​Detailed Explanation and Operation Manual of Polkadot Parachain Card Slot Auction

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Slot assignment

Polkadot expects to allocate 100 slots for parachains to intervene, but it will not have 100 slots at once, but will gradually expand the network, introducing new slots and new parachains over time.

There are about 10-30 slots for "parachains for public good"

These are the chains used by the entire Polkadot ecosystem. For example, a bridge connected to Bitcoin or Ethereum. There are also some practical chains, such as: Polkadot Statemint, statemin on kusama, which will serve as a multi-asset parallel chain for the entire ecosystem. There are also some system-level parachains, which will strip some logic from the relay chain, such as balance, staking, governance and other logic, strip these things from the relay chain, and transfer them to the parachain to release the relay chain resources on the network, so that the relay chain can concentrate all its energy on serving the parachain ecosystem.

So how does the new rental slot open up? Then the auction was introduced, how to auction it?

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Crowdloan (crowd loan)

• In Polkadot, there are two ways of parachain auction:

• Crowd lending: Use crowd funding to help bid for slots, which means you don't need to be super rich to be a parachain, you just need to have a great idea. If you have a great idea, a solid development team, and some hard work, then Polkadot will give you everything you need to put it into production.

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• Crowdloan process

• Users can lend DOTs or other Polkadot ecological assets to support the parachain team, but these assets will not be obtained by the parachain team, it is just a pledge

• After two years (that is, after the slot lease period of the parachain expires), all the assets pledged will be returned to the account, and at the same time, the return assets allocated by the parachain will be obtained

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Crowdloan method

• When users participate in Polkadot parachain auctions, there are three ways to crowdfund:

• Participate through the team's website

• through wallet

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Crowd lending starts before the auction, and the blue one begins with a parachain slot auction. If the parachain wins the slot during this period, this chain can start producing blocks, and then a two-year lease

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The following are the three parallel chains that received DOTs for crowd lending

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slot auction

First understand the lease period of the Polkadot slot:

On Polkadot, the duration of each slot is two years, divided into 8 lease periods, each lease period is 3 months. That means, in each auction, there can be up to 8 auction winners, and each winner gets a different period of time during the two years. Or it may be that a parachain paid a very high price and rented it for a full two years. In general, each auction will provide two years of access to Polkadot, and you can bid.

Leases are shorter on Kusama. Each slot is 48 weeks long, which is almost 1 year, and each lease is only 6 weeks long. Because Kusama is Polkadot's first network, the rhythm will be faster than Polkadot's.

Secondly, let’s understand the auction method: Candle Auction

English-style auction: Everyone can bid higher until finally no one wants to bid again.

Candle auction: In the English auction process, some randomness is added (it is conceivable to add a candle, the candle will be extinguished at any time, and the auction will stop when it is extinguished), which means that no one can know exactly when the auction will end, so people Every bid is treated as if it were the last. Last-minute sniping is not advocated. Because if everyone suddenly bids a very high price at the last minute, it will actually destroy the entire auction economics.

How to end the auction? divided into two parts

In the first part, there is an Opening Period (Opening Period), which is a period of time after the auction has just started, allowing the teams to adjust their status, establish a preliminary strategy, make an initial bid, and see what competitors are there, understandable for an observation period.

The second part, quickly transitions to the random ending period (Ending Period), during which the auction may end at any time and determine the winner of the auction.

Traverse the entire random end period, take a snapshot for each block of the random end period, and find out the current highest crowd loan owner of each block. Then these snapshots are kept until the end, and after the entire random end period is over, a VRF is used to trace back and select which snapshot is the actual end time of the auction, so as to determine who is the real winner.

Although there may be higher bids than the selected snapshot at the end of the final auction period in the auction, the randomly selected snapshot will determine who is the real winner.

The following describes the general auction process under actual conditions:

The auction of the entire slot will last for 7 days. The first two days are the warm-up stage, and the result is not very important. From the third day, it enters the white-hot stage and enters the end of the candle auction until the seventh day. Finish.

After the introduction on the 7th day, the system will randomly select a time on the 3rd and 7th days to end the auction. The person who crowdfunds more at this random time will win the slot auction!

For example, parachainA won the slot, and then it will be connected to the Polkadot relay chain and started. Note: The assets for crowdlending for parachainA will not flow into the project team

The above is a general understanding of the entire auction process. In fact, the actual auction process is more complicated. Let me introduce it in detail through an example:

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Three cobblers, the best Zhuge Liang

In fact, the result of a slot auction is not only one winner. The time of a slot is 2 years, and it is divided into 8 lease periods (one lease period is 3 months), so the parachain auction is only the lease period , of course, a capable chain can also be leased for two years (meaning that it can win in all cycles of auctions), and there can be multiple Auctions within a lease period.

In the example above:

Alice is bidding on all 8 leases and is willing to lock up 200 DOTs for each lease.

Bob only wants to rent the first and second lease periods, bidding 100 DOTs for each lease period.

When evaluating each person's bid, in fact, regardless of the unit price they bid for each lease period, the bids for all lease periods are accumulated.

Alice bids for the full 8 lease periods, bidding 200 DOT for each lease period, so these 200 DOT will be locked up for the entire 8 lease periods. So her locked value is 1600 DOT.

