The Kusama network, Polkadot's canary network, recently announced the approval of upgrade version v0.9.1 through its Council. This upgrade introduces critical code for parachains, auctions, and crowdloans, significantly reducing the minimum contribution amount and deposit fees. This development signals that the highly anticipated parachain slot auctions on Kusama are imminent.
Following the release of Polkadot v0.9.0 on May 6, which included client changes essential for parachain functionality, the stage is set for deploying parachains on Kusama. This version also integrated advanced cryptographic tools like Beefy and MMR (Merkle Mountain Range), paving the way for cross-chain bridges, including a potential bridge between Polkadot and Kusama.
Understanding the Role of Kusama
Kusama serves as Polkadot's experimental testing ground. It is an early-stage, unaudited network designed to trial new technologies in governance, staking, and sharding within a real economic environment. While experimental, Kusama operates with its own native token, KSM, and mirrors Polkadot's token distribution model.
The key difference lies in their operational tempo. Kusama is built for speed and rapid iteration, featuring faster governance parameters and lower barriers to entry. Polkadot, in contrast, prioritizes stability and reliability, resulting in a more measured pace for upgrades and governance decisions.
The official parachain slot auction process outlined by Polkadot involves seven core steps, primarily across three networks: the testnet Rococo, Kusama, and the main Polkadot network.
The Auction Process:
- Launch and stabilize Rococo v1 (testnet).
- Deploy system parachains on Kusama.
- Initiate slot auctions on Kusama.
- onboard winning parachains to Kusama.
- Upon completion of audits, deploy system parachains on Polkadot.
- Commence slot auctions on Polkadot.
- onboard winning parachains to Polkadot.
The successful launch of the Rococo V1 testnet in March was the first step. The upcoming auctions on Kusama represent the crucial next phase. A smooth and successful auction process on Kusama is widely seen as the precursor to a major growth phase for the entire Polkadot ecosystem. Once projects are successfully onboarded as parachains on Kusama and run stably, they will be well-positioned to connect to the Polkadot mainnet once its functionality is fully complete.
Key Details of the Kusama Slot Auction
The Auction Mechanism
The parachain slot auction employs a modified version of a candle auction. Unlike traditional candle auctions, it does not use a random number to determine the closing time. Instead, it has a known start time, and when the auction ends, the actual closing time is determined retroactively to be a random point in the past. This means a past block is randomly selected as the true auction cutoff after the bidding period concludes. This design encourages participants to bid their true valuation early, as later bids have a higher probability of failing.
Polkadot founder Gavin Wood has stated that the initial upper limit for parachains is roughly 100. However, it's important to note that not all slots will be allocated via auction; some are reserved for system-level chains and parachains launched through governance. Furthermore, fully supporting 100 parachains immediately is not feasible, and capacity will be gradually increased through subsequent network upgrades.
Crowdloans
Instead of funding a bid entirely themselves, projects can utilize a built-in crowdloan mechanism to crowdsource their slot lease. This allows users to lock their KSM tokens to support a project's bid. In return, projects typically incentivize participation by rewarding supporters with their native tokens.
The crowdloan process on Kusama involves several steps:
- A team creates a crowdloan campaign, setting a maximum funding goal and an end date.
- Contributors initiate a special transaction to lock their transferable KSM into the campaign's index.
- Contributions are accepted until the campaign ends or the auction is won, up to the maximum goal.
- If the campaign gathers enough KSM to win the auction, the total contributed amount remains locked for the entire lease duration.
- At the end of the lease period, the locked KSM is unlocked and returned to the contributors. If the campaign fails to win an auction, the KSM is unlocked and returned immediately after the campaign concludes.
It is crucial to understand that KSM locked in a crowdloan cannot be used for staking or other purposes during the lease period. The actual cost of running a parachain is therefore the opportunity cost of not being able to stake that KSM, not the face value of the bid itself.
If a project loses an auction, it can participate in subsequent ones. Once the parallel thread functionality is live, projects can also choose to connect to the Kusama network as a parallel thread. Slots are leased for a finite period, and projects must re-bid to retain their slot once the lease expires. To mitigate the risk of losing a subsequent auction, teams can bid on a new slot before their current lease ends.
With the recent deployment of the parachains module to Kusama, the technical foundation is complete. Governance voting to deploy common good parachains will be the next step, followed by the commencement of the first project parachain slot auctions. Industry observers anticipate these historic auctions could begin in late May.
Frequently Asked Questions
What is the difference between Kusama and Polkadot?
Kusama is Polkadot's faster-paced, experimental "canary network." It allows developers to test new technologies and economic models in a real-world environment with real value. Polkadot is the more stable, production-ready main network where security and reliability are paramount.
How can I participate in a parachain slot auction as an individual?
As an individual, you cannot directly bid in an auction. However, you can participate by contributing your KSM to a project's crowdloan campaign. This locks your tokens to help them win a slot, and in return, you typically receive rewards from the project.
What happens to my KSM if I contribute to a crowdloan?
Your KSM is locked for the duration of the parachain's lease period if the bid is successful. If the bid fails, your KSM is unlocked and returned to you shortly after the auction ends. During the lock-up period, you cannot transfer or stake these tokens. 👉 Explore more strategies for participating in decentralized auctions
Are parachain slots permanent?
No, parachain slots are leased for a finite period, typically up to 96 weeks on Kusama. Projects must renew their lease by participating in a new auction at the end of their current lease term.
What is a parallel thread?
Parallel threads are an alternative to full parachains. They offer a pay-as-you-go model for block space, which is more economical for projects that don't need continuous access to the relay chain. This is ideal for projects that cannot secure a full slot or have lower transaction volumes.
What is the opportunity cost of contributing to a crowdloan?
The primary opportunity cost is the staking rewards you would have earned on your KSM had it not been locked in the crowdloan. You should weigh the potential rewards from the project against the estimated staking rewards you are forgoing.