Dot Pulse #3 — The Crowdloan Special

Learn about Parachain Slot Auction Mechanism, EVM on Polkadot, the latest auctions, stories of the week and governance watcher! 📣

Welcome to Dot Pulse, your window into the Polkadot DeFi ecosystem.

If you’re a humble farmer looking to learn more about Polkadot’s DeFi opportunities, or even if you’re a seasoned DOT/KSM staker, this newsletter is the place to find all the latest events in Dot land.

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This week is all about getting ready for the next hot batch of parachain auctions on Kusama and the new crowdloans. We left off last week with Kusama tentatively scheduling auctions for slots 6 through 10. We have now full confirmation that the first parachain auction will start on September 1, with a new auction coming every week. So for this occasion it’s worth diving into how this mechanism works, how to contribute and why you might want to!

The Parachain Slot Auction Mechanism

Parachains are the lifeblood of the Polkadot ecosystem, as the Relay Chain itself is designed to have minimal features and only act as the coordinator of the network. Generic Polkadot features such as governance, smart contracts and token transfers will be eventually implemented entirely in common good parachains, which are a special subset of parachains that are voted in via governance and not through parachain auctions.

Every other aspiring parachain must go through the Slot Auction process to claim their spot. As the term implies, each parachain candidate bids with a certain amount of KSM or DOT to secure the slot, and the system then awards the slot to the winner after the auction is over.

The parachains choose how long they want to lease the slot for, though this period is capped at two years for Polkadot and 48 weeks (about 11 months) for Kusama.

Parachains are assigned through a Candle Auction mechanism, which is a pretty clever way of making the process resistant to sniping — holding off bids until the end to try to catch the opponent off guard. Essentially, the auctions have a guaranteed two day “start period” and then a five days “ending period” where the auction may randomly close at any time. The actual end block is decided at the end of the five days, so the system simply ignores any bid that came in afterwards. 

The Economics of Crowdloans

Acquiring a parachain slot is not cheap, so the Polkadot team came up with an integrated mechanism to raise funds for the auction bid: the crowdloan. Since the bond used to secure the slot is returned at the end, projects can simply ask the community to lend their KSM/DOT in exchange for a portion of the new parachain’s tokens. 

Polkadot and Kusama have dedicated crowdloan modules to simplify this process and make it trustless. This means that if you participate in a crowdloan, you’ll have your money back, guaranteed — either because the project fails the auction, or its slot lease expires.

You can think of crowdloans as yield farming for strong hands. If you can stomach a bunch of lock ups to your tokens (both the KSM/DOT and to a smaller extent, the network’s token), then crowdloans can be a very good opportunity to get new tokens!

How to Join Crowdloans

Probably the easiest and most secure way of participating in crowdloans is with PolkadotJS, which is basically Polkadot’s MetaMask, Etherscan and the Web3.js library, all in one product.

You can download the wallet extension here. Once you’ve done it and set up a wallet, go to (the Etherscan counterpart) and navigate to Network > Parachains > Crowdloan. Make sure you select Kusama as the active network in the top left corner.

If you have an active PolkadotJS extension, you’ll be able to click to the “+ Contribute” button to the right and open the actual window to place your funds in your favorite parachain’s crowdloan.

One slightly confusing thing about PolkadotJS is that it automatically converts every amount to SI units (kilo-, milli- etc.). You may think that the minimum to contribute is 99 KSM ($30,000!) but it’s actually 99 milliKSM, which is one thousandth of a KSM ($30).

Once you’ve chosen the amount you want to pitch in, click Contribute and it will create the transaction for the crowdloan, and you’re all set! It’s that easy. You can also check out Bill Laboon’s video tutorial if you prefer a more dynamic explanation.

Polkadot Weekly Farms

As of this newsletter there are still just a couple of active crowdloans, but let’s take a tour of a few projects that are likely to make a bid for slots 6-10! Each one has their own particular strategies to entice KSM holders into backing them. 

Note that some of these strategies were designed for the old batch of auctions and may still need to be updated (maybe the teams will want to give even more tokens to secure the slot?)

Also, remember that if you’re staking KSM there is a 7 days unbonding period, so if you want to participate, you better remove them very soon!

Upcoming Crowdloans

TL;DR: Manta Network’s Kusama parachain (zkSNARK-based private token transfers and a private DEX) distributes a maximum of 30% of supply with a 10% early bird bonus and referrals.

TL;DR: HydraDX’s Kusama chain (cross-chain DEX parachain) will actually grant you some HydraDX tokens for supporting Basilisk

TL;DR: Equilibrium’s Kusama deployment (DeFi ecosystem with lending, synthetics and stable swap) will give additional bonuses to anyone who joined its previous crowdloan round

TL;DR: Picasso, Composable’s Kusama parachain (runs smart contracts in all languages in a single environment) wants to earn yield with the contributors’ KSM to let their assets work.

TL;DR: Clover’s sister chain (a cross-chain EVM-based platform launched by Bithumb) is distributing 20% of the supply in the crowdloan, though no special bonuses here. 

  • The Altair Crowdloan

  • TL;DR: Centrifuge’s Kusama chain (brings real world assets to DeFi) combines crowdloan rewards with a 1:1 CFG snapshot for existing holders.

Active Farms

Earn KAR by staking into the KSM/kUSD and KAR/KSM pools on Karura DEX

  • Yields are now get 68% APR (or 97% with loyalty bonus) for KSM/kUSD farming, or 19% (39% with loyalty) for KAR/KSM. 

This week we saw notable progress towards having a fully functional EVM on Polkadot, with Acala announcing its EVM+ and Moonriver set to enable transfers on its Ethereum-like chain today.

For a bit of context, Substrate (the blockchain SDK for Polkadot) has an EVM module that essentially lets anyone support EVM smart contracts on their parachain. The module is nonetheless an “emulation” that is still tied to Polkadot. This means, for example, that you still use Polkadot-native wallets to interact with this EVM environment.

Moonbeam is taking this EVM integration further by enabling the full set of Ethereum features, including its ECDSA wallet addresses. This means, among other things, that Moonbeam is compatible with tools like Metamask and Hardhat/Truffle (dev tools for smart contract deployment). Moonriver, Moonbeam’s Kusama deployment, will enable token transfers and the EVM today, so we’re likely about to have a DeFi/NFT season on Kusama! 

Apparently not wanting to be left out of the EVM DeFi ecosystem, Acala has announced its EVM+, which also introduces support for Metamask and the various dev tools. This new technology is supposed to come in a few days, so we may even see a DeFi season on two parachains at once. 

Activity is definitely picking up on the Kusama/Polkadot front, so stay tuned for next week’s edition!

TL;DR: Bifrost has distributed vsKSM, a synthetic token representing KSM locked in the crowdloan.

TL;DR: Covalent will provide advanced data retrieval services for the Shiden parachain.

TL;DR: Calamari has produced a roadmap for the rollout of privacy features on the parachain.

TL;DR: The common good parachain has been updated, but for now it hasn’t been deployed. Among other things, it will now natively support NFTs.

All info in this newsletter is purely educational and should only be used to inform your own research. We're not offering investment advice, endorsement of any project or approach, or promise of any outcome. This is prepared using public information and couldn't possibly account for anyone's specific goals or financial situation. Be careful and keep up the honest work!