Understanding Cryptocurrencies and Block Chains

Understanding Cryptocurrencies and Block Chains can be a challenge if you are new to this market. While cryptocurrency has been around for several years, the momentum surrounding digital based coinage has only seen momentum in recent years. Because crypto coinage is the rate of exchange on such platforms as Polkadot and Kusama, it is important to understand the basic structure of blockchains and crypto currency. If you have ever struggled with understanding cryptocurrencies and block chains, read on.

Understanding Cryptocurrencies and Block Chains is the key to being succesfull in auctions. Here are a few of the cryptocoins on the market.

What are Cryptocurrencies?

If you were to enter a bank, you would have a physical paper or coin means of transaction. Cryptocurrencies are similar in their function. They are usually variations of Bitcoin, which was the first of this type of tender. Like “traditional” money, cryptocurrencies have their own units and their own identification. For example, when you are on Kusama, the coins are called KSM. However, when you are on Polkadot, the tender is referred to as DOT.

Where cryptocurrency differs from, say, a $20 bill is in the where you can spend the money. While you can exchange the currency on the market, you may not spend the money on certain sites. Again, going to the example, you cannot use KSM on Polkadot or DOT on Kusama. In most cases, you will need to have specific cryptocurrencies to auction and complete transaction on the platform of your choosing.

What are block chains?

When transactions are completed, there must be a record of the transaction. This can be a trade, a sale, or the development of new cryptocurrencies. Block Chains are the record of the transactions. Just like a ledger would show the transactions and validate the spender and the money within an account, block chains validate the ownership of units and the currency.

Because there are transactions which occur regularly, there must be updated to the block chain. Each update to the chain is known as a block. Blocks usually are added several times per day. For example, Bitcoin has a rate of about 10 minutes per block being added. Some newer cryptocurrencies have a rate which is quicker.

How are cryptocurrencies secured?

Like most online things these days, the security of your cryptocurrency is based upon a private key. This key can be randomly generated or you can choose the key. It is important to note that the pin or private key which is associated with your wallet is crucial to performing transactions, trades, or auctioning. Private keys are the access validation for such.

Unlike pins which can be retrieved if you have forgotten the code, Private keys cannot be recovered if lost. This is meant as a security measure. Only you have the private key. Therefore, if you lose the key or forget the key, there is no one and nowhere that the key is located for recovery. Why does this matter? It matters because if the private key is lost, you will not have access to your cryptocurrency. While you could form a new private key, you would lose all the accumulated cryptocurrency associated with the lost key.

If you are setting up a private key or if you have a randomly generated key, ensure that you do not lose that key.

What is a cryptocurrency wallet?

All cryptocurrency users must have a wallet in order to perform transactions. The wallet is where the cryptocurrency is housed. Each platform may have different wallets. So, you could end up having several wallets with several units. DOT may require one and KSM may have another. It all depends upon the units which can be exchanged on the platform that you choose.

Backing up your wallet is advised. The backup does not secure your coinage, however. It is more of a means of verifying the cryptocurrency that you have should anything ever go wrong with the site. That being stated, most of the cryptocurrency sites do not offer refunds or additional securities on coinage in your wallet. It is a use at your own risk type of setup.

How are transactions verified?

If you use cryptocurrency, you will eventually hear the term miner. A miner is someone or a group of individuals who have strong servers and IT knowledge which can process the transactions which occur on a platform. Usually, there are multiple servers, decentralizing the cryptocurrencies. This means that there is no one financial institution validating the transaction. Miners, when a transaction is started, freeze the cryptocurrency so that neither you nor the party being paid can access it. Once the transaction has been verified (which usually only takes a few minutes), the party to which the coins were transferred will have access.

It is important to understand that these transactions are not like going to a physical, financial institution. While there are validations of transactions, there is still a risk that you can become hacked or lose your coins. Unlike a physical, financial institution, once the transaction is complete, it is final.

Why are there transaction fees?

There are two types of transactions which can occur, free-fee and for-fee. Most of the platforms will have a transaction fee of 1% or less. Like any institution, they are in the business of making money. Incentives are given, usually as processing times, for users to use fee based transactions. Note that even if you have started a transaction before a fee transaction, most platforms will prioritize the for fee over the free-fee. Transaction fees are how miners make their living.

Picture of a blockchain.

Understanding Cryptocurrencies and Block Chains

While cryptocurrency codes can be complex, the basics do not have to frustrate you. If you remember cryptocurrency is the digital tender which platforms based upon Bitcoin and such technology run, you will be fine. Block Chains are simpler to understand. They are the record of all transactions and the variation of crypto units.

Should you have questions about a particular unit, or if you are unsure how your platform handles cryptocurrency, contact the appropriate parties to find out more information before investing.

Kusama or Polkadot – A comparison

Kusama or Polkadot, which is the better network for your blockchain project? Both developments are by Gavin Wood. This means that both of the platforms have similar qualities as Ethereum. That is what Gavin Wood is known for. Yet, the two platforms are not the same. Project developers should know the differences between the two platforms. They can determine which option is best suited for their needs. If you have ever wondered which network is better Kusama or Polkadot, then read on to find out more.

Kusama or Polkadot which is the better choice?

