Parachain Slot Auctions
Parachains connect to Polkadot by leasing a slot on the Relay Chain for up to 96 weeks at a time, with the option to renew. Parachain slots are assigned by an on-chain auction, with auction winners locking up a bond in DOT for the duration of the lease. Auctions and crowdloans raise the bar for blockchain projects, incentivizing them to demonstrate their technology and gain community support prior to launch.
How auctions work
To bid in an auction, parachain teams agree to lock up (or bond) a portion of DOT tokens for the duration of the lease. While bonded for a lease, the DOT cannot be used for other activities like staking or transfers.
After the lease, the full amount of DOT is unlocked, meaning auctions do not require teams to “spend” DOT. The cost of the lease is best characterized as the opportunity cost of not being able to use the bonded DOT for other activities.
Some parachain teams will fund their auction bid with the help of a crowdloan campaign, which allows them to accept contributions from DOT holders. Crowdloan contributors get their DOT back at the end of the lease, and parachain teams can choose to reward them in various ways, including with a distribution of the parachain’s native token.
Auctions on Polkadot have an open bidding period of approximately 1 week. At the end of the bidding period, the precise moment of the auction’s close is determined retroactively. This prevents last-minute “auction sniping” and promotes more accurate price discovery (See the case for candle auctions).
Slot Duration & Lease Periods
Each slot on the Relay Chain can be leased for a maximum duration of 96 weeks. When bidding on a slot, parachains can choose the length of their desired lease by selecting a contiguous range of 12-week increments known as lease periods. Multiple parachains can win a single auction if they successfully bid on non-overlapping lease periods.
Each auction takes place over the course of 1 week and assigns a total slot duration of 96 weeks (divided into 8 12-week lease periods). The schedule is determined via Polkadot’s on-chain governance community.
Auction Ending Period
Each auction has an ending period that begins approximately 1 day and 21 hours after the start of the auction and lasts until the end of the 1-week bidding period. The auction’s end point can be any time within the ending period, and is automatically and randomly chosen by the VRF at the close of the 1-week bidding period.
Be part of blockchain history by helping kick start your favorite parachains.
Thoroughly research the parachain project and team, and read the details and conditions of their crowdloan campaign. Make sure you only get information from official channels. If ever in doubt, ask in the crowdloan Discord chat.
Learn how to protect yourself
Read this guide for the basic tips on avoiding scams. If you’re inexperienced using blockchain technology, make sure you’re aware of basic best practices like how to protect your secret keys.
Determine where you will participate
Teams can choose to host their crowdloan campaigns natively on Polkadot and/or via third party intermediaries. For Polkadot-native crowdloans, you can participate on Polkadot-JS. If you’re less experienced using blockchain technology, you may find it easier to participate in a non-native campaign via third party platforms. Info on where you can participate in non-native crowdloans can be found here.
Create a Polkadot account
You’ll need a Polkadot account with a free balance of at least 5 DOT to contribute to a Polkadot-native crowdloan. See how to create an account on the Polkadot-JS Extension in this video tutorial.
Make your contribution
Watch the video below to learn how to contribute via Polkadot-JS.
How many total parachain slots will be available? keyboard_arrow_right
Based on theoretical computing constraints, the current goal and expectation is that there will be approximately 100 parachain slots available on Polkadot, though potential future optimizations (such as nested relay chains) may further increase this number. However, it will take some time before Polkadot fully supports 100 parachain slots, and they are likely to be added to the system slowly over time. Not all of these slots will be allocated via parachain slot auctions, as some will be used for governance-enabled common-good parachains and parathreads.
How and when will parathreads be enabled? keyboard_arrow_right
We expect parathread functionality to launch some months after parachains are live. As with any network upgrade, it will need to be enabled through on-chain governance.
What happens to the DOT locked up for the duration of the lease? keyboard_arrow_right
DOT locked for the duration of the parachain’s lease period remains in the account used by the parachain team to bid in the slot auction (or, in the case of a crowdloan, in the index for the campaign), and it is reserved and unavailable for other uses such as staking. At the conclusion of the slot lease, the full amount of DOT is unlocked, after which it is once again free to be used for activities such as transfers, withdrawals, and staking. For crowdloans, contributed DOT is locked from the moment the contribution is made until the end of the lease, unless the crowdloan campaign is unsuccessful in securing a slot via auction, in which case contributed DOT is unlocked at the end of the campaign as specified by the parachain team.