Bob only rents for two lease periods, each bidding 100 DOT, so his locked value is 200 DOT.

But it is necessary to make the lease period as saturated as possible, so from a horizontal perspective, it will be found that Alice has filled up 8 lease periods by herself, but Bob and Charlie need to "combine" to fill up the full 8. lease term. So Bob and Charlie will be looked at together in the final evaluation.

Ultimately, in this auction, Bob and Charlie will be the final winners. But in fact, it will be found that the bids of these two people are not the highest, but the sum of the bids of the two of them, the overall locked value is the highest, so that they won the auction.

Therefore, Polkadot's slot auction is to see which combination maximizes the lock-in DOTs as a whole, rather than who is the most powerful. It is possible that the combined bid of some LPs will eventually win.

Take a look at crowd lending (open the kusama network through polkadot-js, including Crowdloan):

You can see that at the bottom are projects that have completed crowdfunding. They have already raised the required assets and cannot carry out crowdfunding anymore.

It can be seen that there are two project parachains, which are carrying out crowd lending, and their bidding lease periods (LP) are different, and the ending time (ending) is also different. At this time, if you are interested, you can loan your own KSM to this chain

It should be noted that the end time is very important and worthy of attention. When you participate in a crowd lending activity, it means that your funds will be locked in the crowd lending process. If the crowdlending you participate in wins the auction, your funds will be locked until the end of the parachain lease. If you do not win the auction, your funds will be locked until the end of this crowdlending campaign.

During the opening period, it is simple, whoever bids the highest for each specific lease period is the winner. If someone bids more, or a crowdlender raises more money, you'll see that the list of winners keeps changing, with old winners names disappearing and new ones showing up.

Finally, when the auction is over and the random number seed for selecting the winner is generated, a snapshot can be selected, which determines the winner, and the winner will be assigned a lease.

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auction lease

Regarding the choice of lease term, here are some examples:

For example, the current lease period of Kusama is 21. During the current lease period (before entering lease22), there will be 5 auctions, that is, 5 slots will be opened. Then the lease period of these 5 slots is 22~29

When applying for a crowd loan, you need to pay attention to two parameters: ending block and hardcap (capital hard cap)

Special attention should be paid to the fact that our crowdfunding time needs to be within the expected time (that is, it is expected that slots can be obtained through several auctions). This ending block cannot be very short. If it is very short, we have not obtained slots, and all previous efforts will be wasted; If the ending block is set for too long and our hard cap is too low, it is very likely that we will not be able to get a slot within this time (because the hard cap is lower than others)

• The end time of crowd lending is as long as one of the two conditions is met:

• Time to reach Ending block

Note: Once the hard cap and ending block are set, they cannot be changed midway

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Auction failed

If the auction fails, for example, ParachainB failed in the auction above, you can use the assets that have been crowd-loaned to continue the slot auction

Similarly, if the crowd loan time is relatively short, for example, if you only set an auction time, but the auction does not win, then the funds will still be returned to the user, and the next crowd loan needs to be carried out, and all previous efforts will be wasted! !

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lease expires

If the parachain that successfully bids reaches the two-year lease period, and all the DOTs of crowdlending are returned to users, how should the project continue?

• For project parties, there are three options:

• Crowdfunding again

• Downgrading to a parallel thread, that is, paying on demand, means that Polkadot relay chain data cannot be accessed all the time. (The difference between parachain and parathread)

Replenish

Replenish

1. About crowd lending:

When users lend DOTs to participate in the auction, they use DOTs to bid, but they do not actually spend these DOTs, but only lock these DOTs during the period of time when the slot is leased. It means that when the lease period of the slot ends, no matter whether your parachain is about to be withdrawn or you want to continue bidding later, you can get back all the tokens you locked. When tokens are locked, you cannot perform operations such as staking, voting or transfer. That is to say, the only cost of becoming a parachain is actually just an opportunity cost. So when you bid for parachains, you are saying that the value you can bring to yourself and the network is higher than the value you can use for staking and other operations.

2. For users, points that need to be paid attention to in crowdlending:

(1) Pay attention to the auction in time to untie the KSM/DOT in staking in time, so as to participate in crowd lending

(2) Investigate and study the parachain team well. Since crowdlending is an open and permissionless process, be aware that there may be groups with malicious intentions and it may not be worth locking up KSM for it.

(3) Allocate funds rationally: Don’t lock up all the funds in the first crowdlending. Many teams will be crowdlending, and may start at different times. If all the funds are locked in the first crowd loan, there will be no funds to participate in the next crowd loan.

3. Arrangements for Action (2022)

Take kusama as an example, you can see all auction information on its official website https://kusama.network/auctions/

• 4. Preparations for slot auction

• Buy a certain amount of KSM (70+ is usually required)

• The genesis and wasm derived from the parachain

• Apply for a paraId under polkadot.js->parachains->parathreads, you need to reserve 40KSM

• Continue to apply for parathread, it is estimated that 20 KSM will be required according to the size of wasm and genesis

• Initiate crowdloan or auction under the same menu, note that the marketcap is filled in according to the actual affordability and the expected bidding price, once submitted, it cannot be changed, and the ending block should be the last (fifth) auction of the entire lease period, otherwise You cannot participate in subsequent auctions

• After the crowdfunding auction fails, you need to submit a refund to return the funds to the contributor