No difference in code

The code for Polkdot and Kusama is based on a multichain. This is a heterogeneously shared design. It is based on a variation of the proof of stake. The variation is known as a Nominated Proof of stake (NPos), making for secure transactions of your DOT or KSM. Polkadot and Kusama are permisisionless networks built around a decentralized and autonomous framework. What does this mean? It means that most of the processes are monitored and controlled by code. There are human interactions. For example, the validators and nominators, where data is largely delt with automatically.

Networks for parachains

Both Kusama and Polkadot work on a system supporting Parachains. In short, the system has its own blockchain. The main blockchain is known as the relaychain, as all the other chains are relayed back to the main blockchain. Projects from outside of Kusama or Polkadot are added to the relay chain. This is like teeth on a comb or on-ramps to a highway. These projects can change over time.

Kusama’s parachains are intended for the early development of the project. As the governances are more relaxed on this platform, projects can be more experimental. Kusama is perfect for the early stages of development for a project. Polkadot, is more strenuous on the governances. This is because Polkadot is the adult platform. Kusama is the child. The two are carbon copies of each other. It is the governances and the policies which make Polkadot the more secure and steady. Kusama is more aggressive.

Auctions and Upgrades

One of the fundamental differences in determining whether to use Kusama or Polkadot is in the timeframe of the auctions and the upgrades. Polkadot is slow with the upgrades, taking a month for some. Kusama is faster and auctions and upgrades usually take a week. Why is this?

Kusama is the base point for Polkadot. It is known as a Canary Network. This means that the network’s sole purpose is to be aggressive. It also finds issues and problems which projects may have. Then, the canary network gives those alerts to not only Kusama but to the project owners. This allows for more secure projects to be presented ultimately to Polkadot. Think of it as Kusama being the explorer and Polkadot being the settler. Kusama goes forth and finds the upgrades, features, and project which are to be added to Polkadot. But these projects could be risky.

Kusama uses the quicker bid and auction method. The platform can try out new features and parachains regularly. Those who want to use Kusama need to carefully monitor the site. The parachains and the auctions change regularly. Again, Kusama is best suited for the early stages of a project’s development.

Who should use Polkadot?

Anyone can use the Polkadot network. But certain areas prosper on it. Specifically, those who are in enterprises or in B2B applications will find that the security is better on Polkadot. Financial applications and high value applications which need bank-like security should use the network. Note that Polkadot offers bank-like security. Yet, it is not held under the FDIC or other institution insurances. You should review the terms and the conditions of Polkadot. Do this prior to submitting your project for paralink inclusion.

Apart from the financial-based applications, the network is prime for those who have already tested the project. Also, Polkadot has a slower and more secure means of updating and integrating features. You get a slow and steady approach to anything within the network. It makes monitoring of your project easier. And it requires less time focusing on changes and more time focusing on performance.

Kusama or Polkadot options both offer unique advantages. Here you see Kusama's.

Who should use Kusama?

Kusama is best suited for the early stage start up networks. Because of the aggressiveness in finding out the issues with the networks, it is ideal for those who wish to experiment. Then submit those ideas to Polkadot. In terms of the type of networks, Kusama’s network is beneficial to those that have applications that do not require a bank like security. Neither do they need the robustness of the Polkadot platform.

Besides the security, the development stages of a project should be taken into consideration. Kusama is the choice for those who have pre-production projects. Also, those which they want to see eventually integrated with the more secure Polkadot should use it.

Kusama or Polkadot?

Both of the networks are similar in how they are made and in their functionality. Because of the similarities, you should really focus on the intention of your project. Then choose between Kusama or Polkadot. If you need more security and a stable network, then choose Polkadot. However, if you are seeking to experiment with new features use Kusama. If you are in the beginning processes of your project, you may wish to use Kusama. Keep in mind that each platform has its own cryptocurrency. So, if you intend on using both, you will need to purchase both KSM and DOT.

Before using any of the platforms, it is strongly suggested that you review all the trading and auction terms and conditions. Those engaging in auctions are encouraged to research the projects before bidding. Monitor both to see the growth and evolutions predicted to take place.

What is Polkadot?

What is Polkadot? In the world of blockchains and cryptocurrencies, there is a need for an ecosystem for new projects and developments. Polkadot provides this ecosystem. It is a protocol language that connects blockchains together. This is accomplished by allowing for the development of blockchain projects and then stacking those blockchains onto the platform. Once part of the network, the programs are continuously checked for issues, suggested updates, and provided feedback. Sound interesting? Read on to find out more about Polkadot.

What is Polkadot? Yellow picture of polkadot. Polkadot cryptocurrency token symbol, DOT coin icon in circle with pcb on gold background. Vector illustration in techno style for website or banner.

A brief History

Polkadot is much like Kusama in that it was developed by Gavin Wood. You may note that Gavin Wood is the co-founder of Ethereum. The platform shares some similarities with it. Launched on May 26, 2020, Polkadot is one of the newest blockchain platforms available. That being stated, the shares and the popularity of the network have proven to be promising. Predictions state that as Ethereum 2.0 is being launched, they will update some features within Polkadot to mimic the former.

