commitment so it’s definitely worth learning the tooling and how to operate your wallets.
You will certainly lose a lot of benefits that are offered to the crowdloan participants. For instance
- Referral program — Astar will give you 0.1 ASTR for each friend that will contribute via your link
- Early supporters — Again, Astar will give you 10% bonus if you have supported them in the Shiden crowdloan or during Plasm lockdrop
- Early bird — most projects will give users higher rewards if they participate in the early stages of crowdloans (usually until the first auction ends)
Contributing via exchange means losing all of these benefits and most likely resulting in unnecessary financial damage.
As you can see, Polkadot ecosystem continues to flourish and we can now leverage several DeFi platforms with various benefits to get the maximum profit out of our crowdloan contribution.
Some users will stay on the safe side and stick with the plain old’ Polkadot JS, some will be more adventurous and try other ways like Equilibrium or Parallel Finance. In our opinion, this is a great example of the diversity of the Polkadot ecosystem and endless possibilities that can be offered by the Substrate framework and parachains developed on top of it.
So, do your own research, pick the best choice and support your favorite project in the upcoming crowdloans!
If you like this article, consider supporting us by nominating your tokens to our Kusama or Polkadot validator going by the POLKADOTTERS name.