Polkadot Crowdloans & Parachain Slot Auctions
By: Robin Whitney
Tags: Crowdloan, Polkadot, Blockchain, Acala, Crypto

Polkadot’s Parachain Slot Auctions are fast approaching, which means the community can soon participate in the Acala Crowdloan, an exclusive event that invites supporters to contribute DOT and earn a share of the Acala network.

But how does it work? How exactly do you participate? Read on for an overview and work through our comprehensive checklist to help you prepare for the Acala Crowdloan.

Why Launch a Blockchain On Polkadot?

Acala’s VP of Growth Dan Reecer presents an introduction to Polkadot.

Prior to the creation of Polkadot, networks like Bitcoin and Ethereum have operated as siloed islands, disconnected from other blockchain networks and unable to communicate information or value. Polkadot has introduced a multi-chain environment that allows many different blockchains to join an interconnected world of networks, each customized for a specific use case but able to work together seamlessly.

With its built-in network security, on-chain governance, customizable nature, and the ability to upgrade continuously, many consider Polkadot to be the most significant launch since Ethereum and Bitcoin. That’s not surprising since Polkadot’s co-founder Gavin Wood was previously the co-founder and CTO of Ethereum, an experience that informed his vision for Web3 and enabled Polkadot to improve upon the way we launch and scale blockchains.

Today, Polkadot is a Top Ten blockchain network by Market Cap, and networks like Acala will soon launch a Crowdloan event to gather crypto — namely, Polkadot (DOT) tokens — from the community to strengthen its bid to win the first Polkadot parachain slot auction.

What Are Parachain Slot Auctions and Crowdloans

Acala’s VP of Growth Dan Reecer explains how Parachain Slot Auctions work.

The parachain slot auction is a way for blockchain startups to compete by bidding in an auction for the privilege of launching and operating on Polkadot while also benefiting from its security and design. By connecting to Polkadot, its future-proof technology, and its engaged community of users with billions in value at play (i.e. liquidity), blockchain networks like Acala can access key requirements for a successful launch while focusing on what they do best, whether that’s gaming, privacy, or even social media. In Acala’s case, it’s decentralized finance (DeFi), the most proven and well-developed sector of crypto that’s now worth over $100 billion.

Acala is custom-built for DeFi, and optimized for developers and users to build and access new financial applications for decentralized trading, loans, derivatives, and more. Just as Acala will be built on Polkadot to access its security, well-known financial apps and fintech companies like Current.com are already building on Acala to access its platform and deliver DeFi yields to its 3 million U.S. customers.

Because of this, you might say, Acala is like the App Store for finance.

But in order to launch, Acala has to first win the Polkadot parachain slot auction. Here’s where the Acala Crowdloan comes in.

How do Crowdloans Work?

While some startups might turn to private venture capital rounds to fund their launch and initial years of operation, Acala has instead chosen to incorporate the Crowdloan model to ensure a fair and ethical distribution of its ownership. By participating in the Crowdloan, supporters will receive Acala tokens (ACA), representing their share of the network. In this way, the Acala Crowdloan not only invites the community to rally together and strengthen the network’s bid in the auction, it also ensures that those supporters get early access to Acala’s DeFi applications while enjoying a piece of the new financial system as co-owners.

Anyone in the world can contribute to Acala’s crowdloan by loaning Polkadot (DOT), a widely available cryptocurrency. When the Crowdloan event begins, participants simply lock their DOT in the Crowdloan vault. This is a “‘smart contract,” a virtual vault stored on the blockchain that is instructed by computer code to secure the loaned DOT for two years. It’s never touched by the Acala team. In return for their loans, contributors will receive Acala’s ACA token, giving them a share of the network. The amount of ACA is tied to the amount of DOT contributed (for example: 1 ACA for every 1 DOT contributed) with these details to be revealed closer to the Crowdloan event. Once the community has contributed DOT in support of Acala, Acala can bid with these DOT to win a slot on the network in the auction. After Acala wins a slot, the network will launch, and the newest DeFi platform will come to life.

