Crowdloans and Parachain Auctions in 8 Minutes.srt

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Hey everybody this is Dan Reecer from

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Acala, I'm currently VP of growth here.

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I've been on the Acala team for a couple

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months and previously spent my time at

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Web3 Foundation

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where I helped launch Polkadot and

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Kusama. Today I'm going to make this

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really quick. I may talk fast because i'm

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trying to keep it in

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hopefully like five to seven minutes but

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I'm going to be talking about

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Polkadot and Kusama parachain auctions

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and crowdloans, which are the process

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for how to launch

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a blockchain on one of these networks so

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Polkadot and Kusama as you may know are

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these multi-chain ecosystems that are

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tying together

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a bunch of blockchains that are called

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parachains.

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In the future there will be up to a

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hundred parachains on Polkadot and a

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hundred

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plus on Kusama, but as of now there's no

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parachain on either one.

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So today i'm going to talk about how to

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actually earn a slot

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as one of these little squares here in

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this diagram. How do you actually become

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the first

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parachain on Kusama or the first parachain

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on Polkadot

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and that process is crowdloans and

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parachain auctions. So

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this is the timeline. You can see here

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that crowdloans come

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first, which i'll get into.. The main

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event is the parachain auction here in

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white

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this is multiple parachain teams

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essentially bidding against each other

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trying to win this auction

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the winner of the auction then moves on

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and earns a slot

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here in the green. Once you earn a slot

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then you're officially on

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Kusama or on Polkadot as a parachain

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team and you can begin

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launching your applications, applications

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can build on you

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and so on. This is ultimately the

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vision of Polkadot and Kusama

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and then the last part here you can see

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there's an actual end time of this slot

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that the team

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earns so after the team earns that slot

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then there's things that happen

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including crowdloan funds being

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returned

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to the contributors and so on. And

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I'll cover all that in the next few

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slides.

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So parachain auctions, I'm going to start

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with, because you need to understand this

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before we go into Crowdloans. So

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a parachain slot auction is essentially

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like I said

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teams bidding against each other to try

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to win one of these slots

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each auction is ultimately going for

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one slot it can be divided into smaller

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chunks but ultimately

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on Polkadot it can be up to 24 months

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but some teams may decide to bid for

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shorter but to keep this simple let's

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just assume the maximum.

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Teams that are going into this

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auction have two options for how to

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actually

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bid and what funds to use for their bid

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so

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first is if you have a single account

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say for Kusama, you have a

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stack of KSM that you want to use for

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this auction

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and you don't need to involve your

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community then that could be one option.

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The more frequent and more

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likely scenario

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will be number two here, which is using

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the crowdloan module

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so in this case you're actually

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crowdsourcing KSM in the case of Kusama

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or crowdsourcing DOT

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from your community and you're

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basically crowdsourcing this so that you

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can use that

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in the parachain slot auction.

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How often will this happen? So

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Parachain auctions will be done

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one at a time but it's looking like

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these will be about every two weeks so

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in the Polkadot and Kusama ecosystem

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these things will be happening on an

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ongoing basis for the foreseeable future

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so crowdloans first of all

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like i said are used

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for the opening bid in an auction so

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teams will

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crowdsource these tokens and then use

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them in that parachain auction at the

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next step.

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If you're a user and you contribute KSM

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to a Kusama parachain or if you

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contribute DOT to a Polkadot parachain

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you're essentially agreeing to locking

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those tokens for the duration of that

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parachain slot.

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In the example that I used earlier

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let's assume 24 months

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then after 24 months your original

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principle is returned back to you so

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it's essentially no loss and a much more

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ethical model

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than we've seen in the past with things

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like ICOs because in this case

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you really hold the team accountable for

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actually delivering on their

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vision in their white paper because they

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need to add value to their network

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because they're actually not raising

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any funds directly from you as the

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community member.

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Last, I kind of hinted at this

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just now but

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the funds that are contributed in

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KSM or in DOT

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are never touched by the team so there's

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no worries about

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teams raising money and running away

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with it not delivering on what they

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promised. All

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the interests are really aligned here

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and the team is really held accountable.

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In the crowdloan, 

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this is kind of what it looks like.

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You've got multiple teams

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crowdsourcing KSM or DOT from their

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communities

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and that leads into the paratrain slot

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auction.

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Everything that was raised in that

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crowdloan stage is

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is not accessible to the team but

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they can actually use that 

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in their parachain slot auction. So you

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can think of it like a poker table

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at the beginning of the auction all

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these teams will basically go all in

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with the funds that they raised in

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their crowdloan.

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Then how do we determine the winner?

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When the auction starts we will know the

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open time

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here in the green, and we will know the

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close time in the orange over here

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and the most exciting point will be when

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we hit this close time

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the Kusama or Polkadot relay chain

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itself will randomly select a time

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that determines the end time, this red

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bar here. So in this

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example you've got Parachain B bidding,

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Parachain C bidding,

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Parachain A bidding.... E and F

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beat A in terms of number of KSM but the

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winner was determined at this red line

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so

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the highest bidder was Parachain A. 

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This is called an unpermissioned candle auction

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and it incentivizes teams to bid

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as high as they can as early as they can

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instead of waiting until the end like

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you might have seen on ebay

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where people try to

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snipe at the end and get the highest bid.

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This is a full walkthrough of this

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whole process. You've got

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users over here contributing KSM they

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contribute in this example to Karura

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500,000 KSM. Then Karua

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wins the first slot on Kusama and then

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begins its launch process so

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all of the KSM that was crowdsourced in

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this original

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crowdloan period is then locked in the

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core

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Kusama relay chain and then KAR

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is then distributed, the native token of

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Karura (KAR) is distributed to the 

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crowdloan contributors

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and then at the same time

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Karura is also launching so

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the Karura stablecoin, the liquid KSM staking,

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as well as

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the Karura AMM-DEX, the Karura DEX

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 all go live on top of Karura

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when this happens. At the end of

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the parachain slot all of the KSM is

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returned to the

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supporters. Now the

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last question that people sometimes

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have is: 'What happens at the end of that

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slot?' In this example, let's say

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that it was a one-year parachain slot

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the KSM is returned to the original

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crowdloan supporters and then there's

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three options for

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any team to kind of maintain their

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access to the relay chain.

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First is to host another crowdloan and

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do another parachain auction, 

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second is to self fund. Karura and

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Acala will both have a decentralized

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sovereign wealth fund

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and over time that will 

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continue to build and build

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so that we can become sovereign and

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self-sustainable and actually 

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bid with our own treasury our own

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sovereign wealth fund

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for future slots, and then the third

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option

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there's probably several wiki articles

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and videos that you could watch

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about this but, the other option is

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to become a parathread, which

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 just means that you have a little

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bit less access..

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less frequent access to the relay

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chain itself.

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So that's it in about eight minutes.

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Hopefully you learned something. Let me

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know if you have any questions.

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Thank you, bye.