Participate in Parachain Lease Offerings (PLOs) on Kusama: A Beginner's Guide To Crowdloaners

We're on the verge of a historical event that is poised to shake up the entire Polkadot ecosystem.

The long-anticipated parachain slot auctions are about to begin on Kusama – the scalable multi-chain network for early-stage Polkadot deployments – as the developers have entered the final stage of preparation. 

In the course of the next several weeks, teams will start competing for up to 30 parachain slots that will enable their projects to benefit from high transaction speed and security ensured by Kusama Relay Chain.

We’ve prepared a quick guide on PLOs to help you support the up-and-coming Web3 project of your choice and potentially secure some profitable staking opportunities in the process (and probably a bunch of extra rewards on top of that!).

Kusama, parachains, and crowdloans — here's what you need to know

When Gavin Wood, co-founder of Ethereum and creator of Polkadot, first introduced Kusama, it had nearly the same code base as Polkadot, despite one crucial difference — all the newest updates are scheduled to happen on Kusama first. Parachain slot auctions and crowdloans are among those features which will make their grand debut on Kusama for testing and further optimization.

Parachains are layer-1 blockchains that run by individual projects in parallel within the Polkadot/Kusama ecosystem (hence the name). Connected to and secured by the central Relay Chain, parachains share and benefit from the security, scalability, interoperability and governance of Polkadot/Kusama.

The concept of crowdloans allows projects to secure a parachain slot even if they don't have enough KSM — Kusama's native token — in their treasury, but have enough supporters that are willing to loan their KSM to fund its development.

That ultimately makes Kusama a healthier, more diverse and inclusive ecosystem. Here’s how it works: KSM holders stake their tokens to support the project’s vision. If the project wins, they might get additional rewards for their effort on top of staking benefits – although, that depends on the project. 

Parachain slot auctions, in turn, are a form of unpermissioned candle auctions that have been modified to be secure on a blockchain. In short, later bids will have a higher probability of losing by design since there will be a retroactively determined close moment that might precede the time that a bid was submitted.

(Picture originally found in Dan Reecer's Medium guide on Polkadot & Kusama Crowdloans and Parachain Auctions)

PLOs & Crowdloan strategies — how to choose one?

When researching a parachain one considers backing with KSM, they need to keep in mind the following important variables: 

• Leasing period of the parachain slot — and the promised APY 
  
  First, see the projects’ timeline and try to calculate approximate staking rewards based on what they’re offering. Additionally, you might want to make sure that the project’s promised APY (annual percentage yield) includes extra rewards beyond staking KSM in Kusama Relay Chain.

• Readiness of the project
  
  Analyze the GitHub repository to make sure that the project’s parachain is ready to be deployed on Kusama.

• Fundamentals of the project
  
  Ask the following questions: What kind of value does it bring to the ecosystem? Will the Parathread capacity be enough for the project? Is their Parachain planning to collaborate with other teams in the ecosystem as it goes forward?

Parachain contenders: An Overview for KSM holders

Essentially, we can distinguish projects who will be participating in Kusama parachain auctions by two types:

a) Contenders with a live protocol on another chain 

Key markers for this type of projects include an ERC-20 token that was introduced to the open market before the Kusama PLO. These tokens are tradeable and hence an approximate market evaluation, which might help you estimate the project’s growth potential. 

Another distinguishing feature is that in the near future these teams are planning to move the same parachain token to Polkadot. Please note that rewards are usually vested at a ~ 30/70 ratio throughout the lease period, although the terms may vary depending on the project. 

Notable projects:

Crust – decentralized storage network for the Web3 ecosystem (Crowdloan rewards strategy: a total of 90,000 $CRU will be distributed + 18 million $CSM; guarantors will be able to earn extra rewards)

HydraDX – Cross-chain liquidity protocol built on Substrate (Crowdloan rewards strategy: currently unknown; HydraDX’s token on the Kusama parachain is $HDX)

Phala – Substrate-based privacy-preserving cloud computing service (Crowdloan rewards strategy: 1 locked $KSM = 100 $PHA before the Khala Crowdloan reaches the required 150,000 KSM; extra 0.5% on the additional contribution for Referrals)

Robonomics – server-less IoT platform for connecting robotics under Polkadot and Ethereum (Crowdloan rewards strategy: 1 locked $KSM = 1 $XRT; backers get to enjoy increased staking of 125% return for the next 48 weeks)

b) Unlisted projects without tradeable tokens

Unlike participants with a live protocol, these projects don’t have tradeable tokens yet, and the only way to participate in their initial distribution will be through DOT/KSM crowdloans. Therefore, participating in their auctions is a great way to gain early access to those tokens (and “moon” potential) — all while boosting their underlying projects with your locked KSM.

Notable projects:

Karura – EVM-compatible network optimized for DeFi, offering a suite of financial applications (Crowdloan rewards strategy: 1 locked $KSM = 12 or more $KAR, which will be minted at launch with a fixed total supply of 100,000,000)

Shiden – multi-chain decentralized application layer on Kusama (Crowdloan rewards strategy: the earlier you join the crowdloan, the more $SDN you get)

Moonriver – companion network to Moonbeam, Polkadot smart contract platform for building natively interoperable blockchain applications (Crowdloan rewards strategy: a total of 3,000,000 $MOVR tokens — 30% of the Moonriver network — will be allocated to reward crowdloan contributors)

Darwinia Network – decentralized heterogeneous cross-chain bridge protocol (Crowdloan rewards strategy: currently unknown; Darwinia Network’s token on the Kusama parachain is $CRING)

Centrifuge – decentralized asset financing protocol that bridges real-world assets into DeFi (Crowdloan rewards strategy: all participants that lock DOT for Centrifuge’s parachain slot in the crowd loan will receive the Centrifuge token as a reward; rate is currently unknown)

Genshiro – Cross-chain money market that combines pooled lending with synthetic assets (Crowdloan rewards strategy: $EQ holders will receive new $GENS tokens at a 1:10 ratio once Genshiro’s genesis block is mined; see extra details here)

StaFi – DeFi protocol unlocking liquidity of staked assets being built on the Polkadot ecosystem (Crowdloan rewards strategy: currently unknown; StaFi’s token on the Kusama parachain is $rKSM)

Kilt – blockchain protocol for issuing anonymous, verifiable credentials (Crowdloan rewards strategy: currently unknown)

Hedgeware – experimental blockchain with community-managed treasury, decentralised proposal system and network of DAOs (Crowdloan rewards strategy: participants will collect half of the 20% of $HEDG distributed to Edgeware holders)