Since the peaq network and its canary network krest are set up as a parachains in order to benefit from the Polkadot ecosystem that are outlined in the previous section, and will connect to the Polkadot and Kusama relaychains in due course, we feel obligated to inform the community about parachain auctions and crowdloans in which the community can participate.
To understand parachain auctions, we first need to understand parachains. In summary parachains are heterogeneous blockchains (specific purpose layer1s) connected to Kusama. They are interoperable with the Polkadot network and other parachains. A parachain runs parallel to the Polkadot relaychain. The same way parachains exist on Polkadot, they also exist on Polkadot’s canary network, Kusama. There are 100 Slots for parachains on Kusama and 100 on Polkadot. In order to secure one of these slots on the respective relaychain, projects compete against each other in auctions. These "Parachain Auctions" run in summary as follows:
- Bidding participants bid on a fixed number of slots available for parachains using Polkadot’s native token, DOT. Kusama’s token is KSM.
- Bonding: The winning bidders must then bond, or lock up, a large amount of DOT/KSM as collateral for their parachain. This can happen in the following two ways:
- Crowdloan: Public can contribute with DOT/KSM for project tokens as rewards in exchange.
- Self-Funding: DOT/KSM are contributed from the projects own wallet address.
- Allocation: The winning parachain is then allocated a specific amount of resources on the Polkadot/Kusama network, such as computation and bandwidth.
- Unbonding: After a period of time, the collateral can be unbonded and returned to the winning bidder.
- Crowdloan: Participants receive their DOT/KSM back.
- Self-Funding: Wallet address receives DOT/KSM back.
peaq and krest are community projects which is why Peaq Foundation is opening crowdloans for the respective auction slots; for krest for Kusama and for peaq for Polkadot so that the public can participate.
It should be noted that the respective slots are time limited (Polkadot 96 weeks, Kusama 48 weeks). Therefore, the Peaq Foundation has reserved a significant portion of the peaq and krest token pools in order to have not only short term reward tokens for upcoming auctions but also medium to long term reward tokens available for the auctions when they need to be used to renew the parachain slot leases. In addition, both the krest network and peaq network economics have a mechanism built in to ensure that tokens are collected over time in a bucket for this specific purpose.