What are the “eggs” buried in the auction of the Kusama slot in Polkadot?

At 16:00 on June 22, Kusama’s first round of parallel chain slot auction ended, and Acala Test Network Karura won this round of bidding, locking in 500934 KSM, becoming the first project to auction Kusama’s parallel chain slot with a lease duration of 11 months.

The second round of Kusama parallel chain slot auction started at 18:00 on June 22. As of June 24, Polkadot.js data shows that since the slot auction opened, there are 12 bidding projects, and the number of projects participating in the auction let KSM lock up more than 800,000. KSM’s provisional offer is $190, and the lock-up amount is as high as $150 million. As the first network of PoC, Kusama parallel chain slot auction opening will bring more blockchain network access to PoC ecology. So, what is the slot auction and how does the opening of the Kusama Parallel Chain slot auction affect the Polkadot ecosystem? What are the representative projects involved? In this issue, DeFi Honeycomb will bring some of them to the table.

Selecting ecological entrants by merit

What is the slot auction?

Before understanding the slot auction, you need to understand the basic composition of the Poca network. The essence of a polka is a scalable heterogeneous multi-chain blockchain network, consisting of a relay chain and a number of parallel chains running in parallel. In Polka, the relay chain can be considered as the central chain of Polka, which connects all blockchains and also protects the smooth operation of parallel chains, sharing security with them. Parallel chains are other blockchains that want to connect to Polkadot, that is, those blockchain networks that are connected to “relay chains”. Slots are needed to connect parallel chains to relay chains. Relay chains are like an international port, and parallel chains are like ships of each country. Only by entering this “international port” can we share the cargo transportation and transaction information inside, and slots are the tickets for “ships from different countries” to enter the port with limited quantity.

This relay chain + parallel chain operation mode not only guarantees the scalability of PoC, but also allows multiple chains to process transactions in parallel without waiting in a queue on one road. Relay chains can be infinitely scalable in theory, but the practicality of parallel chains carried by relay chains becomes limited because the operation of parallel chains needs to consume a certain amount of network computing resources. However, at present, there are only about 100 slots, and among these 100 slots, there is still a part that cannot be used to support the operation of parallel chains and needs to be used to support various tasks such as official transfer bridges and public interest parallel chains. In other words, there are perhaps only a few dozen slots that can really be used to support parallel chains.

The number of slots for parallel chains is limited, and only one will be released at a time, and there will be a certain time interval for the release of the next slot, so the project owner needs to obtain the rental period by auction. There is a “rent only” rule for parallel chain slots. Currently, the lease period of parallel chain on Kusama is divided into 6 months, 12 months, 18 months, and the longest is 24 months. In other words, the parallel chain slot auction, the auction is for the lease term, and when the slot lease expires, you need to bid again.

Why do slots need to be auctioned?

The parallel chain slot auction can be regarded as a kind of merit elimination mechanism for the parallel chain project by Poca Networks. First of all, parallel chain slot auction requires pledging DOT/KSM, and bidding means that the project party needs to value the slot reasonably and the highest bidder will win it at the end of the auction, which is also a screening of the project’s economic ability. At the same time. It can be seen whether the project has a community base by judging whether it can attract the support of DOT/KSM holding users. In addition, there is a deadline for slot usage, and the maximum lease period for Kusama is 24 months. The maximum is two years, and if the project that is granted this lease period does not excel during this period, it will have to give up the slot to a more worthy project. The slot auction can objectively make projects with access to Poca’s ecosystem internalize a sense of crisis, urging them to run the network well and make the ecosystem valuable in a limited time, so that they can get more users’ support in the slot auction, or else they can only be abandoned by users and Poca’s ecosystem.

What are the "eggs" buried in the auction of the Kusama slot in Polkadot?

