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Kusama Coin – It’s a goldmine to participate in Parachain auctions!

Parachain slot auctions are being prepared by Polkadot and Kusama to add new projects to their own ecosystems. It is important to read every word about new investments regarding these two exciting projects.

Known as the crypto bull market, it is still about 4 to 8 months until it starts to wind down. Because most cryptocurrencies have seen most of their games already, you might be wondering what the next 100x coin or token is. Some smart contract cryptocurrencies are still nascent but are likely to contain dozens of 100xs in the near future. The first parachain slot auction for Kusama is scheduled to take place any minute now.

It’s wild that parachain slot auctions can provide you with a chance to pick up that 100x coin or token without having to spend a dime. Do you know how this is possible? Let’s wait and see.

Kusama Update

I’ll give you a quick rundown of Kusama if you’re not familiar. Dr. Gavin Wood invented Kusama in order to analyze Polkadot in a real-world environment.

As an independent cryptocurrency, Kusama is often called Polkadot’s canary network since it exists independent from regular testnets.

As coal miners worked underground, canary birds were used to check for sufficient oxygen.

Almost exactly one year ago, Polkadot launched its mainnet with Kusama. Kusama and Polkadot are technical projects of the Web3 Foundation, a Swiss nonprofit founded in 1999 and maintained and developed by a company based in London, Parity Technologies Inc.

Polkadot and Kusama are practically identical in terms of technology. As a result, Kusama’s code isn’t audited and all processes other than transactional ones run up to four times faster.

As part of Kusama, a relay chain coordinates communication between attached parachains and is a primary blockchain.

The parachain can be thought of as additional blockchains that add security and interoperability to the main chain.

Kusama and Polkadot, both hosted on Parachain, will host smart contracts. Both Kusama and Polkadots support only 100 parachains, and slot auctions will determine which projects get a spot in each ecosystem.

Parachain Slot Auctions Recap

Although I discussed chain slot auctions in my last blog post on Polkadot. The process needs to be re-examined now, especially in light of recent developments concerning Kusama.

Parachains can be classified into three types based on their technology. A regular parachain, a parathread, or a parachain of the common good.

By bidding on parachain slots, regular parachains are acquired. Slot auctions conducted using parachains work similarly to regular auctions. DOT or KSM tokens in this case.

Unlike regular auctions, parachain slot auctions determine the winner through snapshots taken shortly before an end time. When the snapshot was taken, the project with the highest KSM or DOT wins. To prevent projects from increasing their bids shortly before the auction ends, this step has been taken.

In addition, a potential project can use a parachain loan offering to crowdfund KSM or DOT to participate in an auction with a parachain slot.

Initial coin offerings or ICOs are similar to Parachain loan offerings. The project will use your KSM or DOT in the parachain slot auction and in return, you will receive tokens.

You never see your KSM or DOT on these projects either. Smart contracts secure it to the relay chain, connecting the project’s parachain.

During the parachain lease period, you can keep the tokens you received from the project while the locked-up KSM and DOT are returned to you. Therefore, you didn’t make a single cent.

There’s a catch, and it’s only going to last a certain amount of time. Your KSM or DOT can be locked for as long as two years if you participate in a parachain loan offering. In the event that KSM DOT’s value suddenly exploded, this might cause problems.

You will not be able to profit from your tokens if they are locked on a parachain. You need to check whether or not the Kusama or Polkadot project you’re lending your crypto to is legit and is willing to give you some tokens in exchange for your help on the parachain loan auction.

The Parathread, Common Good Parachain, and Parachain Roadmap

After a parachain’s lease period expires, you might wonder what happens to it. This process demotes the thread to a parathread.

Parathread is like parachain slots that you pay for as you go. Every parathread block must be paid for using KSM or DOT.

In addition, parathread is an ideal choice for Kusama and Polkadot projects that don’t necessarily require 24/7 running, such as certain data repositories.

A parachain differs from a parathread in that multiple projects can share a parathread, making blocks as needed by taking turns. Those projects that serve a critical function for their ecosystems can secure parchain slots without needing a KSM or DOT.

Clearly, these parachains in the public and utility sectors fall into two categories.

Public utility chains include parachains for bridges to other cryptocurrencies like Ethereum and Bitcoin while system-level chains include parachains for governance and token minting processes.

