Dot Pulse #9 — Ready Your DOTs!
Learn about parachain auctions on Polkadot, how to stake on Polkadot, new farms 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 we’ll take a slightly deeper dive into staking on DotSama from the perspective of the average user. There are many ways to earn a pretty significant staking yield on DOT or KSM (right now about 14%). It’s all quite simple, but you do need to take a few quirks into account!
Coming back to our previous edition regarding Polkadot consensus, when you stake your tokens without actually validating the chain you become a Nominator. This means you “nominate” validators you like and lend them your stash, and in return they might earn a commission on your staking rewards.
Nominating is quite easy, and it can be done through Polkadot JS or other wallets like Fearless and Ledger. We’ll be showing it through Polkadot JS (kind of like the Polkadot Metamask).
Nominating, The First Steps
Obviously, the first stage to staking DOT/KSM is to send them to your wallet. We’ll assume you’ve already done this.
With your Polkadot JS extension added, head over to the Network -> Staking -> Account actions tab. Make sure you’ve selected the correct network (we’ll be doing this on Kusama).
Account actions is the tab where you can set up a nominator, or change your Stash settings (a kind of staking cold wallet). You can also set up a full validator if you have the resources required, though in that case you should be able to figure it out without us!
As an aside, Polkadot JS may be very complex as a wallet, but as a developer tool it’s probably the best anyone has ever seen. Setting up validators, crowdloans, registering parachains… This kind of stuff would usually require a lot of command line-heavy interactions, while on Polkadot JS it’s just a few clicks.
For our purposes we need to click on Nominator, which will open up a tab to set up our staking. You will need to pick the Stash and Controller accounts for staking. The Stash is your token repository, designed to act as a cold wallet. The Controller will perform the actual nomination, and it can be considered as the hot wallet. You can set a single account for both, which is less secure but somewhat easier to manage.
Next, choose the amount you want to bond (stake), and the Payment wallet for sending the staking rewards (can be the stash wallet itself).
Make sure to not stake your entire balance, as you’ll need some liquid tokens to pay for transaction fees! If you’re using different Controller and Payment addresses you also need to fund them with the Existential Deposit. On Kusama it’s a few millionths of a KSM, but on Polkadot it becomes a whole 1 DOT. Also, on Polkadot you’ll need to nominate more than 120 DOT due to a temporary performance limitation.
The Existential Deposit ensures your account is kept in the Polkadot state. If the balance falls below that amount, the blockchain will destroy your account and any tokens it may hold. You can still reactivate the account afterwards, but you won’t recover what you lost.
Once you fill in the account information you’ll be sent to the next tab, where you’ll get to pick the validators to nominate. This is not a selection to do lightly as if they get slashed, your stake will too.
You want to strike the right balance between a validator who’s reliable, profitable and not too popular. This is because each validator has a limit to how many Nominators they can pay out to, which is currently 256. Any Nominator beyond that won’t get any rewards, so pay attention to not stake to Oversubscribed validators.
It’s also just good practice to avoid giving too much stake to any one validator, so make sure to spread the love around!
You can check out the list of validators here, helpfully organized by profitability, commission, existing nominators and own stake. Once you’ve chosen a few, click on Bond & Nominate and you’ll be ready to go. Your stake will start earning in the next era or two, so it’s a few hours to days depending on which chain you’re using.
Beyond the minimum staking limits, your bond also suffers a time lock of either 28 days for Polkadot or 7 days for Kusama. This means you can’t withdraw your stake for at least that long, as any request to unbond is delayed by that amount of time. Keep it in mind if you want to join crowdloans!
If you want to avoid the unbonding limitation you can use a liquid staking service, which will take your DOT/KSM and give you a derivative token that can be redeemed for the underlying assets. You can then keep using your assets in DeFi to earn additional yield on top of the staking rewards.
Currently liquid staking is live with Karura, while for Bifrost this feature is expected to come soon. Other protocols have also announced some kind of future liquid staking program, and for good reason — around 70% of the DOT/KSM supply is meant to stay staked. Liquid staking is almost a must for a vibrant DotSama DeFi!
