These days, cryptocurrency exchanges go far beyond simple transactions. You can do a wide range of things on these exchange platforms, including auto-investing, staking, and taking part in slot auctions. But what are slot auctions, how do you take part in one, and which exchanges offer them?
What Is a Slot Auction?
A slot auction, also known as a parachain auction, involves two kinds of crypto coins: Polkadot (DOT) and Kusama (KSM). Other big coins, like Bitcoin, Ethereum, or Ripple, are not supported by parachain auctions, unlike staking. While Kusama is a little pricey, at around $300 per coin, Polkadot is much more affordable, and so allows anyone to take part in slot auctions. But why would you do so in any case?
The main reason for slot auctions is to support DeFi projects that want to become a parachain. This is essentially an independent blockchain that can run within a Kusama or Polkadot network. Polkadot's entire network is made up of an intricate parachain system, with more and more being added every month.
There are always plenty of projects that are looking to become a parachain, and they can do so via these slot auctions. The slot auctions are needed so that the parachain can connect to the Relay Chain and enjoy the network's benefits, such as increased security. In short, they want a parachain "slot", hence the auction's name.
When a project wants to become its own parachain, they bid within an auction. There are only a limited number of slots available per auction, as this encourages some healthy competition between projects. A prospective project must outbid the other projects within the auction to become a parachain. They can do this with the help of other users' funds.
For example, if you're interested in a particular project that's bidding for a slot, and you want to support them, you can put forward some of your DOT or KSM funds in order to push them further up the bidding league. The tokens you give will be locked for the time it takes for the auction to begin and end.
If your chosen project loses, your funds will be returned to you in full. If the project wins, it will then reward all those who gave their support via their native token. It's important to note that the lock-up period for a slot auction is usually much longer than it would be for regular staking. Most projects have a lock-up period of around 96 weeks, or 672 days, so keep this in mind before you decide to contribute to a project.
These auctions are a great way to introduce viable projects to a Polkadot or Kusama network, and give users the chance to win some rewards while supporting said projects at the same time. So, where and how can you take part in a parachain slot auction?
1. Kraken
Kraken is a well-established and reliable crypto exchange program that's been around for over ten years. It's a great place to buy and sell crypto, as well as stake a variety of different coins. What's more, you can take part in slot auctions using Kraken. So, how can you do this?
Firstly, log in to your Kraken account. Then, click on "Earn" on the options bar at the top of the screen. Here, you'll be given two options between staking and slot auctions.
Click on the "Parachains" tab below the options bar, and there you can take a look at the current projects that are bidding for a parachain slot. Depending on the time at which you visit this page, the auction may have a lot of projects that have already won a slot, or a lot of projects that are still taking contributions.
You can check out the projects bidding for a slot, and decide which, if any, you want to support. There are sometimes multiple pages of projects to choose from, so take a look through them all if you don't already have a favorite in mind.
Once you've decided, simply click on the project of your choice, select your contribution amount, and then you're officially a supporting user in the auction. Depending on the project you support, reward amounts and types will differ, so make sure what and how you'll be rewarded before locking any of your funds away.
2. Binance
Binance is another trustworthy crypto exchange. In fact, it's now the most popular crypto exchange in the world. Binance offers a range of great features that allow you to build upon your funds, including slot auctions. Binance currently only supports DOT slot auctions, not Kusama, but DOT is a very affordable coin, making the auctions accessible for most users.
The process of contributing to a project via a slot auction is pretty easy on Binance, too. Firstly, sign in to your account and hover your cursor over the "Earn" tab. Then, click on the "Binance Earn" option.
You'll then be taken to a page displaying the different ways in which you can earn with Binance and with which coins. At the top of the page, you'll see an option to vote in a slot auction using DOT. This will take you to the auction.
Here, you can take a look at the projects currently bidding for a slot and decide whether or not you want to contribute. If you like a certain project, simply click on the "Vote" button to the right of the project to check out the payment type, lock-up period, and other important factors related to the contribution you'd like to make.
Make sure you're aware of these factors before proceeding to contribute your DOT. You only need a minimum of 0.1 DOT to take part, but remember that your rewards are relative to how much you lock up.
3. Huobi
Huobi is another great option for taking part in a slot auction. The platform currently only supports DOT auctions, but it still offers a number of interesting projects to support.
To do this, you'll want to firstly hover your cursor over the "Finance" tab in the options bar at the top of the page. Then, click on the "Polkadot Slot Auction" option. This will take you to the slot auction page, where you can browse the current projects bidding for a parachain slot.
If you find a project that you'd like to support, you can click on the project to learn more. Then, if you're sure you want to contribute, you can do so quickly and easily. You only need 1 DOT to take part in the auction, though the reward type and lock-up window may differ depending on the kind of project you want to support.
Parachain Auctions Are a Great Way to Earn Passively
While you can't guarantee that your chosen project will win in a parachain auction, taking part gives you the chance to win some healthy rewards without the risk of losing your funds if your chosen project doesn't end up getting a slot.
It's easy to contribute to a project, and you don't even need to put up a large amount of funds to get involved. So, if you're interested in supporting a project and getting rewarded for it, check out the parachain slot auctions on the exchanges above. Good luck!