Loom Kusama Crowdloan Launch
Overview
At Loom Network, we want to enable developers to build dapps that are easily accessible across all major blockchains, and for users to be able to use dapps without wasting time trying to figure out the intricacies of the blockchain each dapp happens to be running on. To that end we’ve already built integrations with Ethereum, TRON, and Binance Smart Chain.
ParityTech, and the Polkadot developer community at large have made great strides lately, and the first in a series of Kusama parachain slot auctions are now underway. The first few parachains have already been on-boarded on the Kusama relay chain, a huge milestone!
The Polkadot ecosystem is at the forefront of blockchain innovation, thanks in large part to ParityTech’s work over the last few years in building up the Substrate and Cumulus SDKs that now power a vast assortment of blockchains. We’re very excited about the future of the Polkadot ecosystem, and intend to integrate it into our ever growing ecosystem of blockchains. To start with we want to on-board our own experimental parachain on Kusama, and in order to do so we’re launching a Kusama Crowdloan!
Polkadot Chains
The Polkadot ecosystem currently consists of two production relay chains, Polkadot, and Kusama. The latter comes with its own nifty tag line: expect chaos, that’s because Kusama aims to run on the bleeding edge of Polkadot development, while development of the main Polkadot chain will advance at a more cautious pace — offering a higher degree of stability. The relay chains themselves have limited functionality, their primary function is to coordinate the validation of multiple connected parachains, and to facilitate governance of the Polkadot ecosystem.
Most dapp developers and the end users of dapps will be using one of the ever growing number of parachains that are connected to the Polkadot relay chains. These parachains provide an array of features to developers and users, such as smart contracts, token bridges, DEXes, and yield farms, to name just a few.
Parachain Slot Auctions and Crowdloans
There is a limited number of parachains each relay chain can support, so each relay chain provides a number of slots that parachains must compete for. These parachain slots are allocated through a series of auctions, the winner of each auction is granted the ability to connect to the relay chain for a set lease period. Currently the Kusama relay chain is running the first series of such slot auctions. In order to bid for a Kusama parachain slot the parachain developers and their supporters must lock up a princely sum of KSM tokens.
The winners of the Kusama slot auctions that have run so far have locked up between 138k-501k KSM each, which is roughly 33 million USD on the low end (at the time of writing). Given these numbers, it’s highly unlikely any one party will be able to secure a winning bid in the remaining auctions without borrowing a significant amount of KSM tokens from other KSM holders. Fortunately, Kusama has a built-in Crowdloan system that allows any KSM holder to contribute to a parachain bid. If you’re not already familiar with the term, you may want to read our recent article about how Crowdloans work.
Crowdloan Rewards
Locking up your KSM tokens by participating in a Crowdloan does not earn you any rewards outright, so it’s up to each parachain project to figure out a fair way of compensating participants. As a KSM holder you can stake your KSM tokens for ~15% APR, or you can lock those tokens in a Crowdloan for the duration of the auction plus the subsequent parachain slot lease (11 months) in exchange for the rewards offered by the parachain project. The Crowdloan rewards will only be issued if the parachain secures a winning bid during one of the auctions, no win, no reward.
Most Kusama parachain Crowdloans will issue rewards using their native parachain token. We’ll be following a similar model by giving out LOOM tokens to anyone who helps us win a Kusama auction by contributing KSM to our Crowdloan. While Loom Network may be a new player in the Polkadot ecosystem, we’re no strangers to building blockchains, and our mainnet Basechain has been operational for the last 3 years. As we’ve been around for a while, the LOOM token can already be traded on almost every major crypto exchange, which means it’s highly liquid compared to the native tokens that will be issued by the other parachain projects participating in the current series of Kusama auctions.
We are going to be giving out 100 LOOM tokens for each KSM token contributed to our Crowdloan. If we win a parachain auction, we will start distributing the rewards ASAP, there will be no vesting or lockup periods for these rewards.
Furthermore, as an added incentive, we’ll be offering a special rate for staking the LOOM tokens issued to Crowdloan contributors. Instead of the regular 7.5% APR for a 3-month lockup contributors will get 20% APR for staking the LOOM we issue as Crowdloan rewards. Rates shown do not take into account the Basechain validator fees, which are set by individual validators, you can see the current fees on the Basechain Staking Dashboard.
Crowdloan Schedule
The current series of Kusama auctions consists of 5 rounds, 3 rounds have already been completed, the 4th is underway this week, and the 5th will run next week. We aim to win the 5th and final auction, but if you want those juicy rewards you better be quick!
- Crowdloan Start: July 6th, 2021
- Crowdloan End: July 20th, 2021
- Parachain Slot Lease: 48 weeks (from July 20th, 2021 to May 13th, 2022)
- KSM Lockup Duration: If we win the KSM contributed to the Crowdloan will be locked for the duration of the lease (until May 13th, 2022).
Tokenomics & Crowdloan Financing
With each successive auction the amount of KSM locked up by the winning bid falls, the 3rd auction was won with 138k KSM, the winner of the 4th auction will likely lock in even less. To win the 5th auction we’ll probably need to raise around 100k KSM via the Crowdloan.