Staking with third parties
It’s worth mentioning that there are some centralized staking providers and exchanges who will stake the DOT/KSM for you. They allow you to withdraw and unstake with no delays, and are generally simpler to use — at the obvious cost of losing custody. If you feel like that’s your kind of jam, Kraken and Binance are good options.
Kintsugi became the 11th Kusama project parachain, closing this parachain season on Kusama. But don’t fret, we’re about to enter the main event, Polkadot parachains! More on that below.
Earn KAR by staking into the KAR/KSM pool on Karura DEX
Yields are now 24% APR (or 49% with loyalty bonus) for KAR/KSM.
A new KSM/LKSM farm appeared with 14% APR (47% with loyalty)
KAR/kUSD now offers kUSD surplus as well. APR is 49.8%, 71.8% with loyalty.
Moonriver’s farms are now holding a few dozen million in TVL, but most projects are Uni V2 forks. As before, the following section is not vetted. Rug risk is high, fundamentals are basically absent. Proceed at your own peril.
Earn SOLAR in a classic Pool1/Pool2 arrangement, Pool2 yield hovering in the mid triple digits.
Earn MOON in another Pool1/Pool2 set of farms. Yields at 500% for the Pool 2s.
A few more assorted UNI V2 token farms in this list.
We finally have a date for Polkadot parachains!
Gavin Wood and Robert Habermeier, the Polkadot founders, declared that Polkadot parachains are now technically ready to go after the success of Kusama. Speaking at the recent Sub0 event, they proposed that the first Polkadot parachain auction would start on November 11, pending governance approval.
The referendum to launch parachains is currently standing at near 100%, so it’s pretty much guaranteed that we’ll see auctions in November. Much like Kusama, the first batch will feature 5 back-to-back auctions lasting 7 days. A second batch is already planned for December 23, with 6 more parachains set to join the fold. This second batch will only be rolled out once every two weeks, though the auctions themselves will still last 7 days.
Unlike Kusama, the parachains will need to wait quite a bit to actually launch. The first batch will only be able onboarded on December 17, while the second batch will need to hold steady up until March 2022. This sounds worse than it is — in both cases they’ll be launching about a week after their auction batch is over.
The slow release is typical for Polkadot, which compared to its cousin is slower in almost everything (by design). The team considers parachains to be ready but not yet mature, with subtle bugs still likely to eventually creep up. For this reason, the launch is very gradual and staggered.
As an additional precaution, the team advised to always keep the number of Polkadot parachains below 75% of Kusama’s count. This requirement would basically guarantee that there will also be new Kusama parachains between now and January, when the 8th Polkadot auction will begin (or March at the latest). Kind of a wide net but we’ll take what we can get!
In the meantime, if you want to join the crowdloans it’s best to start unbonding from staking now. With a 28 days delay you’d just about squeeze in for the first slot now!
TL;DR: Polkadot and Kusama now have a new Gifts feature, which will hopefully attract new users to the networks.
TL;DR: With it’s v0.9.2 upgrade, Bifrost has launched the Swap module and kUSD transfer function, announcing upcoming rewards for Zenlink participants as well.
TL;DR: In this weekly update, Phala Network’s team talks about the launch of Khala Transfer, the success of Khala Secure Worker Mining, dev updates and more.
TL;DR: Acala adds a new derivative, Liquid Crowdloan DOT (lcDOT), in order to enable its crowdloan participants to maintain liquidity, resolving the issue of the DOT lock up.
TL;DR: Equilibrium/Genshiro team share their major September milestones, such as Genshiro’s closed beta, Fluid DOT staking, DeFi Llama listing and more.
TL;DR: Asset teleportation on Statemine broke this week due to incompatible XCM versions. Thankfully, the referendum to fix this has now passed.
TL;DR: Gavin Wood announces the successful asset transfer, using the new XCM format, which he explained in his article series.
(Polkadot) Referendum 38, Referendum 37, and many others were proposed and eventually passed to upgrade Polkadot to Runtime v9110. Some mishaps were involved as the initial version did not have the proper compressed hash.
(Kusama) Referendum 138, executed to force Kusama to only send v0 XCM messages to Statemine.
(Kusama) Referendum 139, a proposal to upgrade Statemine’s runtime to v4.
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!