Parachain auction, it sounds like we need to pay money and try to buy something from someone. However, this is not quite true. Let's figure out what it is.
To begin with, the parachain auction is, in my opinion, the safest investment in the crypto world. Those who want to start investing in cryptocurrencies and plan to do it for a long time (1 year +) - this is an ideal option for a beginner.
What is a parachain auction?
To begin with, let's clarify that parachain auctions work in the Polkadot (DOT) and Kusama (KSM) ecosystems.
Polkadot и Kusama these are separate independent networks, although they share their code in many parts, they have different priorities.
In this example, we will take a closer look at parachain auctions on Polkadot.
Polkadot developers were able to realize the ability to create networks of other projects using Polkadot as the basis - this is how parachains appeared. This is a unique product of its kind that allows developers to create their own blockchain, with their own personal token and the ability to optimize it for their requirements, needs and tasks. Parachains also have all the advantages of Polkadot itself and the ability to interact with all other projects within the ecosystem.
The number of auctions is limited, there are about 100 of them. Slots are distributed just with the help of auctions. Those who hold DOT can vote for the project they like in order for this project to be connected to the chain in the future. To win a slot, the project needs collateral, which is exactly what happens with the help of DOT tokens. This is a kind of crowdloin in the crypto world and an alternative to ICO.
How does the auction work?
In Polkadot, the auction slot is rented for up to 96 weeks (8 periods of 12 weeks). The Kusama network is smaller, where rentals are up to 48 weeks (8 periods of 6 weeks).
Once you have selected a project, you put your DOTs on hold for up to 96 weeks. In return, the project to which you sent your DOT will distribute to you the tokens of their project or provide other rewards. The cool thing about this system is that if the project wins a slot and 96 weeks pass, all the DOTs you donated to the project will be returned to you 100% back. And if the project does not win the slot, your DOTs are returned to you, almost instantly. It turns out that you do not lose your investments in parachains at all, but only get new project tokens if the project wins the auction.
The rewards can be a huge profit. Below are the rewards for the Polkadot network.
As you can see, with All-time-High, you could earn solid money on ASTAR and Moonbeam.
For example, I will show the largest ROI (Return on Investment) parachain auction. It was held in the Kusama network last year.
As you can see, 1 locked KSM ($475) at the time of the auction last year, the reward in Moonriver project tokens (MOVR) was $6920.
I personally participated in ASTAR and Moonbeam and for the next 18 months I will receive ASTAR and Moonbeam a little bit every week. I have said it more than once and I will repeat it again, I see crypto as a super-long-term, even if all the projects in which I invested turn out to be another LUNA, I won’t worry, I have my own risk management. Therefore, always, in any project, start from your risk management and DYOR (Do your own research).
On Kraken, rewards are issued automatically, you don’t need to click anything extra, as soon as a certain period of time passes, the project tokens will automatically appear in your wallet. Usually in the first hours, the price of these tokens is the highest, in this regard, most people sell the first airdrop instantly.
Each project decides for itself in what quantity and in what time period to issue its tokens.
For example, after winning the auction, the project is obliged to give you 100 tokens within 96 weeks. 12 weeks after the victory, they will send you 30% of your rewards and the remaining 70% will be distributed over the remaining 84 weeks. ASTAR issued the first 30% after 12 weeks and distributed the remaining 70% over 84 weeks, and is issuing a little bit of its tokens weekly to evenly issue its tokens for a little less than two years.
How to participate in the auction?
Did we tell you how much we love Kraken as a crypto exchange? We also have an analysis of crypto exchanges, which you can read at link.
Step by step instructions on how to participate in a parachain auction using Kraken.
Login to your Kraken account and click on the Earn tab in the upper left corner.
In the upper left corner there are two tabs Staking and Parachains. Open Parachains.
Next we see a tab of all active/completed parachains
In the right corner, put a tick on Open and watch active auctions.
At the time of writing, there were no open auctions :(. The bear market has a solid effect on this.
Below you can see a visual graph of how auctions work on Kraken. Absolutely all the outcomes that can happen to the project, timeframes, etc. are indicated here.
Hack and predictor Aviator
Parachain auctions are a fairly new and incredibly interesting tool for support and personal income, because what project can bring a few X, Moonriver is an example of this. On top of that, it is a very safe, as much as possible in the world of cryptocurrencies, way to invest for the long term.
Below you can find a list of our articles related to the crypto world.
- Brief comparison of crypto exchanges
- About Cryptocurrency and Blockchain
- How should you invest in cryptocurrency?
- What is crypto coin staking?
- Metaverse - why is there so much hype behind it and in general, what is it?
- Is it possible to make money on a mining farm?
- NFT - a new source of income for artists?
- An alternative way to earn money through the Keplr wallet.
- Compiling a crypto portfolio for 2022