Learn what parachains are.

Parachains are the key to Kusama’s scalable, multichain architecture. The introduction of parachains on Polkadot’s mainnet represents the fifth and final phase of Polkadot’s launch. As Kusama is the testbed for new Polkadot features, it will support parachains on its network first. Kusama will test that the parachain logic works on a decentralized network, by successfully executing an auction involving crowd loans and hosting at least one functional parachain. An auction is necessary to connect parachains to the network by leasing a slot on the Relay Chain. These auctions will be hosted on Kusama for testing and optimization.

A parachain must inhabit an available parachain slot in order to be added to Kusama. There are a limited number of such parachain slots available in the network, and it is possible that only a few slots may become unlocked every few months to host parachains. It is hoped that there will eventually be 100 parachain slots available. Occupying a slot is necessary to guarantee that blocks produced will be included at every Relay Chain block. Who gets to occupy a parachain slot is determined by a parachain auction.

What is a parachain auction?

A parachain auction is a variation of a candle auction, where bidders submit increasingly higher bids until an amount of time has elapsed, and a winner is declared. A team bids on at least one range of 1 – 8 lease periods (each period representing 6 weeks) and the amount of KSM tokens they want to lock up for the duration of this range. Bidding for a slot on Kusama takes place publicly, meaning all participants have full visibility of what other teams are bidding. The end time of an auction is determined randomly by a Verifiable Random Function (VRF). The successful winner is onboarded at the beginning of the lease, and their bid remains locked until it ends. A lease can be extended by winning another auction before the occupancy of their allocated slot expires.

Crowdloans for Funding Parachain Auctions

Crowdfunding bids to win a parachain auction can be facilitated by Kusama’s on-chain crowd loan mechanism. This allows anyone to contribute towards a project’s auction bid by agreeing to lock up their own KSM tokens until the end of the parachain lease. Such contributions can be submitted until an auction is won up to the maximum amount required by the team creating the campaign is fulfilled. By participating in crowdfunding, loaners can be rewarded financially with tokens on the blockchain. Crowdloans can be hosted either on Kusama or a 3rd party platform. At the end of a lease period, all tokens are returned. This is also applied in the event of a slot auction bid being unsuccessful.