After months of waiting, the time has finally come. Kusama is launching the first functional Parachain and investors can now take part in Parachain auctions.
On June 8th, Kusama announced the successful launch of its first Parachain on Twitter.
This development represents an extremely important milestone for the project of Ethereum co-founder Gavin Wood. Because according to one Blog post Crypto projects can now take part in Parachain auctions to secure a place in the KSM ecosystem.
Parachains and Parachain Auctions on Kusama
Parachains are custom blockchains built into the Kusama network. The special thing about them is that they can be adapted for any number of use cases. In addition, the parachains are connected to Kusama’s main blockchain (relay chain), which allows them to benefit from their network security.
There are currently only 100 parachain courses on Kusama. Every project that wants to secure a parachain spot must take part in a so-called parachain auction. In such an auction, different teams of crypto projects with KSM bid for a parachain place. It is not possible to participate in the auctions with other cryptocurrencies. For this reason, the start of the various Parachain auctions means that there is a high probability that the demand for KSM will increase.
Parachain auctions as reason for Kusama’s price increase?
In parachain auctions, the crypto project that has submitted the bid with the most KSM at the end of a parachain auction usually wins. It is important to know that such an auction does not run like an auction on Ebay, for example. This is because the end of each Parachain auction is determined randomly by an algorithm. For this reason, every project must be included immediately after the start of an auction vote on as many KSMs as possiblebecause they don’t know exactly when the auction is over.
In the case of Kusama auctions, the project that agreed with most of the KSM at the time of the auction snapshot usually receives the parachain space.
Because of this, you can win a parachain seat on Kusama very expensive for the individual projects as they need as many KSMs as possible. As a result, the start of the Parachain auctions on Kusama means that many projects are currently competing with one another and the demand for KSM is increasing. This is also reflected in the KSM course. In the last seven days alone, the project recorded a price increase of over 18 percent. At the time of going to press, a single KSM token costs just under $ 428.
How can investors benefit from parachain auctions?
The individual crypto projects can not only accumulate KSM themselves in order to have a chance at the Parachain auctions. You also have the option to borrow KSM tokens from your community via so-called crowdloans. The community members agree that their KSM may be used in Parachain auctions. You also agree that you will not be able to access your KSM for a predetermined period of time. In return, they receive token rewards. For example, investors who support the Kusama Karura project currently receive almost 12 KAR tokens for every KSM token they make available for the auction.
Should a Kusama project lose the auction despite the support of the community, the KSM made available will be automatically paid back. In addition to normal staking, KSM owners can now also use crowdloans to generate passive income.