We should note that Ethereum and Polkadot are not intertwined. Gavin Wood has been a huge part of both platforms. Yet, the two are independent of one another. The only platform which is directly tied to Polkadot is Kusama, which acts as a filtering network for Polkadot’s potential projects.

How does Polkadot work?

Polkadot has two functionalities, but three parts. First, you have the tokens. The tokens are known as DOTs and can be bought and sold through Polkadot or on any other cryptocurrency site. Currently, the average price for a DOT ranges from $30 to $50. Market predictions do state that the price will rise in the upcoming years, as the network becomes more seasoned. When purchased, they store the DOTs in your wallet on the network. Polkadot uses a polkadot.js address system for the wallet.

The second part of the platform is the relay chain. The relay chain is the main blockchain for the network. It is the part of the network that all the other programs latch onto. Polkadot must limit the number of projects attached to the main chain. Otherwise, there would be an overload of data. An overload would cause stability issues. Therefore, to sift through the potential candidates, Polkadot uses bids and auctions and Kusama.

Polkadots third part is the projects which are accepted to the network. They are referred to as parachains. Parachains are available on a lease contract basis and are determined through bids and auctions. Those who win the bid get the opportunity to have their projects leased on the network for up to 96 weeks. Leases offer the option to renew.

Bids, Auctions, and Kusama

To maintain the fairness of the site, Polkadot uses bids, auctions, and Kusama. Bids and auctions work in the same way. First, the potential project agrees to bond the KSM (for Kusama) or the DOT (for Polkadot). This means that the currency cannot be sold or traded during this time. DOTs are returned if the project does not win the bid.

However, if the bid wins, the DOT is locked in for the duration of the lease. At the end of the lease, the DOT is returned to the owner. Second, the number 1-8 is determined. This will determine the length of the lease if the bid is won. After the bid length is selected, the project is placed in the auction. The auctioning method is based upon a candlelight method, meaning that no one knows the exact time when it will end. This limits auction snipping. During the bids and the auction, participants bid DOTs or KSM towards their desired project. When the bidding stops, the one with the most votes wins. This project is given a lease space as a parachain on Polkadot or Kusama.

Who controls Polkadot?

Polkadot is not controlled by any individual. This takes out the threat of shareholders and board members affecting the bids or the network. Instead, the platform is maintained by automated codes which interpret the data. Not that the complete network is automated. However, the entire network is autonomous in nature. It is also decentralized. When human interaction is necessary, it is broken up into three categories.

The three human parts of the network

Nominators give investors the ability to take part in staking. This is part of the process in which the DOT is delegated to another party, the Validators. Think of it as securing your vote of confidence by allocating the DOTs to the desired party. You should note that when you invest in a validator, that your DOTs depend on whether that person adheres to the terms, rules, and stipulations of Polkadot. Choose your Validator with care.

Validators do just what the name suggests. They validate. However, they are also the ones who cast votes for the council. The Council determines the updates and features available on Polkadot. Therefore, it is critical that you choose your Validator with care. Currently, there are 7 members on the council. Yet, with the increase in traffic to Polkadot, and an increase in potential projects, more seats are expected to be available soon.

Who ensures that everything is followed?

It is essential to have a method in place to ensure that the rules and the terms are being adhered to. While the running of the site is based on automated coding, adherence monitoring is largely based upon two groups.

Collators ensure transactions are valid and then send the transactions over to the validators. They are the in-between for the nominators and the Validators, ensuring that no spam transactions are used on bids and auctions. To help maintain the integrity of the site, the second group, Fishermen, is used. Fishermen work to find and to report unacceptable behavior and spam within the network.

This is an image of a Polkadot coin. Polkadot coin on a black background. What is Polkadot? This is a cryptocurrency coin.

What is Polkadot?

Polkadot is a blockchain that allows for other blockchain projects to emerge. It is a token system that gives power to cryptocurrency transactions. Polkadot is also the near cousin of Kusama, another platform used to give projects a relaychin to attach their parachain to. While still young, the Polkadot system shows tremendous stability, safety, and growth. Predictions say that it will be as popular if not surpass Ethereum soon.

Kusama and Polkadot Auctions

Kusama and Polkadot Auctions are similar. In order for projects to be secured on Polkadot, there must be a system in place to determine which projects are worth having on the Relay Chain and those that are not. Unlike other sites where the influence of the project is based upon the capital of shareholders and individuals, Kusama and Polkadot auctions are based upon a system that keeps the playing field even. This is known as the candle auction method.

Kusama and Polkadot Auctions are similar as the two programs rely heavily upon one another.

The basic method of auctions

The basic method which is used by Kusama and Polkadot is the candle auction method. This method was created in the 16th century when ship actions took place. Basically, the auction stated that the winning bid would be determined when the candle went out. While there was a brief telling of when this would occur, the exact time and duration of the auction remained unknown until after it ended. In the same way, the Polkadot and Kusama parachain auctions work.

Parachain auctions require KSM or DOT to take part, depending upon whether you are using Polkadot or Kusama network. Because of the randomness of the ending, bidders do not have the ability to bid at the last moment. Bidding follows a five-step method for the bids.

