In this article we will explain how to join a Polkadot parachain auction on Kraken or Binance.
What is a Polkadot parachain auction and what are the rewards? Why should you join? Should you join via a centralized exchange like Kraken or Binance or should you lend directly to the project?
We will explain and answer all these questions for you.
Polkadot parachain lending is good way to earn free tokens but there are also many different options to earn crypto passive income.
No Financial Advice, Information only. Do your own research
What is a Polkadot Parachain?
Polkadot parachains are intended to connect to Polkadot by leasing a slot, via an auction, on the Relay Chain for up to 96 weeks with an option to review.
What is a Polkadot Parachain Auction?
A Polkadot parachain auction is a bidding process where the winners get access to lease a slot on the relay chain. The winners are locking up a bond in DOT for the duration of the lease (often 96 weeks).
On Binance and Kraken can projects list their project to get help financing the slot lease. Here, users can lock their funds on the listed project for 96 weeks to help them secure a slot on the relay chain. If the project wins a slot the DOT tokens will be locked for a certain period of time (often 96 weeks).
If the project doesn’t secure a slot, the funds will be returned.
What are the Polkadot Parachain Auction Risks?
The main risk with Polkadot parachain auction is that you agree to lock your funds for a long period of time (Usually 96 weeks). Once they are locked you can’t sell them if you think we are going into a crypto winter or if you loose faith in the Polkadot project.
Another risk to consider is the project you support. If that project fails for any reason you will lock your funds for nothing.
Read more about crypto investment risk management.
What are the Polkadot Parachain Auction Rewards?
The Polkadot parachain auction rewards are hard to know before you support the project since there is no market for the project before launching.
Still, there are always rewards and compensation for contributing to a parachain auction. Considering the risk you are taking and the alternative Polkadot DOT interest and staking rewards you can get, the rewards should be pretty good to make it worth it.
Kraken Polkadot Parachain Auctions
Kraken is a regulated US crypto exchange with many features. One of the features is the Polkadot parachain auction.
The reward of the parachain should be compared to the 12% staking reward you can get on Kraken for Polkadot DOT.
How to join a Polkadot Parachain Auction on Kraken?
The process to join a Polkadot parachain auction on Kraken is very straight forward. This is one of the main reason to join a Polkadot parachain auction via a centralized exchange, like Kraken or Binance.
Here, we have created a step-by-step guide.
- Sign up for a Kraken account
- Deposit or buy Kusama (KSM) or Polkadot (DOT)
- Navigate to Earn > Parachains (See screenshot below)
- Select the project you would like to support
- Enter amount of Kusama KSM or Polkadot DOT to contribute
- Select contribute and confirm (see the second screenshot)
In the screenshot below you
- Select the amount you want to contribute
- See the contribution endate
- Parachain duration (Purposed by the project team and this his how long your KSM/DOT will be locked)
- Estimated reward (Decided by the project team. The actucal reward might vary)
- Minimum contribution
- Reward fee (This fee is charged from Kraken and taken from your reward. You DOT contribution is untouched)
Kraken Polkadot Parachain Auction Pros and Cons
There are some pros and cons associated with investing in parachains auctions on a centralized exchange
Pros
- Very easy to use, especially if you already have DOT at Kraken
- A third party that might be able to handle any questions that arise
- Convenient for new users that are not yet familiar with DeFi
- It reduces the risks that you sign up with a scam since Kraken will probably only list legit projects
Cons
- Kraken takes a 2-5% fee
How to join a Polkadot Parachain Auction on Binance?
So, how to join a Polkadot Parachain auction on Binance?
Well, its as easy as with Kraken
- Create an account with Binance and sign in
- Navigate to Finance>Binance Earn. Scroll down and look for “DOT Slot Auction” (See the screenshot below)
- Once you have clicked, you will be taken to a list with all available auctions. Click on the on you wish to contribute to. (See the second screenshot)
Navigate to Binance Earn DOT Slot Auction
Ongoing DOT Slot Auctions on Binance Earn
DOT Slot Auctions on Binance Earn Terms and Conditions
As you see in the screenshot below, you will be asked to enter the amount you want to stake. In addition, there is some information about
- What project you intend to fund
- How long you lock your funds
- What token you will earn
- Total maximum lock up for the project
- How much you want to stake for the project
- Minimum amount to stake
- Agree to terms and conditions
Binance Polkadot Parachain Auction Pros and Cons
Binance Earn pros and cons for Polkadot parachain auctions
Pros
- Very easy and convenient way to contribute
- More likely to avoid scams since Binance would only list legit projects
- Binance doesn’t charge anything for this service
- Binance even have additional rewards in form of warm-up period.
- You have the 3th party risk since your funds are deposited to Binance
No Financial Advice, Information only. Do your own research
