After a victorious $450 million TLV sale in the first round in June 2021, the Kusama Council plans to release five more parachain auctions.
Kusama is a platform that serves as a test environment, or “canary network”. This allows developers to experiment with and evaluate the effectiveness of their blockchain code and apps. This is before they release them on the Polkadot network.
Due to Kusama’s trial-and-error nature, developers may benefit from a less severe governance system. Also from cheaper staking needs than they might on Polkadot.
Auctions for this Week
The Kusama Council is planning five more auctions in the following weeks. This is following the victory of its first parachain auctions in June of this year. Kusama’s parachain auctions use a unique historical technique of auction analysis known as the candle method. This is where users bid within a fixed assigned bidding time, staking their Kusama (KSM) tokens for their preferred project. The project with the highest total funding will win the auction.
This hourglass strategy is well-known to current retail consumers. This is because of its use in the auction process on the e-commerce platform eBay. This strategy, however, is not without drawbacks. Most notably, factors such as front-running, which fosters insider info. Also the last bidding wars skew the dataset because every bidder knows when the timer expires.
The justification for candle auctions is twofold with the use of blockchain technology. This is addressed in the study at the Web3 Foundation this year. This is the “front-running and the inclusion of smart contracts between bidders.”
Although bidding participants are aware of the start and finish times of the blocks, they are unaware of the time of the critical termination block with the five-day finishing duration. It means that neither participant can foresee when the bidding will end. This ensures that each project has an equal chance of acquiring value.
On September 1, the first parachain place bidding of this new round, and the sixth overall, will commence. The initial bidding process will be two days long, preceded by a five-day closing period. Five auctions will occur in more than a five-week timeframe, with a planned pause to assess the network’s performance.
The auctions will occur at noon GMT on September 1, 8, 15, 22, and 29. Around June 15 and July 20, 18 independent teams enrolled to engage in the crowd loan campaign. They obtainedfunds from around 20,000 individual accounts that contributed a total of over 1.3 million KSM (about $450 million).
About Crowdloaning
Crowdloaning is a system that distributes tokens to users in exchange for their staked assets to encourage decentralization among parachains. The method is similar to Ethereum liquidity mining. Wherein, participants can obtain token grants from their preferred decentralized finance initiative.
If a crowd loan campaign is successful, the parachain will add to the Relay Chain. And then they will store the collective tokens in that parachain’s account for the life of its operation. The bulk of the slots in the first five auctions is overly paid. This indicates a favorable trend toward decentralization and the distribution of particular project value.