Bonding

The first part of the auction process is known as bonding. In this step, the proposed project agrees to lock in the KSM or DOT until the end of the auction. A contract for the end of the auction may be issued at this point. If the auction wins, then the KSM and DOT will need to be bonded for the duration of the lease contract. Teams can specify the duration of the lease for their project with a range of 1 to 8 lease periods. Bonds specify that the KSM and DOT cannot be used for any other activities after they are locked in. This means that you cannot use the KSM and DOT for stakes and/or transfers.

Bidding duration and costs

When the boding has been completed, the next step is to have the auction. This can be in the form of crowdloans or in parachain auctions. In both instances, the cost of the auction is based upon the KSM or DOT which is contributed to the project, update, or new feature which is proposed. The number of projects which can be bid upon at any time is determined by the council. Currently, the average projects per bidding session is 25. However, it is predicted that as the popularity of Kusama and Polkadot increases, so will the number of slots available per bidding session.

When bidding, team members can see the other bids and raise the bids accordingly. Open bidding is available for the duration of the auction. The cost of the bid is determined and set prior to any bidding. Currently, the rate is 5 DOT or .1 KSM per bid. To bid, you will need to have KSM or DOT in your wallet.

Types of bids

There are three ways in which you can bid on a job. The first is through your wallet. This is the preferred method, as well as the safest. Funds in your wallet can be added to the bid easily as you work through the Polkadot.js auctioning platform. The second method for bidding is through the official project website. This is done by clicking on the Join now button on the auction site. Be sure to read all the terms and conditions, as the rewards and the KSM or DOT stipulations may vary. Last, is exchange. This is the riskiest of investments.

Because you are transferring your KSM or DOT to a third party, you may or may not get your cryptocurrency back after the auction. Only with the exchange is the auction passed to a third party. Invest in these types of auctions only if you are confident in the trustworthiness of the project holder.

Kusama coin

Winning and KSM, DOT allocation

Duration of auctions last for a week and 18 hours on average. Again, as the end of the auction is not known but randomly determined, the ending could be any time after the one-week bidding has occurred. The winning auction is the project which has gained the most KSM or DOT support.

It should be noted that the auction is not a spending of KSM or DOT. Rather, it is an allocation of the KSM or DOT to show confidence in the project which is being proposed. At the end of the auction, if the project cannot win the bid, the KSM or DOT is awarded back to the owners, usually within a 7-day period. The auction will not clear until all members have received back their “investment” Alternatively if the auction wins, then the KSM or DOT will be locked in for the entire duration of the lease. At the end of the lease, the KSM or DOT will be released back to the owner.

Lease Contract

With the winning bid comes the lease contract. The lease contract is available in 12-week leases and can last up to 96 weeks. Leases can be renewed at the end of the contract. When won, the project becomes part of the parachain on the relaychain for Kusama or Polkadot, depending upon where the auction takes place. Most times, the project will start on a Kusama auction and get the real world environmental testing needed. Once the project has proven itself on Kusama, it typically has an auction on Polkadot to become part of the parachain there. However, this is not a requirement. Auctions can take place on either one or both, depending on the needs for the project.

Kusama and Polkadot auctions

Kusama and Polkadot auctions are low-risk ways in which you can show your support for a project. The quick bidding period of one week, the non-specified ending period which establishes a fairer bidding platform, and the return of the KSM or DOT, makes it worth taking part in.

Before participation, it is advised that you review all the policies and procedures for Polkadot or Kusuma auctions so that you understand fully how your KSM and DOT will be affected by the bids.

The Stability of Kusama

The Stability of Kusama has been questioned. Because Kusama is a relatively new network launched in the latter part of the 2020s. As such, those new to cryptocurrency transactions may have questions. Additionally, the network’s primary function is to test the Polkadot network. These are various projects which will eventually end up on the Parachain of the network. Developers and investors may question the stability of the Kusama network. These concerns would be based solely upon its age and availability. But is Kusama stable and safe? To answer this question, we need to look at how it is created. Read on to find out more.

Stability of Kusama is based upon several layers of stability. This is a compass showing stability.

A DAO system

The first thing to note about the Kusama network is that it is a DAO system. This means that it is a decentralized autonomous system. The system is based on these two factors. To define each is important to evaluate the security of the overall network. First, the decentralized portion of the system means that there are no executives or shareholders. For security purposes, this is great. Also, it allows for the system to work without outside influences. You get this when a board of directors can determine the day-to-day functions of the network. For stability purposes, it means that the code is the fundamental authority of the site.

Autonomy is the second part of the DAO system. It is known as being the automated enforcement of the code. Autonomy does not mean that there is no human interaction. You should understand that there are operations that must be conducted by a human influence. This keeps the platform from collapsing. This is minimal. It does introduce a human factor into the stability of the overall network. All bit chains have a level of such. It can be judged as minimal risk.

But who are those who influence the DAO? The governance does.

The governance by the people

The system is not controlled by one person or by shareholders. There is a hierarchy under which the network operates. These influences determine what is added to the network, changes, and updates which may be needed. However, in order to keep the Kusama network secure, these influences have been broken up into three categories of governance.

First, you have the referendum chamber. As the name suggests, they are the ones who refer to changes to the network. Anyone who has KSM purchased can suggest changes. It is important to note that these changes are not immediately approved or rejected. Changes may require a vote. Where a new project is proposed, an auction takes place. Referendums do not affect the stability of the network. They are just people who offer suggestions based on their own experience with the platform.