In the event that we secure a winning bid, and raise the full 100k KSM we’ll have to issue 10 million LOOM in rewards, and up to 2 million LOOM in staking rewards. To finance this expenditure, and the on-going development costs of the Polkadot integration we’ll introduce a modest 5% annual inflation rate to the LOOM token. This means that if we win an auction (and only if we win an auction) we’ll mint 50 million new LOOM tokens. The new LOOM tokens will be allocated as follows:
- Parachain Crowdloan Rewards: Will be distributed to KSM holders that have contributed to our Crowdloan on Kusama.
- Parachain Slot Reserve: Will be used to secure a future parachain lease (once the initial one ends after 48 weeks).
- Staking Rewards: Will be distributed as block rewards to validators over the next 12 months.
- Parachain R&D: Will be used to fund on-going development of the Loom Kusama parachain.
- Developer Outreach: Will be used to introduce our blockchain platform to third-party developers, and to help them build dapps within our ecosystem.
While inflation may seem undesirable for existing LOOM holders, we believe that integration with the Polkadot ecosystem will increase the utilization of the LOOM token (more on that later), which will benefit old and new LOOM holders alike.
Kusama Parachain
Loom Network’s Kusama parachain will serve as the primary interconnection point between our mainnet Basechain and other Polkadot parachains connected to Kusama. As development of the parachain progresses we’ll expand its core functionality to take advantage of more features of the Substrate and Cumulus SDKs.
Initially Basechain’s existing BSC Transfer Gateway — a two-way bridge to Binance Smart Chain, will be upgraded to allow other parachains to transfer tokens to BSC and back, and to call smart-contracts deployed on BSC. Furthermore, BSC dapps will be able to access tokens from the Polkadot ecosystem. The Ethereum Transfer Gateway will also undergo similar upgrades.
The multi-chain interconnections provided by Basechain will be a boon for DeFi dapps, regardless of which network they’re deployed on, because they’ll be able to utilize liquidity across Ethereum, Polkadot, and Binance Smart Chain. For instance, if a developer creates a new token within the Polkadot ecosystem, they could quickly make that token available to hordes of BSC users through DeFi dapps like PancakeSwap, Venus, Beef, Belt, to name just a few.
LOOM Token Utility
Every token transfer and remote call to a smart-contract that goes through our parachain between Polkadot, Ethereum, and Binance Smart Chain will incur a small transaction fee. These transaction fees will be payable in LOOM, and other highly liquid tokens (e.g. ETH, BNB, KSM, DOT).
A portion of the foreign tokens collected in transaction fees will be pooled and used to pay for outgoing transactions (from Basechain to other chains), while the remainder will be converted to LOOM. The LOOM that is accumulated from transaction fees will be allocated to on-going development, and block rewards (which will be distributed to Basechain validators and delegators).
Contributing to the Crowdloan
In this section we’ll show you one of the ways in which you can contribute KSM to our Crowdloan on Kusama. If you’re still confused about how to contribute after reading through this section YouTube has a number of videos on this subject, like this one, and this one.
Before You Begin
We’ll assume that:
- The Polkadot-js extension is already installed in your browser.
- You’ve previously created a Polkadot account. If you haven’t please follow the steps in the How to create a DOT account page in the Polkadot documentation.
- You have some KSM tokens in your account.
How to contribute
- Open the official Kusama Crowdloan page.
- If this is your first time using the Polkadot extension on polkadot.js.org you will be prompted for authorization:
- Next, scroll down to Loom Network’s Crowdloan (2080), and press the Contribute button:
- In the contribution field, enter the amount of KSM tokens you wish to contribute, then press the Contribute button:
- You will now be prompted to authorize the transaction, in the unlock account with password field, enter the password you used to protect your account, and then press the Sign and Submit button:
That’s it, you’re done, thank you for your contribution :)
Summary
The Loom Network Crowdloan is now live on Kusama! If we win a bid in the Kusama parachain slot auctions in the next two weeks we’ll be giving out 100 LOOM for every 1 KSM contributed to our Crowdloan. Any contributor that wants to stake the LOOM they receive from their Crowdloan contribution can take advantage of the special staking rewards rate of 20% APR on a 3-month lockup.
Don’t want to stake your LOOM rewards? No problem, the LOOM tokens can be easily transferred to Ethereum or BSC, and traded on most major exchanges.
Time is of the essence, to maximize the chance of earning the Crowdloan rewards contribute your KSM tokens to our Crowdloan by the end of July 14th, 2021 UTC, you can do so directly on the official Kusama Crowdloan page.
Loom Network is building an ecosystem of blockchains for the next generation of DeFi protocols, NFTs, and high-performance multi-chain dapps. At the core of this ecosystem is our Basechain network — already live in production, audited, and battle-tested.
New to Loom? Start here.
Want to stake your LOOM tokens so you can earn rewards while helping secure Basechain? Find out how.
Got experience running Linux servers, and interested in running a Basechain validator node? Reach out to us in our Telegram channel and we’ll tell you all about the current requirements.
