How to Participate in Kusama Parachain Auctions
Kusama is Polkadot’s canary network designed for designers and developers to run experiments and test implementations before merging any feature on the main chain. It has a lower barrier to entry and faster governance parameters compared to Polkadot. Kusama isn’t a testnet. Instead, the team has built it to function alongside the Polkadot network. Thus, supporting ongoing usage and offering value to the ecosystem and its participants.
Parachains are application-specific data structures of the Kusama network that are globally coherent and validatable by the network’s relay chain validators. Though they can work as a blockchain, it is not a condition that they must work like one. Their coextending nature allows them to process parallel transactions and bring stability to the Kusama network. Since the network supports only a limited number of chains, it has plans for parachain auctions, wherein projects can bid on their offer to join the Kusama network.
In this article, we will cover how to participate in their parachain auction.
How Do You Bid in a Kusama Parachain Auction?
The auction follows a customized candle auction format, where the ending period is unknown to bidders. It prevents auction sniping for more accurate price discovery. Here are the steps to follow to bid in the parachain auction:
1) The team makes an offer by specifying a minimum of one contiguous range of 1-8 lease period(s). (Note: each lease period is of 6 weeks.) They also need to share the amount of KSMs and the time for which the team is willing to lock up their KSM tokens.
2) The auction continues as per the candle auction pattern. The bidding details are open for everyone to see. Accordingly, the teams can increase their bid over time to gain an edge over the competitors.
3) A Verifiable Random Function (VRF) of the Kusama network will determine a random day or date to end the auction.
4) Once the auction ends, the winning parachain will be automatically onboarded at the beginning of the lease. The amount of KSM offered in the bid will remain locked for the duration of the lease period. Once the lease ends, the team can claim the locked tokens back.
5) Teams can also win another auction after their current slot period ends to extend their lease.
Who can Participate in the Auction?
Bidders can participate either via ordinary accounts or use the built-in crowdloan functionality of Kusama to source tokens from the community.
To enter into a parachain auction with a personal account, the bidding team must have sufficient KSM tokens that they can lock for a certain period.
Teams can also choose to crowdfund their slot lease that allows anyone to contribute to the project by locking their KSM tokens until the end of the lease. Teams can reward the contributors as they please. Moreover, they can host the crowdloan either on the Kusama platform or on another platform.
Winning the parachain auction is the only way to get a slot on the Kusama network. Popular DeFi platforms like Karura, Moonriver, KILT, etc. are bidding in the auction, which, as per our research, is expected to go live in May.
Once a team wins, the KSMs that it bids get reserved until the end of the lease. No one can use this reserve balance for staking or trading. Once the lease ends, the smart contract releases back the KSM tokens to their respective contributors.
Currently, KSM is trading at $392.09, with a market cap of $3,521,292,699 and a 24-hour trading volume of $252,778,662.