A non-shareholder council

The council is the second governance party of Kusama and consists of elected members. These are KSM holders who have been voted upon by other members. Council members can affect the stability of the network as they are the ones who approve changes to the software/network. Kusama currently allows for 7 seats on the council. This helps to maintain the autonomy and decentralized nature of the network. They do not want to have a council that turns into a board or shareholders. However, there must be a regulatory committee to judge the validity and merit of the referendum members.

Kusama regulates the number of seats that are available. While the current seats are 7, it is predicted that there will be more seats added. This is due to an increased interest in the Kusama community growth. This could cause concerns with programmers and developers in terms of the overall stability. Remember that the members are elected to the seats by the community, not by shareholders.

But even with this party does not limit the security as the third governance keeps the council in check.

The technical governance

The third party is the technical governance. This party is responsible for the building of Kusama and the implementation of the updates, project, and features therein. If there was a party that could influence the stability of the network, it would be the technical governance. Keep in mind, though, that the program is built upon automated code. This code is constantly tested in a real environment setting. This ensures that it is stable and safe for use. Technical governance individuals are not an active part of the network, as they are only used for updates and, in the case of emergencies, on the network.

Unlike non-bitcoin platforms, Kusama follows the decentralized and non-shareholder system in all aspects of the governance. As the council members were voted upon, so are the technical members. The council votes for the technical members. So, you have the referendum members who vote for the council and the council who votes for the technical. All in all, you have a voting system by the members of the network, ensuring that no one person influences the functionality or the features of Kusuma.

Stability of Kusama is based upon a check and balance system. This is a picture of the logo.

The Stability of Kusama

The Kusama platform is built as a carbon copy of Polkadot. Polkadot has proven to be stable. The Kusama platform should be trusted to hold to the same stability. While there are a bit looser provisions to the Kusama platform, this should not diminish the overall coding and functions of the site. There is a hierarchy regulating the human aspect of the site. Also, there is a focus on the DAO nature of the site.

Overall, the network is secure. KSMs are locked and returned to owners once bids are completed. The KSMs do not transfer to the project owners. The framework will last as the whole thing was developed by Woods, the co-founder of Ethereum. Ethereum has been the backbone for bitcoin platforms for years and continues to show growth.

Like any bitcoin platform, there are risk factors involved. It is important that you review all the terms, conditions, and stipulations of the Kusama site prior to any investments on the network.

Kusama Crowdloans

Kusama Crowdloans is a replica of the Polkadot network. The system was formed as a carbon copy of the network in order to provide a means of testing projects. Projects which are tested on the Kusama network are available for a slot on the Polkadot network. Kusama works on two bit chains. The first is the Relay chain, which is the key chain used. The second is the Parachain. It is the Parachain which hosts the various project slots.

The necessity of the Parachain to the Relay chain is critical. Projects must be added to the network in order to reduce the stresses which can be formed. As the Kusama network is a Canary Network, the platform must only allow for projects which have the established confidence. Parachain slots are limited to ensure the stability of the network. In order to get a slot on the network, the project must have the confidence of validators. And to get this validation, crowdloans are needed. But what are Crowdloans and how do they work?

Kusama Crowdloans are explained here.

The basics of Kusama Crowdloans

The basic way in which crowdloans work is through the KSM. In Kusama Crowdloans, the KSM is “loaned” to bids. But this is a misleading term. The loans are not given to the participants wishing to have their projects on Kusama. Instead, the KSMs are locked into the bidding process. Various potential projects are conducted at the same time. Only those who beat out the other projects are awarded a slot on the Parachain for Kusama and ultimately on Polkadot. When you look for a project to bid on, look at the forerunners. Keep in mind that the lock in time is 48 weeks and that the runners can change from time to time.

Unlike some KSMs crowdloans are given a special form of transaction. The transaction ensures that you do not give up your tokens when you bid. The tokens are locked in as part of the bid, yes. But you are given back your tokens if the bid does not win. If the bid wins, you still get your tokens back, but only at the end of the loan’s duration. The current rate needed for a bid is a minimum of.1 KSM or 5 DOT if crowdloaning for Polkadot’s network projects. Check the stipulations of the bid before you allocate any of your KSM to the intended project.

Taking part in crowdloans

There are three ways in which you can engage in a crowdloan. Out of the three, only two are considered being the native way in which to perform a bid for a project. The three ways are through the wallet, through the project’s official website, and through an exchange. The wallet is the most secure of the transaction methods. To use the wallet method, select Kusama from the live relays & Parachains menu. Simply click the switch button to go between Kusama and Polkadot platforms.

Project official websites are the second method in which to participate in supporting a project through crowdloans. To go to the official site you only need to click the join now button on the auction/crowdloan page. Be sure that you are accessing an index and not an address. Indexes are secured through the Polkadot site. Addresses have their own terms and conditions for their crowdloans.

Exchanges are typically conducted through a third party. These are not considered being part of the Kusama or the Polkadot crowdfunding. Because they are third party, there is an increased risk of bidding and using your KSM. It is strongly recommended that you only use the exchange method for projects which you have performed due diligence upon. These companies should have an established trustworthiness with their projects.