Official auction mechanism and community participation form

The parallel chain slot auction uses a modified version of candle-style auction – the auction executor lights a fixed-length candle at the beginning of the auction, and whoever has the highest bid at that moment when the candle goes out gets the bid. Since all the bidding data of the items involved in the auction process are public, in order to prevent anyone from maliciously raising the price at the last moment, Parallel Chain Slot Auction will simulate the process of “candle auction” on the blockchain, using a combination of “2+5” two-stage auction. The first 2 days will be a normal auction with open bidding, meaning that the higher the bid, the more advantageous it will be; after 2 days, it will enter a random end period, which will last for 5 days. The auction system will set a random function to select a random block height in this 5-day period as the real auction end time, and whoever has the highest number of DOT/KSM pledged at this moment will be able to rent the slot. Project parties need to pledge DOT/KSM to participate in the slot auction.

However, for cost reasons, it is not possible for all of them to go to the secondary market to buy DOT/KSM for pledging to themselves. At this point, the project owner will openly lend to DOT/KSM holders, which is called Crowdloan for Slot Auction (PLO), that is, users holding DOT/KSM tokens can lend to the parallel chain project, and then the project owner will use these borrowed tokens to bid in the parallel chain slot auction, and the project owner will also give rewards to the supporting users. If the bid is successful, DOT/KSM will be locked during the parallel chain slot leasing period. At the end of the lease period, DOT/KSM will be returned to the investor. In order to encourage the participation of DOT/KSM holding users, the project owner will give some rewards to the holders, and the common way is to allocate the project tokens to the participants in proportion to the number of DOT/KSM pledged by the users.

It is important to note that the pledged DOT/KSM is still in your own hands and you do not need to transfer the tokens to the project owner. Any project owner who asks users to transfer tokens to a specific address is a scam created by the pseudo-project. So in the slot auction, the DOT/KSM pledged by the user is simply locked in a smart contract and lent to the project owner. The effect is that the two assets are temporarily rendered illiquid without losing their principal. However, it should also be noted that although the pledged user participating in the crowd-lending process has their principal amount risk-free, they also need to bear the potential market risk of asset price fluctuations and unstable returns – the user needs to bear the risk of price fluctuations after the DOT/KSM is locked in the crowd-lending process, as the two assets cannot be traded after pledging. In addition, the reward tokens given by the project owner have unstable returns. Most of these tokens are fledgling projects, and you need to be prepared to take the risk of unstable, declining or maybe even no returns at all.
Who are the Top 5 slot bidding lockers?

The first round of Kusama’s parallel chain slot auction ended on June 22, with Acala First.com Karura winning. The second round of slot auction opened at 18:00 on the same day, and the top 5 applications in the KSM lockup are notable. Top 1-DeFi Infrastructure Karura (KAR)

Brief introduction

Karura (KAR) is the pioneer version of Acala, the DeFi infrastructure of Poca Networks. Since Kusama is currently the test network of Poca Networks, Acala launched the first version of Karura on the test network, which is a one-stop DeFi application center. It is mainly dedicated to de-neutralized financial applications and stable coins.
Currently, the stable coin kUSD can be circulated across chains in the Kusama ecology; the decentralized exchange Karura DEX supports cross-chain trading of Kusama ecology assets. In Karura network, any assets in the platform can be used to pay network GAS fees, such as KSM, LKSM, KAR, etc.

What are the "eggs" buried in the auction of the Kusama slot in Polkadot?

Karura official website

Pledge mechanism and related data

On June 22, Karura (KAR) became the winning item in the first round of Kusama slot auction, attracting a total of 501,137 KSM locks and 14,164 accounts involved in pledging. Karura bids for Kusama parallel chain slots with a 48-week lease period and a total KAR issuance of 100 million. 11% of the total KARs will be put aside by the project to reward community users, which means 11 million KARs will be put aside for rewards. the maximum KSM pledge is set at 1.5 million, which means users will get at least 12 KARs as rewards for every KSM they lend. TOP 2-Development App Moonriver (MOVR)

Introduction

Moonriver (MOVR) is Moonbeam’s first platform. Moonbeam is the blockchain middleware provided to developers by Polkadot Polka Ecology, the most labor-saving platform for developing applications on the ecology, and is dedicated to providing development tools and networks compatible with the existing Ether. Developers of DeFi applications on Ether can efficiently migrate to Moonbeam chain, and developers can use tools on Ether to develop new applications on Moonbeam chain and enter the Poca ecology without learning a new code language. Moonbeam new code or new technology will be tested and validated on Moonriver running on Kusama first, but Moonriver will always exist as a parallel chain on Kusama and will have its own project later.

