What is a Crowdloan?
A crowdloan is a way for projects to anticipate the support they need to connect to the Kusama or Polkadot network as a parachain.
With a crowdloan your contributions are locked into Kusama or Polkadot for a certain period of time. This means that you are locking rather than loaning your tokens for reuse. So you make contributions to a project through the crowd loan and these contributions are locked into either a kusama or Polkadot project for a designated period of time. Typically during this time you are offered a reward in the form of the project’s native token. If you believe in a project and are passionate about its mission then this is the easiest way to show your support and get involved.
If the project doesn’t win the auction the funds are returned to their owner and unlocked.
How to participate in a Kusama crowdloan?
The first thing you need to do is buy KSM or use the unlocked KSM you already have. Leading up to all crowdloans, participants must unlock their DOT or KSM and ensure that they are not being used for staking, vesting or governance in other project.(Note: this can take up to 7 days). If you don’t have any KSM or DOT you can easily set one up with the steps outlined here.
Every project that is participating in the crowdloan gets an Official Index number that is securely stored on the Kusama/Polkadot network and not accessible to the project teams at any point during the crowdloan campaign.
To contribute to a specific project you must send your KSM via a special transaction designed for the crowdloans. The easiest way to ensure that you are contributing to a campaign is to carefully follow the instructions on the project’s website.
NOTE: You will never contribute to a campaign by transferring DOT or KSM to an address.
Is there a minimum/maximum amount that somebody can contribute?
There are no fixed minimum and maximum amounts determined by the Kusama Council. The minimum amount of KSM contribution depends on different projects.
As an example Unique Network has no minimum requirements. You need to have extra 0.001 KSM in your wallet to pay for the transaction fee and keep the account alive. This is a requirement by the Kusama network. To illustrate with an example: if you plan to contribute 100 KSM, they you need to have an available balance of 100.001 KSM.The maximum amount or the cap of KSM contributions also varies with projects
What are the rewards for contributors?
Projects usually offer crowdloan contributors rewards. It is up to the individual projects how they wish to distribute these rewards. How the rewards are claimed also varies from each project. All of the details are disclosed on the crowdloan pages of individual projects. For example, Unique Network are rewarding QUARTZ contributors with 237 QTZ for every KSM bonded.
In addition to that there are significantly higher rewards for early participation. The earliest KSM contributor earned 750 QTZ for 1 KSM. You could calculate your total rewards, including the early bonus, by using the calculator on the crowdloan page.
They have reserved up to 8% of the total QTZ supply for the crowdloan participants with a 10 month vesting (linear vesting every block) period. This is 80,000,000 out of the total 1,000,000,000 QTZ.
In addition, projects may offer additional rewards that are not KSM or token related. Unique Network cleverly gave away 100 Chelobrick NFTs to the first 100 people to contribute over 10 KSM to the crowdloan.
What happens if the crowdloan is successful?
If the Crowdloan is won by a project then the parachain is on-boarded to Kusama and the KSM collected in the crowdloan is locked into the module for the duration of the lease it won.
There are a limited number of parachain slots available on the Kusama and Polkadot networks and auctions for these slots may be incredibly competitive.
If a crowdloan project wins the parachain auction, you will receive your DOT or KSM tokens after the leasing period (24 months on Polkadot and 48 weeks on Kusama). If it does not win a parachain slot, you will get your KSM back in a few days after the auctions are over.