Kusama Crowdloans are similar to Polkadot. As seen here.

Are crowdloans safe?

Loans, as the name suggest give people a bit of apprehension in investing in a crowdloan. However, as discussed earlier, the name is misleading. Because of how crowdloans work, it is virtually a no risk and high reward way of investing. First, your “loan” is locked into the bid. This is only to give the bid a sense of who wants to have the new update, new project, or addition to a project used on Polkadot or Kusama. Once the bid is over, you will get your KSMs invested back. You can expedite the process yourself. However, as the rate of refunding is typically 7 days after a bid ends, most people just rely upon the system to place the funds back into the wallet.

Second, when there is a winning bid, your KSMs are secured until the end of the contract that the project has with Kusama or Polkadot. This means that you may not be refunded your KSM for some time. Yet, you will eventually get your KSMs back. In the meantime, you will be rewarded for your contribution. Most crowdloans offer tokens to participants if their project wins. Check the bids conditions and terms to know the specifics of your particular project bid prior to crowdloaning it.

Why participate in crowdloans

Projects require that they have crowdloans in order to get on Polkadot or Kusama. To ensure that the products are on Kusama, a confidence in the project must be established. Once the bid is one and the project is on the network, Kusama can test the project in a real world environment, ensuring that it is ready for Polkadot. Besides the necessity for a project to win a slot, is the rewards which were previously mentioned.

As with any blockchain bidding, there is a low risk of loss. It is critical that you evaluate the terms, conditions, and stipulations of investment prior to using the Crowdfunding. This is especially true for any third party investments of KSM. Know fully the expectations and the uses of your KSM for the projects.

Low risk, high rewards, and a method of being able to advocate for the projects, updates, and features that you wish to have on the Kusama and Polkadot network. What reason is there for you not to want to invest in crowdloans?

What is Kusama?

 Kusama is known as a canary network. They based this on the term a canary in a coal mine. But what does this mean? This means that you have a network that provides alerts if there is danger in the pre-production stages of development. Kusama works as a carbon copy of Polkadot. This allows for those who would have their developments on the network to perform a test with looser restrictions than those necessary for Polkadot integration. If you have ever wondered about Kusuma, read on to find out more about all you need to know.

Kusama bird. The Kusama platform is based on the canary method.

A brief history of Kusama

Kusama is relatively new to the blockchain and cryptocurrency world. Created in 2016, this network has emerged as the main testing source for Polkadot. The platform was created by Galvin Wood, Peter Czaban, and Robert Habermeier. You may remember Galvin Wood as being the co-founder of Ethereum. Also, he is known for the creation of dapps. Both are major parts of the development process. Wood’s influence in the development of Kusama includes the main framework, Substrate.

In order to take part with Kusama, you will need to have the proper tokens. We know Kusama tokens as KSM. These are primarily used within the various slots available on the Kusama network, but can be traded as well, as NASDAQ has shown. As the KSM is a stake, the price of a token will change based upon the market. Current pricing of the KSM ranges in the high $300s. Projects and trading on the Kusama network will require that you invest some KSM in order to become a Validator or a Nominator. Because rates differ day-to-day, check the rates and the intended investment obligations.

Testing blockchain projects

The primary function of Kusama is to test blockchain projects before they are submitted to Polkadot. As such, the platform must provide a realistic testing environment. This means that real cryptocurrency is exchanged on the network. Furthermore, Kusama works as an ecosystem for Polkadot, providing a full test of the products as well as ongoing testing of the Polkadot network. Think of it as an all-around fail proofing of the network and the content therein. As this is a canary network, if there are any issues, they are flagged.

There are two types of blockchain testing that occur with Kusama. First, is the relay chain. Second, is the Parachain. Both are fundamental to the overall functionality of the blockchain. Each requires testing as well as cryptocurrency. Both parts play a critical role in the investment of KSM, and in the testing of new blockchain and cryptocurrency projects. Knowing how each works is critical for those wishing to use the Kusama network.

Relay Chain

If you think of the network as a highway, the relay chain is the main part of the road. These points are what everything else branches off of. The relay chain makes permanent transactions. As such, it is the fundamental way in which Kusama functions. Relay chains complete the transactions on the network using a split form of validation. New transactions are handled differently than validations. Validations are done using a variant of the proof of Stake (PoS) which is the common way in which to verify. This variation used by the Kusama system is known as a nominated proof of state (NPoS).

When using the Kusama network, you will notice that there are two ways in which the cryptocurrency is used. First, you have the validators. These validators are responsible for validating data. Also, they are the ones who are responsible for any updates or changes which are to be performed to the Polkadot network.  Second, is the Nominators. The Nominators work as the name suggests. They are responsible for nominating the validators. This is much like an electoral vote. The more validators which are nominated, the more influence the vote will be from that validator. So, the validators vote on the changes to the network. But it is the nominators who are responsible for picking the validators.

The Parachains and how they work

Continuing on with the highway metaphor, if the relay chain is the main highway then the Parachain is the exit ramps and access points. Parachain means parallel chain. These are smaller chains that are connected to the relay chain. Think of them as the support system and the stress reliever for the relay chain. Again, like a highway, if there were no exit and access points, the main road would become congested. The same is true with the relay chain and the parachain. If there were no supporting chains (parachains) for the relay chain, the network would become bogged down.

