Polkadot Parachain Auction and Crowdloans Explained
Everything you need to know about the upcoming parachain auctions on Polkadot 🔴
- Projects that want to become a parachain on Polkadot or Kusama need to win a parachain auction
- Fearless Wallet supports all parachain auctions on Polkadot and Kusama by default (some crowdloans with custom features will be supported on a case by case basis)
- On Polkadot, the parachain leasing period is a max. of 96 weeks, while on Kusama, it is max. 48 weeks
The Polkadot parachain slot auctions start on Nov 11. But, what are Parachain slot auctions and crowdloans on Polkadot (or Kusama)? And how can I participate in crowdloans?
Projects that want to become a parachain on Polkadot (or Kusama), need to win a parachain auction from this point on they will be referred to as Crowdloan Campaigns.
Here is a brief overview of how the process works, and how you can participate in crowdloans with Fearless Wallet in an easy way.
Note: Fearless Wallet supports all Crowdloan Campaigns on the Polkadot and Kusama networks by default*
*If the Crowdloan Campaign that you wish to support has a custom flow, please check compatibility directly with the project first
Blockchains: Parachains and Relay Chains
Background: Polkadot (DOT) and Kusama (KSM) are so-called “Relay Chains” which are designed to host blockchains called “Parachains”.
- Relay Chain: The Relay Chain is the central chain where transactions are finalized. (Polkadot and Kusama)
- Parachains: Blockchains that are pegged to the relay chain
Parachains are blockchains that operate on top of the Polkadot and Kusama networks. Different Parachains can be developed to match their individual design and specifications, e.g: decentralized finance (DeFi), identity management, and gaming. This is significant, as no single blockchain is optimal for all use case scenarios.
With Fearless Wallet you can easily buy Polkadot (DOT) and Kusama (KSM) tokens with a few clicks.
How Do Polkadot Parachain Auctions Work?
A parachain auction offers an opportunity for Substrate-based (framework for building blockchains on Polkadot or Kusama) blockchains to connect to the Polkadot or Kusama relay chains. This is achieved via an open and permissionless auction while benefiting from the security of the relay chain (Polkadot and Kusama). However, Parachain slots are scarce by design in order to encourage competition and to optimize the relay chain’s resources. On Polkadot, the parachain leasing period is a max. of 96 weeks, while on Kusama, the parachain leasing period is max. 48 weeks.
So-called “candle auctions” are the auction mechanism for parachain auctions. This particular auction-style traces back to the 17th century, when the bidding was allowed until a candle burned out. The highest bid up until that point was considered the winner. Candle auctions are implemented to avoid “auction sniping”, where an entity would come in at the end of the auction and outbid all other contenders. Thus. candle auctions have the major advantage of not knowing exactly when the auction will end, and therefore, participants are more likely to place early bids that correspond to their estimated value of the auctioned item. This has led to more accurate pricing in parachain slot auctions. For more detailed information you can read the research article on candlelight auctions by the Web3 Foundation.
Crowdloans Are Used to Win a Parachain Auction
Crowdloans allow the community to provide a project with DOT or KSM to participate in a parachain auction in order to win a parachain slot. The Сrowdloan process allows the community to contribute to the project by locking their own DOT or KSM until the lease period is over. In this process, the projects that participate in parachain auctions reward DOT or KSM contributors with their native blockchain token. The contributed DOT (for Polkadot auction) or KSM (for Kusama auction) are automatically returned after the parachain leasing period is over. And if the project does not win the parachain auction, then the DOT or KSM tokens are returned in a few days. (current batch).
For more detailed information on crowdloans please visit the Polkadot Wiki
Fearless Wallet Supports All Crowdloans
The following screenshots showcase the 3 main steps of the Crowdloan process in Fearless Wallet. All data is fictional:
1) Choose which Crowdloan to contribute
Users can pick the Crowdloan they want to contribute. It’s also possible to add more DOT / KSM to the ones the user has already contributed to.
2) Contribute the desired amount of DOT / KSM to the Crowdloan
*the minimum contribution amount is 5 DOT / 0.1 KSM
Users can review the leasing period and estimated rewards for the crowdloan in case of winning, as well as the network fee (for the tx). Various applicable Crowdloan information is displayed as well.
3) Confirm the transaction
Users can review and then confirm the tx.
4) Transaction is submitted
5) Supported Crowdloan Campaigns will appear in Overview
Users can see how much they have contributed to each Crowdloan (and click to add more)
Frequently Asked Questions
What is a Crowdloan?
Crowdloans allow the community to provide DOT or KSM to a Crowdloan Campaign (project) to participate in a parachain auction in order to win a parachain slot. The Сrowdloan process allows the community to contribute to a project by locking their own DOT or KSM until the lease period is over. In this process, the projects reward the DOT or KSM contributors with their native blockchain token.
Detailed information is available here
How can I participate in Crowdloans?
On the Fearless Wallet App, you can find a button labelled “Crowdloans” on the bottom of the screen. Click on it, then provide your contribution to participate in the selected Crowdloan Campaign. If you use Fearless Wallet, this ensures that your DOT or KSM tokens are returned to your account automatically after the leasing period.
What is a Parachain Auction?
Parachain auctions are candlelight auctions that are held on the Polkadot or Kusama network in a permissionless way to determine which blockchain is going to be connected as a parachain.
Detailed information is available here
What is the minimum amount of DOT or KSM required to participate in Crowdloans?
The minimum amount for Polkadot crowdloan contribution is 5 DOT
The minimum amount for Kusama crowdloan contribution is 0.1 KSM
When will I get my DOT or KSM back?
If a Crowdloan Campaign wins the parachain auction, you will receive your DOT or KSM tokens after the leasing period (24 months on Polkadot and 48 weeks on Kusama), automatically in the account associated with the Fearless Wallet app you used to contribute.
If a project does not win a parachain slot, you will get your DOT or KSM back in the account associated with your Fearless Wallet app in a few days after the auctions are over.
For more information on parachain auctions, check out the Fearless Wallet Wiki section on Crowdloans.
If you have any further questions or need some help with any of these steps, the Fearless Wallet Telegram community or the Fearless Wallet Telegram Support community will be happy to help and answer all your questions. You can also follow our Twitter account for updates. Finally, you can also consult the Fearless Wallet Wiki for more information.
Remember to #StayFearless
About SORA, Polkaswap, and Fearless Wallet
SORA is a new economic system aimed at creating a supranational multiverse economic system with built-in tools for decentralized finance (DeFi). The SORA network implements a new way of parachain architecture on Polkadot and Kusama network, with the capability to bridge external blockchains (like Ethereum) to the Polkadot ecosystem.
One of the DeFi applications that will run on the SORA network is Polkaswap, a non-custodial liquidity aggregating, cross-chain AMM DEX designed uniquely for the Polkadot ecosystem with boundless liquidity through its one-of-a-kind Aggregate Liquidity Technology (ALT).
Fearless Wallet is a mobile wallet designed for the decentralized future on the Kusama and Polkadot ecosystem, with support for iOS and Android platforms. An awesome user experience, fast performance, and secure storage for your accounts. Fearless Wallet will integrate Polkaswap for easy, decentralized swaps of assets.