The Polkadot parachain auction for Double Eleven has started. What are the ways for users to participate?

Original Title: “The Launch of Polkadot's Mainnet Parachain Auction is Imminent, How Can Ordinary People Participate?”
Written by: Azuma

At that time, the explosion of the application layer was just beginning to emerge on Ethereum and had not yet spread to various emerging ecosystems. With the mainnet launch and continuous market cap breakthroughs, Polkadot's popularity is unparalleled, and the popularity and appeal of related offline activities are also in a league of their own.

A year later, with EVM compatibility and massive economic incentives, emerging public chain ecosystems have achieved significant scale explosions, and market enthusiasm continues to rise. The popularity of offline activities for Avalanche and NEAR this year is the most intuitive proof. In contrast, Polkadot seems to have been following its own development rhythm, without adjusting its pace due to the dramatic changes in the external competitive environment.

Over the past year, Polkadot has gone through the simulated auctions of the Rococo V1 testnet and multiple rounds of practical auctions on the Kusama network. After a long period of experimentation and evaluation, the mainnet's slot auctions have finally been scheduled—following the smooth passage of governance proposal #118, Polkadot's mainnet is set to launch its first round of parachain auctions on November 11. Stimulated by this positive news, DOT's recent performance in the secondary market has been quite strong, breaking the $50 mark and rewriting its historical high.

As the auction approaches, different roles within the ecosystem are already gearing up to showcase their strengths. On one hand, major project parties that have been waiting for a long time are gradually announcing their crowdloan incentive plans in hopes of securing the top spot in the upcoming auction; on the other hand, many users who participated in the Kusama auctions earlier have made considerable profits, attracting more users to turn their attention to the upcoming mainnet auction in hopes of sharing the pie.

However, due to the differences in Polkadot's underlying architecture and infrastructure compared to other public chains, the parachain slot auction and related crowdloan mechanisms are also a first in the entire blockchain world. Many investors who have never interacted with Polkadot often find themselves confused about how to proceed after purchasing DOT tokens, especially when faced with various auction derivative plans.

To address this issue and facilitate smoother participation in Polkadot's mainnet auction crowdloans for more users, Odaily Planet Daily has compiled the main channels for participating in crowdloans, hoping to be of assistance. It should be made clear that this article does not involve any investment advice and will not recommend users to vote for any specific project. How to choose should be researched by users themselves, weighing factors such as the comprehensive strength, past performance, incentive intensity, and unlocking rules of each project.

The Most Common Method: Official Channels

The official channel is clearly the most common way to participate in the auction crowdloan. The basic requirement for using this channel is that users must use the Polkadot.js wallet and need to have at least 5 freely available DOT in their wallet.

The mainnet's auction has not yet officially started, but if all goes well, the general crowdloan operation process will remain consistent with that of the Kusama network. As for the detailed operation method, the leading Chinese Polkadot community, Polkaworld, previously recorded a tutorial on the original version, which interested friends can watch directly to understand. Once the mainnet auction starts, simply replace the Kusama network with the mainnet.

Although the official channel provides the most common participation path, for most users planning to participate in crowdloans, this channel is still somewhat cumbersome. Therefore, if there are other options available, we do not highly recommend users to operate directly on-chain themselves.

The Most Convenient Method: Third-Party Services

At the current stage, the parachain slot auction is undoubtedly the largest value flow scenario within the Polkadot ecosystem aside from staking. Therefore, for some third-party institutions that operate based on traffic, this is clearly a cake that cannot be missed.

The third-party service institutions mentioned can be roughly divided into two types: one is third-party wallets, such as Maiar Wallet, Polkawallet, Nova, etc., and the other is centralized exchanges, such as Binance, OKEx, Kraken, etc.

First, regarding third-party wallets, several wallets launched auction-related tools during the previous Kusama network auctions, and it is expected that similar services will be available for the upcoming Polkadot mainnet auction. Taking the auction tool from Maiar Wallet (for the Kusama network) as an example, this tool integrates real-time bidding information from various projects, allowing users to simply select their target investment amount.

As for centralized exchanges, everyone is more familiar with them. Exchanges like Kraken and Kucoin have supported crowdloans for the Kusama network auctions, and now, with the mainnet auction approaching, more mainstream exchanges are joining this camp.