Then after two years, the smart contract opens the vault and automatically returns the DOT to its rightful owner. All participants receive their original DOT and also retain the ACA tokens that they were gifted for their contributions.

Get Ready With Our Acala Crowdloan Checklist

Whether you’re an old pro or brand new to Crowdloan events, you’ll want to be sure you’re eligible to participate with a compatible crypto wallet and DOT tokens on hand. Work through the checklist below to ensure that you’re Crowdloan Ready.

❏ Join the Newsletter

Want to be the first to know when the Crowdloan begins? Join the Acala newsletter: ​​https://acala.network/acala/join-acala

❏ Complete the Acala Quests

To get prepared and help you with several of the checklist items below, complete your Acala Quests. You’ll earn an additional 2% bonus and an exclusive NFT. https://acala.network/acala/quests

❏ Get the Polkadot.js Browser Extension

In order to participate in the Acala Crowdloan, you’ll first need a compatible wallet with a Polkadot Account and corresponding DOT Address. The Acala Crowdloan is supported by several types of wallets, but we recommend the Polkadot.js browser extension to ensure a user-friendly experience when the Acala Crowdloan event begins.

A wallet is not only a place to hold your crypto, like DOT tokens and ACA, but it’s a tool that allows you to connect and interact with Web3 applications. You’ll need this wallet to contribute to the Crowdloan Vault and to receive Acala’s ACA token.

Download Polkadot.js Browser Extension for Chrome or Firefox here and follow the video guide in the next step to install.

❏ Create a Polkadot.js Account

Follow the video below to create a Polkadot Address with the Polkadot.js browser extension.

Before deciding which Polkadot Address to use in the Acala Crowdloan, be sure you’ll always have access to this address by keeping your private key safe. This address will not only be the one you use to transfer your DOT to the Acala Crowdloan Vault, but it will also be the address by which you receive your ACA rewards after Acala’s launch, as well as the address that you use to redeem your original DOT after two years.

❏ Make sure you have Polkadot (DOT)

Because the Acala Crowdloan requires supporters to lock DOT, you should have DOT tokens ready in your wallet before the event begins.

DOT is the native token of Polkadot, and is available for purchase through several exchanges including: Binance, Coinbase, and Kraken. There are also services like Moonpay, which allow for users to purchase DOT with their debit card and have the DOT arrive directly to a preferred Polkadot Wallet Address.

If you already have DOT, you may already be participating in DOT staking, which often requires your DOT to be locked and bonded. If instead you aim to contribute your DOT to the Acala Crowdloan, and become eligible to receive ACA rewards, you’ll need to unbond your DOT and ensure it’s unlocked and available in your Polkadot.js Account before the Crowdloan begins. It’s recommended that you wait to unbond until after the Polkadot Parachain Auctions have been announced.

Checklist Review

❏ I joined the Acala newsletter.

❏ I installed the Polkadot.js browser extension.

❏ I have a Polkadot.js account.

❏ I know the DOT address that I want to use for the Crowdloan (starts with “1”).

❏ I have my private key phrase safely stored and won’t share it with anyone.

❏ I have DOT in my Polkadot.js account.

Want a Different Way to Participate?

Join the Acala team for a Community Call on the Acala, Polkadot, and Crowdloans. During the call we’ll go over some alternative options to participate that might be especially interesting to DeFi power uses and Polkadot experts.

We’ll also detail how to earn more rewards, exactly how to participate, and answer any community questions live. Save your spot for the event here.

About Acala

Acala is an all-in-one decentralized finance network offering a blockchain platform secured by Polkadot, as well as a suite of cross-chain financial applications that let users trade, issue self-serviced loans, become liquidity providers, access staking derivatives, and earn high-interest APY on their digital assets. The network is scalable, Ethereum-compatible, and optimized for DeFi.

Acala was founded in Oct 2019, and today has received five Web3 Foundation grants, has backing from Coinbase Ventures, Pantera Capital, Polychain Capital, and other top firms, and has a distributed team in New Zealand, China, Europe, Brazil, and the United States.

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