Polkadot crowdloans (and how to use them to your advantage)

We have described the inner workings parachain auctions in our previous article, now we are going to focus on the crowdloans. So, what is a crowdloan and why may you want to participate in the crowdloan instead of bidding directly in the auctions?

Auctions recap

To just briefly remind what the auctions are and how they work — there is a limited amount of parachain slots on Polkadot/Kusama and projects will have to compete for them. The competition will take a form of a candle auction and each project will bid for a different amount of slots.

The important thing to note here is that time on Kusama is usually shorter than on Polkadot — that means parachain slot duration on Kusama is shorter than on Polkadot. To be precise, projects can bid on 6 slots, each lasting 8 weeks — therefore most of them will go for a 6 slot period that will guarantee them parachain slot for a total of 48 weeks.

Credits to Shawn Tabrizi and his wonderful presentation at Polkadot Decoded

Auction timeframe on Kusama

There will be an initial set of 5 auctions happening on Kusama. Each auction will last exactly one week, the winner will be immediately onboarded as a parachain and a new round of the auction will start right after that.

We don’t know the exact date of the first auction yet but we believe we are really close because the only thing left is upgrading Shell parachain to a Statemine. Therefore we recommend to unbond your KSM tokens (if you are staking) because crowdloans will start some time before the auctions.

Credits to the Plasm Network

Why crowdloan?

Although you can directly bid for a project in a parachain auction, most of the projects will try to win the auction by themselves. Therefore they are trying to accumulate as much funds as they can and they will reward their supporters with various benefits. Actually, this is your only chance to get your KAR (Karura) or SDN (Shiden) before they get listed on any exchange and thus benefit from the fact that you are an early supporter.

So how does this work? Each project will provide you an easy-to-use web interface where you can lock your KSM tokens for the project's bid period (usually 48 weeks) and receive a reward in a form of tokens or/and NFTs for your support.

The mechanics

So, you lock your tokens in order to support the project and now you are expecting your reward. If the project (be it Karura, Bifrost or Shiden) wins the slot, you will receive its tokens immediately (conditions vary from project to project and we will describe this further on). If not, your tokens will still be locked for the next couple of auction rounds and if the project still fails to win a slot, your funds will be returned to you immediately.

The important thing here is that the security of this process is guaranteed by Kusama's relay chain so the project cannot withhold your funds even if it wanted to. Also, the only cost here is the opportunity cost — you don’t pay for participation in the crowdloan, you are just locking your KSM tokens!

Now let’s have a look at the projects participating in crowdloans and what benefits can offer you for your support!

Khala (Phala)

Phala Network is a PoS network that aims to solve the problem of privacy of smart contracts running on an open blockchain. Once becoming a parachain, Phala will provide the ability to run private contracts for all other parachains.

Khala Crowdloan strategy

Khala is a Phala Network canary chain. Every KSM locked by you through the Crowdloan will be rewarded by 100 PHA (PHA: KSM = 100:1). The fixed reward ratio for the Crowdloan is intended to provide each participant a full 100 PHA per KSM, regardless of how many KSM is raised.

There are 15,000,000 PHA set aside for rewards on Kusama auctions. Based on the above ratio, when the KSM in the Khala Crowdloan reaches 150,000, there is no more PHA that can be distributed to contributors.

When Khala wins a slot and runs as a parachain successfully, 34% of the PHA in the reward pool will be given to contributors’ addresses immediately. The remaining 66% will be vested monthly over 11 months.

There is an additional reward available for Referrals. If a Crowdloan participant invites an additional participant who makes an additional contribution, they will each receive an additional reward: an extra 0.5% on the additional contribution.

Karura (Acala)

Acala has couple of goals to achieve while becoming a central DeFi hub in the Kusama ecosystem. The most important one is the creation of algorithmic multi-collateral stablecoin aUSD, pegged 1:1 to US Dollar. Others is to run Acala DEX that will use aUSD for trading various tokens (in a similar fashion to Uniswap) or liquid staking for Kusama and Polkadot networks .

