Introduction

Polkadot is a scalable sharded chain and the first protocol that provides a secure environment for cross-chain composability across multiple shards. Polkadot believes in a multi-blockchain world and hopes to host many of those blockchains in its ecosystem, which it calls parachains. Parachains allow other projects to build on Polkadot and get all their security and interoperability from the Polkadot system, but there are a limited number of parachains, so projects have to lease space on a parachain by posting Polkadot’s native governance tokoen DOT as collateral.

Crowdloans

Crowdloans allow projects to crowdsouce the necessary DOT collateral to win the parachain auction for the 96 week lease. Holders of DOT can contribute to a project and be rewarded with that project’s token once it wins the parachain auction. If the project doesn’t win the auction, the DOT is returned to the contributor, so the risk is minimal if done correctly (see warning below).

There are a number of steps you have to complete before you can contribute to any crowd loans, such as installing the PolkadotJS wallet and transferring some DOT from an exchange into the wallet. A list of all the crowdloan opportunities can be found on the PolkadotJS apps page. Here is a screen shot that shows which ones I contributed to:

Crowdloan List

I circled the projects I participated in. My research was pretty basic, just looking at the websites. They are mostly DeFi projects. DeFi has exploded in popularity during 2021 and I expect that growth to continue on the Polkadot network.

Warning

Here is an important scam warning directly from the crowdloan apps page:

Do not transfer any funds directly to a specific account that is associated with a loan or a team. Use the “Contribute” action to record the contribution on-chain using the crowdloan runtime module. When the fund is dissolved, after either the parachain lease expires or the loan ending without winning, the full value will be returned to your account by the runtime. Funds sent directly to an account, without using the crowdloan functionality, may not be returned by the receiving account.

Acala

Acala aims to be the DeFi hub of Polkadot. You can read all about the project on their webpage. If you want to contribute some DOT to their crowdloan, you can click on the Contribute Now button on the top right portion of the page. Better yet, click on Learn in the menu bar and then Quests (or just use this Quests link). That will open up 4 quests that will walk you through the step necessary to participate in the crowd loan. By completing all four steps you will have a Polkadot wallet with DOT and be read to start earning Acala’s ACA tokens once the auction ends. At the end of the lease, your DOT tokens will be returned to you.

As of the time of this post, the Acala project had the most contributions of any project. Should you decide, after doing your own research, that you would like to contribute as well, you can use my referral link to get an extra 5% of ACA allocation.

Astar

Astat aims to be the multichain Polkadot DApp hub. Contributor’s to Astar’s crowd loan will be rewarded with ASTR tokens during the period of the 96 week lease. And of course, at the end of the lease, your DOT tokens will be returned to you.

In case you are interested in contributing, you can use [this link which contains a referral code](https://crowdloan.astar.network/?referral=15Vd1WdavwMs4n1Zi8BDkFG262iS6Ut5YN57Ew7HJXNfUnzz

Others

I also contributed to Parallel Finance, which is also a DeFi project, and Litentry, which is a cross-chain identity aggregator. I wanted to invest in Moonbeam, but they are not allowing anyone from the USA to participate. I know I could have used a VPN to circumvent those restrictions, but I didn’t want to risk loosing my funds due to geographic restrictions and a long (96 week) lockup period.

Summary

I didn’t go into too much detail on the actual projects. My goal was just to outline the process of contributing to a crowdloan, along with a brief introduction to Polkadot. A full understanding of the aims of Polkadot requires a lot of research that I still haven’t had the time to fully understand. I basically invested a small amount of DOT in each of the top three projects and then an even smaller amount in Litentry. If I was investing much more money I would spend more time researching each project, but at this stage, even if I did spend a ton of time researching each project on the list, I am not sure it would help me predict which one was going to have the best prospects. The whole area is still too new and these projects are not even fully operational yet. I am optimistic that the best is yet to come.

Disclaimer

These posts are for informational and educational purposes only and should not be construed as investment advice or a recommendation to buy or sell any tokens. In this series I am just outlining what I am doing to learn more about the crypto space. Just because I am comfortable doing this, that does not necessarily mean these activities are suitable for you. I have not received any compensation from any of the products or services mentioned herein. Please do your own research and stay skeptical. These markets are not normal.