Parachains are many and branch off of the Relay chain. As such, they communicate directly with the Kusama relay chains. This system locks in the transactions to confirm the transactions made on the network. As such, it should be noted that in order to fully take part in the Kusama network, you should invest in both the relay network and parachain network.

Kusama is linked to Polkadot. The network uses KSM. This image shows the links

What is Kusama?

Kusama is the replica of Polkadot. Because of this, it is intended to be the jumping platform for those who wish to put their blockchain and cryptocurrency projects on the Polkadot network. As Kusama is not Polkadot, the platform works with its own token system known as the KSM. Due to the real cryptocurrency is used on the platform, there is a need to have transactions verified on the network. The validation is done through the use of nominators and validators. To ensure Bthat projects are ready for Polkadot, the Kusama network test not only the projects, validating the data for use but also the Polkadot network, validating updates and the current network. Before using Polkadot, it is important to test your product on Kusama.

As Kusama is a new network, the risk obligations are a bit higher. Ensure that you are familiar with the stipulations and regulations of Kusama before use. That being stated, the risk and rewards of the platform are congruent with those of most blockchain networks.

What is Polkadot Network and Staking on Polkadot Network

Are you new to the Crypto world and wondering What is Polkadot network and what the buzz is all about? Polkadot is the next big thing when it comes to stepping up blockchains in the smart crypto-age. There is a lot that Polkadot promises which you wouldn’t find with any other cryptocurrency. With all the perks that it comes with, its growth is inevitable and you better get on board while it is still early and picking. Tech savvy geeks who oversaw the mooning of Bitcoin and the ever rising Ethereum have got the attention of the amazing dot (DOT) token, of the Polkadot blockchain which has seen an explosive growth over recent months.

In this guide, we will go through the introduction of Polkadot and help you explore beyond the definition by getting you to understand more about staking on Polkadot.

What is Polkadot Network?

To better understand the Polkadot network and what comes with it, we need to first understand what and how blockchains work. A blockchain network uses peers (multiple computer systems) to store data in nodes. In a nutshell, it doesn’t store information or data in one location like you would do with data in your computer. It uses multiple nodes that are networked together. The same data is stored in these computers (nodes). Whenever the data is updated in one computer, it updates the record across all the nodes. This is meant to improve the accuracy and reliability. There is therefore no way that the data can be manipulated, and has since been used to reliably transact billions worth of dollars. It has become very dependable and its use is exploding all over the world.

The blockchain systems used by cryptocurrencies like Bitcoin and Ethereum are immutable which means that the data is entered irreversibly and spreading the data across different computers enhances dependability of the data.

Polkadot on the other end is a system that utilizes NPoS (Nominated Proof-of-Stake) which basically means that that there is a layer of validator set which is nominated by DOT holders (nominators). This improves efficiency and security and with the improved speed, users get better transaction speeds than you would find with the common blockchain based systems.

There are many instances where Polkadot can come in handy in replacing the traditional blockchain based systems. This may include applications ranging from anything in Finance, Health, Education and many other sectors.

Shared below are some of the major issues that cryptocurrency blockchains have.

Speed Limitation

the number of transactions that can be done through a normal cryptocurrency blockchain is limited. by way of example, Bitcoin allows procession of 7 transactions per second, Ethereum has a 25 transaction per second speed. By comparison, this is considered low which is a major challenge as it will lag with overloads.

System Integrity Monitoring

With normal blockchain systems, there is need to keep the system always secure and running as it is needed all the time. It is a tasky approach to secure the network and would be better if there ways a way to manage this more efficiently. And this is where dot (DOT) token like Polkadot comes to play.

Centralized Governance

As much as cryptocurrencies are run from different peer nodes, critical issues are only decided by the owner or a group of people who have their own thinking on how to run it. This leaves the future of the cryptocurrency in the hands of a few, not to mention the limitations on improvement that comes with that. updating such systems also tend to be more difficult.

How Polkadot Network Is Better

There are many ways that experts see and find the Polkadot network to solve some of the common issues experienced with the blockchain networks. Below is an overview of Polkadot network and how it can address some of the traditional blockchain system functionalities.

Polkadot Is Faster & More Efficient

Common blockchains have the tendency to break or lag when there are many people using or transacting at a time. This means that you will have to wait for some time to confirm the transaction.

Apart from this being the major issue that the blockchain based systems have had to face, it means that as they grow, they become slower and less dependable. As aforementioned, Bitcoin currently has speeds of 7 transactions per second, while Ethereum has about 25 transactions per second. By comparison with Visa card which has the capability of transacting about 65,000 transactions per second, it is clear to see why the traditional blockchain systems are a far-cry from being dependable. Amazing enough, Polkadot beat them all. The Polkadot system has the capability of handling 166,666 transactions at the moment and with ability to be upgraded to higher speeds.