What does a slot lease cost? keyboard_arrow_right
The cost of leasing a parachain slot will purely be a function of market supply and demand, so it’s difficult to give any meaningful estimate as to what the bid requirement will be. However, it's important to realize that the actual cost of a parachain slot is not the same as the size of the parachain bid. Since parachain bonds are returned at the conclusion of the slot lease, the actual cost of running a parachain is best characterized as the opportunity cost of not staking those DOT for the duration of the lease. The need to run collators is an additional but relatively minor cost. In general, for high throughput applications we expect parachains to be more economical than building with smart contracts or building a standalone blockchain.
What is the duration of a slot lease? Do parachains have to bid for the full duration? keyboard_arrow_right
Parachain teams can bid for leases in contiguous increments of 1 to 8 12-week periods (from a minimum of 12 weeks to a maximum of 96 weeks). After the lease is over, the slot will go up for auction again and the team will need to bid again if they wish to retain a slot (or connect as a parathread once that feature has launched). Parachain slots are fungible, so to avoid any downtime in connectivity and minimize the risk of losing a subsequent auction, teams can bid on and secure an adjacent slot before their current lease ends.
What happens if a parachain team loses a slot auction? keyboard_arrow_right
They will need to join a subsequent auction and bid again. Once parathread functionality is delivered (expected some months after parachains launch), parachain teams will have the option of connecting to Polkadot as a parathread while they attempt to secure a dedicated slot. In the case of crowdloan campaigns, a campaign can be set up to last for several auctions to increase the chances of winning a slot. If a team does not win a slot by the end of their set crowdloan campaign endpoint, the total amount of contributed DOT is once again unlocked and the team will need to initiate a new campaign if they wish to continue participating in auctions.
Why were these lease periods/limits chosen? keyboard_arrow_right
The method for dividing the parachain slot leases into 12-week periods was partly inspired by the desire to allow for a greater amount of parachain diversity, and to prevent particularly large and well-funded parachains from hoarding slots. By making each lease period 12 weeks but the total slot deployment period 96 weeks, the mechanism can cope with well-funded parachains that will ensure they secure a slot at the end of their lease, while gradually allowing other parachains to enter the ecosystem to occupy the 12-week durations that are not filled. For example, if a large, well-funded parachain has already acquired a slot for range 1 - 8, they would be very interested in getting the next slot that would open for 2 - 9. Under this mechanism, that parachain could acquire only period 9 (since that is the only one it needs) and allow range 2 - 8 of the second parachain slot to be occupied by another chain.
What happens at the end of a parachain’s slot lease? Does the team lose its slot? keyboard_arrow_right
Individual parachain slots can only be leased for a period of up to 96 weeks (in 12-week increments). At the conclusion of the lease, the slot will go back up for auction and the team will need to bid for a slot again if they wish to retain one. Parachain slots are fungible, so teams do not need to always bid on the same slot. To avoid any downtime in connectivity and minimize the risk of losing a subsequent auction, teams can bid on and secure an adjacent slot before their current lease period ends. Teams can also choose to connect to Polkadot as a parathread once that feature has launched.
How can there be multiple teams that win a single auction? keyboard_arrow_right
Each auction allocates a parachain slot for a total deployment period of 96 weeks. Teams are not required to bid for the full 96-week period, but can specify a contiguous range from 12 weeks to 96 weeks. This means that two or more teams may win one particular slot auction if they each bid on different, non-overlapping lease periods within the full 96-week deployment period. For example, one team may bid on the first 48 weeks, and another team could bid on the second 48 weeks. The winner selection algorithm is designed to maximize the amount of DOT held over the entire 96-week period, and will pick the best combination of non-overlapping bids to achieve that objective.