Karura Crowdloan strategy

KSM holders lock their tokens on Kusama for 48 weeks to help Karura lease a parachain slot and gain access to Kusama’s plug-and-play security. In return for KSM holders’ loan, KAR (Karura’s native token) will be distributed to participants.

For every 1 KSM contributed, a minimum of 12 KAR is rewarded — which means that reward can be even higher, depending on the amount of support.

You can join Karura’s Crowdloan by following our referral link!

Shiden (Plasm)

Plasm is a fully functional EVM & WASM platform on Polkadot not only supporting Ethereum smart contracts but also cutting-edge Layer2 technologies such as Plasma and Rollups that scale these contracts to a new level. Plasm will provide interoperability with other bridged blockchains (like Cosmos) to access the entire Polkadot/Kusama ecosystem.

Shiden Crowdloan strategy

Shiden will use crowdfund to secure parachain slot by Kusama’s crowdloan mechanism allowing KSM holders to contribute by locking up their own KSM tokens for 11 months. Shiden will then reward its contributors by providing SDN tokens, the ratio will be roughly 1 KSM = 25 SDN.

Received SDN tokens will be locked 1 month and then periodically released every month with vesting of 10 months. Important thing here is that the crowdloan will start at the first day of auction and rewards for joining will be highest in this period!

Shiden will use 22% of the total supply (15,400,000 SDN) and bid for 1–8 periods (8 periods lasting for 48 weeks). Shiden is proud to be a community-driven project and wants to distribute 65% of the tokens to the community members in total.

Crab (Darwinia)

Darwinia is a decentralized cross-chain bridge network based on Substrate. It provides a safe, permissionless and non-custodial bridge solution that connects Polkadot with other blockchains such as Ethereum, Tron and others. It can become a central hub for wiring transactions between all popular blockchains and therefore a major exchange of value.

Crab crowdloan strategy

Darwinia will go for the 4th parachain slot (remember, each auction will last for one week so Darwinia will join auctions month after they begin). It will offer variety of rewards including CRING, RING, NFTs a even a BTC price for crowdloan contributors.

30% of the price pool will be released immediately and rest will be vested for duration of parachain slot period (48 weeks). Crab strategy offers wide range of rewards, therefore please refer to their article describing all the benefits.

Bifrost

Bifrost is the DeFi project based on Substrate which will run as a Polkadot parachain. The goal of Bifrost is to unlock liquidity of the staked funds for Proof of Stake projects within the entire Polkadot ecosystem. That means you stake on any Polkadot-based project without locking your tokens and losing the opportunity to participate in the DeFi ecosystem!

Bifrost crowdloan strategy

Bifrost will actually used its newly released SALP protocol to allow users to provide their KSM tokens in exchange for vsKSM that will have the same value! And of course, with a nice BNC token airdrop as well. So, you don’t actually lose the opportunity to use your KSM tokens since your vsKSM will be usable through the entire Kusama ecosystem.

You will receive at least 10 BNC tokens for 1 KSM with some of the tokens being airdropped immediately, 50% only after successful winning of the auction and rest gradually within 48 week period.

You will need a personal code to enter the crowdloan and we will be pleased if will use ours NA0418 :-)

Genshiro (Equilibrium)

Equilibrium is a cross-chain money market. Cross-chain means that it allows trading and using all the connected blockchains such as Bitcoin, EOS and in the future Ethereum, Binance Smart chain, Cosmos, Tezos or Tron. Equilibrium will contain all the DeFi tools we already know — trading, staking, lending & borrowing of all the main crypto assets including stablecoins and much more.

Genshiro crowdloan strategy

20% of the 1.2 billion GENS token supply will go towards crowdloan— that’s 240 million tokens. Their strategy is quite interesting because they don’t want their supporters to lose rewards from KSM staking — therefore KSM staking reward will be calculated into the total reward received from the crowdloan.