Pledge mechanism and related data

Moonriver bids for the Kusama parallel chain slot with a 48-week lease period and a total MOVR issuance of 10 million. 30% of the total MOVR supply (i.e., 3 million MOVRs) will be distributed to the crowd-lending participants as a reward throughout the lease period. The number of rewards for pledging KSM to receive MOVRs will depend on the total pledged volume of the crowd lending. On June 23rd, Moonriver (MOVR) locked in a slot auction with 125,979 KSM, and 5,039 accounts participating in the pledge. Top 3- Scaling Solution Shiden (SDN)

Introduction

Shiden (SDN) is a beta version of Plasm, which is one of the expansion technology solutions on wave card and can be understood as Layer2 solution for wave card. Therefore, Shiden is considered as a decentralized application layer on Kusama, the test network of PoC. Since the Kusama relay chain is not designed to support smart contract functionality, it needs to have a space that is for separate support of smart contract applications such as DeFi, NFT, etc.
Shiden has supported EVM, Web3 and Layer2 solutions from the beginning and the platform supports a variety of applications. It can be very helpful for Kusama to scale.

Pledge mechanism and related data

In this slot auction, KSM holders can support Shiden by locking in 11 months of KSM assets, and the program will provide 15.4 million SDN rewards throughout the period, with rewards representing 22% of the total offering. On June 23, Shiden locked in a total of 89,342 KSM in the slot auction, with 3,869 accounts participating in the pledge. Top 4 – Liquidity Protocol Bifrost

Introduction

Bifrost (Rainbow Bridge) aims to solve the liquidity of PoS-like collateral assets, and is a cross-chain network providing liquidity for Staking. The Bifrost protocol allows DeFi projects in the PoC ecosystem to exchange assets under the PoS mechanism into vToken at any time to gain collateral revenue and liquidity. For example, converting locked DOT/KSM into vDOT/vKSM via the Bifrost protocol can be used to either receive pledged lock-in proceeds, trade them, or receive a reward for providing liquidity.

Pledge mechanism and related data

Bifrost has taken out 3 million BNCs as a reward in this slot auction, and the maximum lock-in supported is 250,000 KSMs, i.e. 1 KSM reward for over 11 BNCs. the lease period for Bifrost to bid for the Kusama parallel chain slot is 48 weeks. It is worth noting that pledged KSM at Bifrost,can be casted as vKSM in advance, so that the pledged KSM liquidity can be released. On June 23, Bifrost (BNC) attracted a total of 21353 KSMs in the slot auction, with 3303 accounts participating in the pledge. Top 5-Privacy Chain Khala (K-PHA)

Introduction

Khala (K-PHA) is a privacy parallel chain on Kusama and the pioneer network of Phala (PHA) in the PoC ecosystem. Phala integrates TEE (Trusted Execution Environment) with blockchain to implement the confidential smart contract function. Confidential smart contracts can run in a special secure zone, and the execution of the contract is completely isolated from the outside world, ensuring the secrecy of data. On the one hand, it can achieve the effect of DeFi smart contracts; on the other hand, it allows the privacy of other applications such as data services to be protected.

Pledge mechanism and related data

Khala bids on slots with a 48-week lease period, and the project says it will not issue any new tokens independent of the PHA, so Khala uses K-PHA as a network pass, and K-PHA can be exchanged 1:1 with the main network PHA. Currently, the slot auction crowdfunding reward token is PHA (Phala mainnet token), the total amount of reward is 15 million PHA, every locked position of 1 KSM can get 100 PHA, the maximum amount of crowdfunding that can be supported is 150,000 KSM, which means after the amount of crowdfunding reaches 150,000, there will not be any reward. On June 23, Khala attracted a total of 17,956 KSM locked positions in the slot auction, with 996 accounts participating in the pledge.

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