How can I follow the status of auctions in progress? keyboard_arrow_right
Are there other ways of securing a parachain slot besides the candle auction? keyboard_arrow_right
Parachains considered a common-good for the entire network can be added to a slot via governance vote. Common-good chains are parachains viewed as a common-good, in the sense that they will benefit the entire network, for example a bridge that apps on Polkadot could use to connect to an external network like Bitcoin or Ethereum. Chains are designated as a common-good parachain by network governance, which can vote to allocate the chain an empty slot on the Relay Chain, thereby bypassing the auction process. Common-good chains can be thought of as system-level and public utility chains that provide functions and benefits to the network that builders can tap into.
What is a parachain slot crowdloan and how can I participate? keyboard_arrow_right
Parachain teams may or may not choose to use Polkadot’s crowdloan mechanism to help back their parachain slot lease bid. To participate in a crowdloan, users agree to lock up a portion of DOT for the duration of the parachain slot lease period, after which they can be unlocked. To participate in a crowdloan, you must have a transferable balance of DOT, so if your tokens are currently locked due to staking, you’ll need to unbond them in advance of the crowdloan campaign. The unbonding period on Polkadot is currently 28 days. The details of individual crowdloan campaigns and the process for joining them will be determined and communicated by the respective parachain teams.
Important: Polkadot’s native crowdloan mechanism does NOT require users to send DOT from their own wallet/account to a third-party address to participate in a crowdloan. Native crowdloan contributions are made with a special “Contribute” transaction using what’s called a campaign index, whereby contributed DOT remain locked in the campaign index (if the auction is successful, contributed DOT remains locked from the moment the contribution is made until the end of the lease). Legitimate teams conducting a crowdloan natively on Polkadot will NOT ask you to send tokens to their address to participate. However, some teams may choose to conduct a crowdloan campaign using other mechanisms or platforms. In this case, be sure to never send tokens to anyone you don’t trust. Always check teams’ official channels to find out how to participate.
What are the benefits of participating in a crowdloan campaign? keyboard_arrow_right
Beyond the non-material benefits of supporting parachain teams’ success, teams may or may not offer additional rewards for participating in a crowdloan campaign. A project team who is sourcing the required DOT from its community may choose the type of award, if any, offered to participants for locking their DOT in the event of a winning bid. The decision on the type of award to offer for a successfully secured parachain slot is completely in the control of the project teams and will not receive any input from Web3 Foundation. Awards will take many forms and may vary widely among projects, from a network’s native token to certain goods or rights as directed by project teams and accepted by community members.
What does it mean for a crowdloan campaign to be conducted ‘natively on Polkadot’? What other options are there? keyboard_arrow_right
A crowdloan conducted natively on Polkadot is one that uses the Crowdloan pallet to interact directly with Polkadot without the involvement of third parties. Participants in a Polkadot-native crowdloan must have a transferable balance (not locked for staking, vesting, governance etc). Teams may also choose to conduct their crowdloan campaign through other methods, including on third party platforms like custodians and exchanges
A crowdloan conducted natively on Polkadot is one that uses the Crowdloan pallet to interact directly with Polkadot without the involvement of third parties. Participants in a Polkadot-native crowdloan must have a transferable balance (not locked for staking, vesting, governance etc). Teams may also choose to conduct their crowdloan campaign through other methods, including on third party platforms like custodians and exchanges.
Is there a minimum contribution amount to participate in a crowdloan? keyboard_arrow_right
Yes, the current minimum crowdloan contribution is 5 DOT. Some teams may also choose to set their own minimum contribution required for receiving rewards. A minimum contribution amount is necessary to prevent spam and to facilitate the smooth operation of the crowdloan mechanism.
Why do crowdloan campaigns have a maximum amount of total allowed contributions? keyboard_arrow_right
Setting a maximum contribution amount allows teams to place a cap on the rewards that they are willing to offer crowdloan contributors. For example, if a team decides to award contributors with a certain distribution of their native token for every DOT contributed, this allows them to cap the maximum distribution they are willing to make. Teams may choose to reward contributors (or not) in any way they see fit, and Web3 Foundation has no input on what those rewards may consist of.
Have a question not answered here?
Join the crowdloans Discord chat.