“We Bought DOT!” Initiative Explained
Ferrum makes a statement around their commitment to securing a Polkadot parachain and begin to accumulate DOT.
Dear Ferrum Community,
Ferrum recently announced that we made a substantial DOT purchase as part of our new initiative, “We Bought DOT.” This signifies an important step in the evolution of Ferrum as we commit to fully embracing the journey towards obtaining both Kusama and Polkadot parachains.
In this article we’ll cover a bit about what a parachain is and how the Polkadot and Kusama parachain auctions and crowdloans work before we dive into our reasoning behind this initiative.
Understanding the DotSama Ecosystem
Before we can effectively convey the strategy behind this initiative, its important to understand how the Polkadot-Kusama (DotSama) ecosystem operates. Polkadot founder, Gavin Wood, took quite an innovative approach to the “bet against blockchain maximalism” when creating this sort of ‘blockchain of blockchains’ Layer 0 protocol.
Some of these innovations pertain to the way that parachains are secured. Parachains are secured through an event called a parachain auction which are typically funded through a process called a crowdloan.
Parachain, auctions, and crowdloans…
Parachain — For starters, a parachain is a project-specific blockchain that is integrated within the Polkadot or Kusama networks. Polkadot supports a limited number of parachains, currently estimated to be about 100.
Parachain auction — Due to the limited availability of parachains, there must be a mechanism to ensure that only the most promising projects are able to secure a parachain slot. Parachain auctions are auctions that are held on the Polkadot or Kusama relay chains to determine which blockchain will connect to the parachain slot.
Crowdloan — Parachain slots can be expensive. This requires a way for pre-revenue projects to fund their endeavors. A crowdloan allows a team to crowdsource DOT (for Polkadot slots) or KSM (for Kusama slots) to use in order to bootstrap its parachain auction. Crowdloans allow people to contribute by agreeing to lock up their own DOT (KSM) until the end of the lease.
To take a deeper dive into all of these items, click here.
Kusama vs Polkadot
There is an important distinction to be made between Kusama and Polkadot. Polkadot describes these differences as: Kusama is wild and fast; great for bold experimentation and early-stage deployment. Polkadot is more conservative, prioritizing stability and dependability.
Kusama can be viewed as a monetized testnet environment in which products, features, incentive and governance models, etc can be tested prior to being pushed to the more production ready environment that exists within Polkadot. This relationship is exemplified through projects such as Moonriver on Kusama to Moonbeam on Polkadot. Karura/Acala or Shiden/Astar are other examples.
Ferrum’s Parachain Plans
Ferrum is setting out to lock in, not one, but TWO parachain slots. One on the Kusama relay chain and one on Polkadot. The Ferrum X Network will exist as a Kusama parachain while the Ferrum Network InfinityLayer mainnet will exist as a Polkadot parachain.
An Unprecedented Approach
From redesigning the way assets are securely moved across networks with the Ferrum Cross Chain Token Bridge to deploying never before seen staking and deflationary rewards mechanisms via Crucible, Ferrum is consistently attempting and achieving the unprecedented.
Our approach to securing parachains in the DotSama ecosystem is no different. Most projects who launch within the DotSama ecosystem are substrate based projects from their inception. Ferrum being a so-called ‘legacy project’, presents a certain degree of both challenges and advantages.
FRMx vs FRM
The best place to start when trying to understand these specific challenges and advantages is in the way the economics behind FRM and FRMx are currently structured. At the time of writing, about 13% of FRMx tokens are in circulation whereas upwards of 50% of FRM is in circulation. Typically, when conducting a crowdloan, projects reserve between 10–20% of their token supply for such an event. While this is possible to do with the large amount of uncirculated tokens of FRMx for the Ferrum X Network on Kusama, it’s a bit more difficult of an undertaking with the low supply of uncirculated FRM for the Ferrum Network on Polkadot.
Ferrum X Network — A crowdloan is possible to do with the large amount of uncirculated tokens of FRMx for the Ferrum X Network on Kusama. Ferrum plans to conduct a KSM crowdloan with a sufficient percentage of FRMx allocated to crowdloan participants.
Ferrum Network — Given the low supply of uncirculated FRM available, the Ferrum Network crowdloan on Polkadot presents a certain challenge. Having less tokens in the treasury results in less tokens that can be utilized for exchange liquidity, bridge liquidity for MultiSwap or ecosystem growth initiatives such as grant foundations, hackathons and other developer support programs.
Fortunately, Ferrum has thought of a way to cater to the strengths of being an established project. What Ferrum lacks in available tokens it makes up for by being a revenue generating project in an industry in which most early stage projects are pre-revenue. Therefore, Ferrum plans to loan a bulk of the DOT required to secure a Polkadot parachain themselves. This allows for a smaller percentage of FRM to be allocated to the crowdloan thus reducing emissions and preserving treasury tokens for growth strategies. Stay tuned for more information on these sorts of initiatives when the updated FRM and FRMx tokenomics are released!
We Bought DOT!
This brings us to the “We Bought DOT” initiative! We’ve committed to allocating a significant portion of our revenue to accumulating a substantial amount of DOT in the coming months. We hit the ground running by purchasing nearly 3000 DOT DOT Purchase Transaction 💰👇
https://bit.ly/BiMonthlyDOTBuybackJuly2022a few days ago and will continue to conduct routine purchases of DOT.
DOT Purchase Transaction 💰👇
Note: If you’re asking yourself “why isn’t Ferrum also accumulating KSM?”, the answer is due to the large discrepancy between available supply of FRMx and and FRM. The Kusama parachain is more attainable through a crowdloan alone. The Polkadot parachain will require a supplemental approach.
Not only do we intend for this initiative to bring us closer to our goals of securing parachain slots, but we hope it brings us closer to the DotSama ecosystem as a whole! We’re truly looking forward to beginning our journey in the DotSama ecosystem.
Find out more about why we are choosing to join Polkadot in their bet against blockchain maximalism by checking out the interview that our EVP of Partnerships and Growth, Nick Odio sat in on with The Kusamarian while he was at Decoded Buenos Aires.
About Ferrum Network
Ferrum is a pioneer in ushering in the era of Interoperability 2.0. Powered by the Quantum Portal, Ferrum Network’s mainnet nodes and related infrastructure will bring value, data, and functional interoperability to every chain in the industry. Utilizing the Ferrum Network, anyone can build and deploy solutions on one network and instantly enable multi-chain functionality without the burden or technical debt that comes with managing a multi-chain infrastructure for their dApps, and projects.
With the mission of breaking down barriers to mass adoption in mind, Ferrum empowers the industry by reducing friction and bringing startups and established networks closer together.
Polkadot is a sharded, multichain network that allows multiple different blockchains to run in parallel (as parachains), connected to its Relay Chain. Polkadot’s infrastructure enables the transactions from the blockchains to be processed in parallel, also allowing the parachains to communicate and exchange assets between each other via cross-chain messaging, and with external blockchains through bridges.