Users can earn up to 30% APY while participating in the crowdloan but the final amount depends on the amount staked and Kusama’s staking rewards rate. You can read more in Genshiro explanatory article about crowdloans.

Robonomics

Robonomics Network is the blockchain, that aims at robot-to-human and robot-to-robot communication. Robonomics will use their Robot operating system that creates a ground level for the Smart Cities, autonomous service providers, marketplaces for robotics and the Industry 4.0 implementation.

Robonomics crowdloan strategy

Each KSM locked will result in 1 XRT token as a reward. 25% of XRT tokens will be distributed right after winning the slot, rest is estimated to come 2–4 weeks afterwards. XRT is an ERC-20 token and currently tradable on Uniswap and Huobi.

Moonriver (Moonbeam)

Moonbeam is an implementation of EVM (Ethereum virtual machine) based on Substrate which aims to help developers and users to migrate on Polkadot while still being connected to the “old” Ethereum chain via bridges. Moonbeam has been very successful in on-boarding new projects to their network so we are really looking forward to their launch!

Moonriver crowdloan strategy

Moonriver will distribute 3 million MOVR tokens (30% of the total supply) to its supporters. There is no fixed reward ratio for the reward, you will get proportional number of tokens from the whole distribution. So, let’s say you lock 10 KSM and total amount of locked KSM is 1000, you will get 1% of the total supply — that is 30,000 MOVR tokens.

You will receive 30% of those right after the parachain launch, rest will be distributed via vesting during parachain slot duration.

Shadow (Crust)

Crust will provide decentralized cloud storage for the whole Polkadot ecosystem. Crust supports multiple storage layer protocols such as IPFS and DHT. It leverages TEE tech for storage work validation and Polkadot’s Substrate tech framework for the chain. It aims to build a decentralized cloud ecosystem that values data privacy and ownership.

Shadow crowdloan strategy

Crust will distribute 15,000 CRU and 3,000,000 CSM (Shadow native token) during the crowdloan period. The ratio of rewards is per 1 KSM = 0.07 CRU+14 CSM each week, that is, contributors can receive 7 CRU and 1, 400 CSM for every 100 KSM loaned per week. 30% of these tokens will be distributed immediately after win of the auction, rest will be given to users periodically every week.

SherpaX (ChainX)

ChainX is a decentralized cross-chain bridge network that will connect the Polkadot ecosystem with the Bitcoin blockchain. ChainX is already running for quite some time giving users stable rewards from staking on their chain.

SherpaX crowdloan strategy

Every user will get 10 KSX (SherpaX native token) for 1 KSM of their contribution. There’s also a quota bonus (more KSM you lock, the higher is the bonus) and invitation bonus for inviting people with your referral link (up to 5%).

Conclusion

We have tried to provide a comprehensive guide so everyone can understand benefit of crowdloans. Like we said, most of the project will provide easy-to-use interface for you to participate. Security of your funds is guaranteed by the relay chain and those funds will be returned to you after 48 weeks.

So, if you are a KSM holder and you intend to hold your tokens anyway — then crowdloans are a no-brainer and definitely try to support your favorite project(s)! If not, then consider locking your KSM for various benefits because you will not only get valuable tokens before they enter the market but also support smooth start of crowdloans and auctions as well!

If you like this article, consider supporting us by nomination of your tokens to Kusama or Polkadot validator going by the POLKADOTTERS name.

Stay tuned for further information about the Polkadot ecosystem projects here on Medium, our Twitter channel Polkadotters as well as in our Facebook Group Polkadot unofficial! If you are feeling really generous, you can send some DOTs to our donate address 🙂

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Czech bloggers & community builders. We are validators of Polkadot, Kusama, Darwinia, Crab, Bifrost, HydraDX, StaFi, Centrifuge under the name: POLKADOTTERS