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?
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.
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?