Kusama and Polkadot Parachain Lease Auction Crowdloans: A Win-Win Situation

Thanks to Polkaswap for this great image exemplifying what a Kusama parachain would look like

The Cambridge dictionary defines a win-win situation as one that is good for all the involved parties. When it comes to Parachain Auctions on the Kusama and Polkadot networks, that is definitely the case.

Although a protocol or network keen for a parachain slot is called a “Parachain Lease Auction Project,” the most common terminology for this is simply a crowdloan. The theory behind parachain leases is quite complicated, but for all intents and purposes, I will keep this simple.

Why should I participate in a Crowdloan?

The crypto sphere is mostly dominated by Ethereum and Bitcoin. Everything else is either considered an altcoin or a shitcoin (depending on your research and skills of deduction), but among these alts there are a few doing quite innovative things, projects like SORA, who are about to begin their parachain crowdloan. Polkadot and Kusama are at the forefront of blockchain technology (well, mostly Kusama, while Polkadot lags behind dragging bureaucratic luggage) with their concept of parachains.

In broad terms, a parachain is a network connected to Polkadot or Kusama, taking full advantage of the larger network security and connectivity. In order to gain a parachain, a project needs to pay a lease. Sort of like paying rent for a slot, but the leases have a time limit. Once the limit reaches, Polkadot and Kusama then open auctions for other projects to have a shot at a parachain. This is so that everyone has a fighting chance, and the projects considered “stronger” don’t hog the slot. At least, in theory, that's what they say.

Here is where crowdloans come into the picture. Each project aiming to have a parachain can appeal to their users through incentives to collaborate with their crowdloan in order to help them win a lease auction.

The win-win aspect stems from the fact that if the project loses and does not secure the parachain, user contributions are returned immediately, along with the incentives in some cases.

If the project wins, however, the contributions are locked for the duration of the parachain lease and the incentives are paid out, but, the contributions are returned to the users at the end of the lease. So proverbially, the contributor wins regardless, because they get rewards for contributing AND they get their contribution back!

What could possibly go wrong?

Might be the question in your mind right now, and for a contributor, not much. For a project, however, it is a different story. There are networks that have given a nice chunk of their total circulating supply as an incentive for their community to support their lease.

This is an issue that has been seen by projects that hopped on the opportunity immediately, they needed larger amounts to secure their slot, which meant larger rewards for users, but the tech is not always in place to back the enthusiasm and we have seen some reward prices reduce… Such is life with degenerates, I guess…

If this has given you some newfound enthusiasm or curiosity and you want to hop on to crowdloans, here is the fastest way to get you started:

How to Crowdloan

1. First and foremost, get your hands on some KSM and DOT tokens. They are the only currency accepted for contributions, and depending on the parachain you want to support, could be either one.

   
   

2. Second, you will need a database to follow. Like every good degenerate, your choices will be based on data. The best data source for all things parachain auctions is Parachains.info. It is a bit tricky to navigate at first, but here is a quick start: Navigate to the website and you will get the choice of following either Polkadot or Kusama crowdloans. Select your preferred one, and scroll all the way to the bottom. Here you will find an interactive chart with the ongoing crowdloans, and, at the bottom of the page, you will see a countdown showing the remainder of the auction along with information such as project details and rewards.

   
   

3. Good, you have a feed, now time to drop some tokens. There are a few ways to go about it, but by far the easiest is via Fearless Wallet. Using their Android or iOS app, you will be able to collaborate quickly to crowdloans that are live on the respective blockchain and even take advantage of services such as referrals. They even have a step-by-step walkthrough on their wiki!

Wrapping Up

There you go ladies and gentlemen, the simplest way to get into DeFi and navigate away from the expensive coins is through crowdloans. You will get great exposure to new projects, as there is plenty of data for you to research on, as well as all the project links to deep dive before you decide to contribute, so as your attorney I advise you to read everything you possibly can before parting with even a fraction.

If you are interested in more information about contributing to crowdloans with the old-school look and feel of an interface like Polkadot.JS, try out this guide.