From our $3 entry from August 2020, we're now up over +1,500% 🚀
The reason is fairly simple: Polkadot is an innovative architecture to how an ecosystem can be built and that ecosystem is just about to launch. You can think of it like Ethereum without any dApps on it or Solana without anything being functional back in the start of 2020. If you want to better understand the value proposition of Polkadot, read this.
We were early to DOT and will be early to the Polkadot ecosystem too.
Parachain Auctions
New projects will need to secure a parachain slot to exist on Polkadot and to get that they either need to personally pledge an extraordinary amount of DOT, or crowdsource it from people. Projects are going for the latter obviously. Originally, they were meant to launch on November 11th but the timeline has been accelerated to the 4th.The motion to enable parachain registration and crowdloans has passed Polkadot's council and gone to a public referendum. If passed, parachain teams will be able to register their parachain and open their crowdloan on Nov. 4, 2021 at approx. 19:15 CET. https://t.co/5ouDWBmnvc
— Polkadot (@Polkadot) November 1, 2021
Faster exposure, why not? Anyhow, let's run through how we're preparing for these launches and how we'll be participating.
Please note that some information surrounding the exact mechanism of crowdloans will only be available on the day the crowdloan starts. We’ve done our best to provide as much information in this journal as we have ourselves, and we will continue to update the entire way throughout the Parachain campaigns!
Let’s do a quick refresher of how the whole crowdloan/auction works:
- DOT is loaned to a project looking to secure a Polkadot Parachain slot.
- This DOT is used to bid in a Parachain Auction, and the highest bid wins that slot - so basically the project that gets the most DOT from the community wins the slot.
- The project then issues investors with an allocation of their token as a proportion of their DOT contribution to the overall amount loaned to that project.
- A certain percentage of the project's tokens issued are unlocked immediately (usually around 30%) with the rest released over a vesting period (usually the duration of the Parachain lease).
- After the lease period is over (anywhere between 6 months to 2 years) the DOT is returned to the original investors.
- The risk for investors is the opportunity cost of not having access to the loaned DOT for the lease period.
- The reward for is essentially free tokens and an early entry into a project building on Polkadot.
Participation
We have been looking at a few options for participation and there are a couple of parameters we have considered when making that decision:- Our DOT will be locked for up to 2 years – where do we feel comfortable placing that trust?
- Where is the most convenient place to interact with crowdloans?
- Where can we extract the most value in the event our supported project wins?
Centralised Exchanges
The easiest way to participate with no additional knowledge is through centralised exchanges because the user experience (UX) is generally simpler than any decentralised option and most people are familiar with the user interface (UI). Here’s a non-exhaustive list of exchanges that will be offering Parachain auction and crowdloan functionality:- Binance - has confirmed that they will be support Polkadot through the auction process. We do not have any further details on what that will look like at this time; however, we expect that it will be fairly straightforward to interact with.
- Kraken - has already supported Kusama crowdloans and will also support Polkadot crowdloans.
- KuCoin - same situation as Kraken.
- OKEx - same situation as Kraken & KuCoin.
- KYC/AML requirements.
- Participation may not be supported in some jurisdictions.
- Any bonuses from the projects will likely be unavailable.
- The exchange will have custody of any DOT + vested rewards (for up to 2 years).
- CEXs will most likely charge fees for the service.
Direct On-Chain
There are other more decentralised options that use the Crowdloan contract, for instance the two mobile wallets we mentioned in this journal. The benefit here is similar to the benefit of using a CEX – easier GUI, all in one place, etc. with the added benefit of full custody. However, any additional benefits/incentives offered by the projects won’t be available.
Another option is to participate through the Polkadot web app. There isn’t really any benefit to this other than full custody of funds – the UX/UI isn’t massively complicated for those familiar with transacting between wallets etc; however, those less experienced will probably struggle. Additionally, the project rewards/incentives will still not be available.
What does that leave us with?
Parallel Finance
We decided to use their platform for our Parachain contributions - here’s why:- Additional rewards and incentives – 4 PARA tokens per DOT contributed to any project supported, referral programs, bonuses etc.
- Fairly simple to use once the js extension is set up.
- All-in-one place - convenient, no need to go through multiple sites.
Here's a brief TLDR of how we participated:
- We installed the polkadot.js browser extension and pinned it to the browser for easy access. Link: https://polkadot.js.org/extension/
- We created a Polkadot Account (wallet), storing the seed phrase in a safe and offline location.
- We switched the account for use with the Polkadot Relay Chain.
- The address below the name of the account is the Polkadot address we used for sending/receiving DOT. The account balance can be viewed at https://polkadot.js.org/apps/#/accounts. Note that there is an “Existential Balance” which is currently 1 DOT. If the balance goes below this, the remaining DOT will be burned.
- Since we're participating in Crowdloans through the Parallel Finance portal we went to this link and connected to the site through the extension. Projects that are supported through Parallel have a green tick next to their name.
- By contributing through Parallel, an additional 4 PARA tokens will be issued per DOT contributed through their platform – for each project. An additional 5% in PARA rewards can be earned by using a referral code.
- The minimum allocation per Crowdloan is 5 DOT. This means that roughly 6.1 DOT must be present in a wallet to contribute that 5 DOT whilst also maintaining the Existential Balance of 1 DOT, and enough to cover any fees.
- Once we made our contribution, our rewards are viewed/claimed under the Crowdloan tab here:
- For more details on project specifics read our full Giga-Brain Plan here!
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