On November 3, OKEx and Binance successively launched pre-heating activities for the Polkadot mainnet auction. OKEx has supported users in early bird voting for three projects: Acala, Astar, and Moonbeam, while Binance announced that on November 4 at 21:00, it will simultaneously open support channels for nine projects: Moonbeam, Clover, Astar, Acala, Manta, Litentry, Bifrost, Efinity, and Parallel, and plans to provide $30 million in equivalent rewards for pre-heating participants. There is also an interesting point about Binance's service plan, which we will elaborate on in the next section.

Although third-party services can provide users with the simplest and most convenient way to participate in crowdloans, it is important to note that whether users can successfully retrieve their expected returns using purely centralized service channels ultimately depends on the operational status of the third party. Additionally, the universality of third-party services may be less than that of official channels and may not cover all bidding projects. For example, as mentioned earlier, both OKEx and Binance only support certain bidding projects, which means that when users want to support other niche but equally promising projects, they may not be able to use this option.

The Most Flexible Method: Liquidity Derivative Solutions

The parachain slot auction and crowdloan mechanism provide DOT holders with an opportunity to leverage their tokens for greater returns. However, for some token holders, there is a significant concern regarding this mechanism: since participating in crowdloans requires completely locking up DOT for the entire slot lease period, this means that users' invested DOT liquidity will be locked for 1-2 years, which may result in certain opportunity cost losses. To address this issue, some projects within the ecosystem have successively launched liquidity derivative solutions.

In terms of service scope, the currently more mainstream liquidity derivative solutions can be divided into dedicated derivative solutions and general derivative solutions.

Dedicated derivative solutions refer to liquidity derivative solutions launched by a specific project that only serve their own project, with Acala's lcDOT being a representative solution. Through this solution, when users invest DOT into Acala, they will receive an equivalent amount of freely transferable lcDOT, which represents a certificate of rights for the DOT that will be unlocked in two years. The advantage of this solution is that Acala will utilize its DeFi product matrix to create use cases for lcDOT, meaning that lcDOT holders can pledge their lcDOT for lending or swap it in Acala's decentralized AMM-DEX, increasing opportunities to capture additional returns.

General derivative solutions refer to liquidity derivative solutions launched by a project that can also serve other projects, with representative solutions including Bifrost's SALP, Parallel's Auction Loan, and Equilibrium's xDOT. Here, we will focus on the first two solutions.

First, regarding Bifrost's SALP, which stands for "Slot Auction Liquidity Protocol." The biggest difference between SALP and other solutions is that when users stake their DOT through the SALP protocol, they can obtain two derivatives: vsDOT and vsBond. vsDOT is a fully fungible token representing the certificate for the DOT staked in the parachain crowdloan, which can be traded at any time or redeemed 1:1 with vsBond after the parachain lease period ends; vsBond, on the other hand, is not fully fungible, as its attributes represent the crowdloan rewards obtained by users supporting different projects in the auction. Therefore, the vsBond obtained for supporting different projects will also differ, for example, supporting Acala and Moonbeam will generate different vsBond-Acala and vsBond-Moonbeam (this is just an example; projects may not necessarily adopt the SALP solution).

In the second round of slot auctions on the Kusama network, SALP provided liquidity support for four projects: Basilisk, Altair, Parallel, and Kintsugi, and it is expected to further support these projects and many others in the mainnet auction. (On November 3, Bifrost announced a partnership with the decentralized identity aggregator Litentry.)

As for Parallel's Auction Loan, in addition to releasing the liquidity of staked assets (in the Auction Loan solution, the derivative token is called cDOT), Parallel will provide a certain amount of PARA token rewards for each DOT invested through this solution, which makes the overall yield of this solution higher than that of other derivative solutions under the same conditions. This is also the biggest highlight of this solution.

Currently, Parallel has announced that it will provide liquidity derivative services for projects like Astar and Litentry, offering up to 36% and 10% additional rewards, respectively, for users voting for these two projects through Auction Loan.

Earlier, we hinted at Binance's third-party services; what we wanted to mention is that Binance will also adopt similar liquidity solutions, specifically issuing derivative tokens BDOT to users who invest DOT through its channels, which can be redeemed 1:1 for DOT after the lease period ends.

A Gathering of Heroes, A Great Battle is About to Begin

The above is a summary of some main channels for participating in the parachain auction compiled by Odaily Planet Daily. Overall, different solutions have their own advantages and disadvantages, and how to choose should be compared and judged by users themselves.

Having gone through multiple rounds of practical exercises on the Kusama network, most users have likely summarized certain experience methods on how to maximize their returns, just waiting to put them into practice in the mainnet auction. For project parties, the mainnet auction is clearly the most important battle, so they must devote greater energy to preparation to seize the limited early slots.