Kusama and Polkadot both have an enormous number of upcoming projects that will fall into these two categories. It is the ones who are chosen by the community that secures a chain of the common good.

Parity developer Shawn Tabrizi noted during the recent Polkadot decoded event that 10-30 slots will be set aside for these common good parachains.

Recently, Kusama launched its first common good blockchain. It only creates blocks and does nothing else. Its only purpose is to test the functionality of Kusama’s Parachain.

A few days from now, the shell parachain will be transformed into the state mine parachain, which will enable Kusama to mint fungible tokens and, possibly, tokens that are not fungible.

Kusama will announce the start of its parachain slot auctions on its website and via Twitter once the state mine has been operating for a few days without major issues.

Having connected a few chains to Kusama’s network, Polkadot will now begin to auction its own slots. What you can expect and how to participate are listed below.

Parachain Slot Auction Timeline

The first Parroting Slot auction will be announced by Kusama a week before it starts. So that everyone with staked KSM can unstake in advance of the first parachain slot auction, this is the time frame.

As a matter of fact, the unstaking period for KSM is seven days. Here is an important but complicated topic that I want to discuss. Therefore, read carefully or you might end up in a mess.

There are para chain slots available to lease for years at a time, as I mentioned earlier. Parachain leases on Kusama last 48 weeks, which is shorter than a year.

The 48 weeks are divided into 8 slots of 6 weeks each. So, if you loan your KSM to a project that is interested in securing the full parachain lease period, you won’t receive it back for 8 slots, or 48 weeks. The next bear market is likely to start then.

Therefore, some projects looking to secure a parachain slot for Kusama might opt for a six-week minimum. Accordingly, KSM would only be unlocked for about one and a half months.

It’s important to remember that during the actual auction period on Kusama, which typically lasts two weeks, your KSM will also be locked.

Furthermore, it seems that if they lose the first auction, they could use your KSM in future auctions if they win the next one.

Basically, you have to keep an eye on how long your KSM could be locked without rewards – and your KSM is subject to this fate depending on which project you work on.

Every two weeks, Kusama will auction off its parachain slots one-by-one. Gavin Wood stated in a recent interview that they would probably perform five back-to-back parachain slot auctions at first, and would continue thereafter if Kusama stays stable.

Kusama projects you lent your KSM to are likely to win slots in these parachain auctions if all goes well. Afterward, their relay chain will attach to their parachain, and you should receive your tokens or rewards the same day.

Polkadot currently has over 440 projects under development, with many of them launching on Kusama first.

If you use the Polka Project Website’s slot tab, you can easily see which projects are going to launch on Kusama. The Kusama community has many projects that aren’t mentioned here.

You should then check out the terms and conditions of each Kusama project you think has potential once you’ve identified a few that you think have potential.

The first rule is to avoid picking up a project where a coin or token is already in circulation. Among these polka projects, many already have ERC20 tokens. Existing investors have a high probability of selling these tokens after the parachain loan offering has ended if the price spikes too much.

Nonetheless, it might be worthwhile if their crowdfunding campaign offers a price significantly lower than the token’s current market price.

It gets a bit tricky here since many projects looking to launch on Kusama will offer tokens based upon the amount of KSM you lend them. Assuming KSM’s current price is $1, then you should calculate the token price per $5.

A KSM is now worth $500 if 400 tokens are offered per KSM and each token is worth $1. Here, the issue is that this initial price may be much higher than the token Rather than being worthless. In some cases, this can be easily determined by checking tokenomics.

A KSM loan would be to a project that would have a 1 trillion token supply, and the maximum number of KSMs per project would be 1. Think about the real value of their project. Of course, this is an extreme example, but it has to do with how well the tokenomics of what you’re going for are designed.

More important is the period during which the tokens will be unlocked. From my experience, perishing campaigns on Kusama tend to give token holders only a small proportion of the total tokens allocated to them.

Having a restriction on selling tokens at the beginning of the project is logical because they do not want people to stupidly sell them when they receive them. In some cases, vesting schedules can take a long time. Be on the lookout for them.

Whether you are going to get tokens for the KSM you lend must remain in your mind at all times. To see if the top 3 Polkadot projects will launch on Kusama first, you can watch my read about the top 3 Polkadot projects.

Disclaimer:

I‘m not a financial advisor and this article is simply for educational purposes. It should not be used to make any decisions regarding your finances. If you need investment advice, please contact a qualified financial advisor.

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