Better Security With Polkadot

While top blockchains like Bitcoin and Ethereum have a dependable and very secure system. This is because the system is based on validation. The system is made up of validators and nominators (holders of DOT holders). With this, DOT holders are encouraged in a program where they nominate validators which helps to build credibility in the network. Nominators can nominate up to 16 validators as trusted candidates. These validators helps to build new chains through a system called BABE (Blind Assignment for Blockchain Extension). They also play the role of validating parachain blocks and guaranteeing finality.

From this structuring, it is clear that users will get better security and integrity as compared to when they would rely on a a blockchain system that is solely dependent on trust.

Improved & Dependable Governance

The future of a blockchain is based on how it is run. With Polkadot, the system is run on a more sophisticated mechanism which guarantees a more guaranteeing future. Unlike the blockchains which is dependent on the owner, founder or the few people at the top, Polkadot network is more open and DOT holders have a word on both how the system runs and how it is updated. It employs some novel mechanisms to achieve this. These methodologies includes using amorphous state-transition based on the chain, WebAssembly neutral language as well as voting mechanisms such as adaptive referenda based on majority stake and approval voting.

In a simpler manner, the use of Polkadot is more like a democratic controlled system where DOT holders have a say, and this is what guarantees its future.

Staking On Polkadot Network

Now that we have a better understanding of what Polkadot network is all about, let us delve onto how staking on Polkadot works.

The staking process on Polkadot network is sophisticated and is done on a pro-rata basis. The system rewards stakers not based on the amount staked but rather gives all stakers an equal amount of reward to all validators. So, regardless of the stake, everyone gets an equal reward.

However, as much as the stake amount doesn’t affect the influence nor the rewards that a validator has, there is a probabilistic component that alters the power of validators in a particular era. The system, through a pro-rata basis, incents lower stake validator nominations to equate the validator stake sets.

How Actual Staking Works On Polkadot

Here is how staking on Polkadot works. The staking process involves both validators and nominators.

Nominating Validators

Nominators are given the chance to nominate from 1 to 16 validators that they trust in helping them get rewards on the system. Nominators play a crucial role when they nominate validators. This is because the integrity of the system relies on dependable validators that the nominator elects as a candidate. It goes without saying that it is very important to nominate good validators. If the nominator fails to do so, and ends up with a poor validator who is not always online to perform their duties, the validators will be slashed and consequently the nominator will also lose a DOT. Good validators that you pick will help you share the reward stake.

On the other end, Validators are required to be available and responsive around the clock. They do most of the heavy lifting in the “parachain” and are expected to perform different duties including creating new blocks, validate the state transition function and other duties concerning data availability. They are required to execute their duties fast and promptly as required. The validators need to avoid slashable behaviors in order to keep the system running smoothly and effectively as required.

Validator Nomination Process

the process of nominating and getting validators elected is a sophisticated one. A validator is required to meet certain requirements. After which they need to state their intention of becoming a validator. Their validation intention will then be made public where nominators are free to nominate them. Nominators will then submit a list of validators that they wish to support. There is no strict requirement for one to become a nominator and every DOT holder can participate. However, they have the role of keeping track and monitoring the validators that they vote for. After this a list of validators who have received most votes will be selected and become active to operate. It is worth noting that the validator slots are limited.

The whole idea of using DOT holders as nominators and to vote for validators is to increase security and come up with a dependable system that is user defined. It also ensures that there is a fair representation in matters to do with decision making. Currently, the total number of DOT required to be approved and become an active validator is 350.

Reward Distribution Process

Through the NPoS (Nominated Proof-of-Stake), a validator pool is created where validators have their backers. The reward system works in a stake based mechanism where for instance if a certain nominator has multiple validators that they back, their stake-power would be split among the nominators that they have. A validator will receive rewards based on the backers that they have which means that there is involvement of multiple pools created by the different backers that nominate them. The rule of the thumb is that a validator pools are rewarded the same as other pools and not proportionally based on the stake in that pool.

In a validator pool, there is a percentage that is set aside to be used to pay for the validator service fees while the remainder goes to the nominators and validators and this is usually based on the amount of stake. The total reward amount that one can get is 100 DOT tokens.

As much as validators and nominators in a validation pool receive the same amount of rewards, it is worth noting that lower-stake pools tend to pay higher per DOT to nominators as compared to those that have higher stake. In a nutshell, nominators gain more when they shift their focus and preferences to smaller staked validators who have a good reputation. The validators do not usually have their own stake and receive the same number of era points. Validators do not change any commission fees.

Below is a video guide on Polkadot for beginners.

Final Word

Polkadot is taking over, and with the history of how Bitcoin came to dominate the cryptocurrency arena, this is something that is not only worth watching but also diving in and being part of the growth. It demonstrates and promises a more stable, secure and more dependable way to transact. Millions of people are banking on it, and with the results of its growth already visible, there is no reason why you shouldn’t dive in.

The Polkadot network uses a system dubbed as “parachains”, and is very promising in terms of speed, efficiency and security.

The appetite for a better chain system in the cryptocurrency world has been increasing, and Polkadot is here with goodies.

Here at Substar, we are enthusiastic and always keen on Polkadot as a new game-changer. We would be pleased to have you on board to our network where we have been running a successful validator nodes for a while. Get in touch with us if you need anything, or would like to chat with someone to guide you through the mazes of the Crypto world.