Acala AMA: How does Acala lcDOT help you get liquidity during crowdloan?

This article is a summary of the Acala Community AMA hosted by PolkaWorld, the global Polkadot/Kusama community.

Time：2021.10.15 19：00

Location：PolkaWorld Community

Host：PolkaWorld Chris

Guest：Acala Yuzhu

Chris： Congratulations to Acala’s canary network Karura for being the first Kusama parachain slot winner, opening the cross-chain era.

As 11 parachains have now been connected to Kusama, and the second round of slot auctions have come to an end, everyone’s attention is on Polkadot now. How will Acala prepare for the upcoming Polkadot parachain slot auction? Welcome Yuzhu to share that with us.

Yuzhu：Thanks for having me, I am Yuzhu, an open contributor to Acala. I’m very happy to be able to introduce the Acala slot auction to you. If you haven’t unlocked your DOTs yet, you can start to unlock them now. Acala has put out a very generous auction reward waiting for everyone’s participation.

Acala & Karura have been established from the beginning of the Polkadot ecosystem development. Although most community members have been very familiar with Acala and Karura. Here I still want to briefly introduce them:

• On the whole, Acala and Karura serve as one-stop DeFi platforms for Polkadot and Kusama respectively, bringing a series of out-of-the-box DeFi basic products (also known as the new DeFi infrastructure of Web3) to Polkadot and Kusama ecosystem, such as collateral stable coins, decentralized exchange Swap, and LDOT and LKSM derivatives that release staking liquidity. In addition, Acala and Karura also have EVM-compatible smart contract modules, allowing Solidity developers to enter the Polkadot ecosystem with minimal migration costs. Not only are they 100% compatible with the Ethereum development environment, but also 100% retain the advantages of Substrate.
• The first function I want to introduce to you is Acala EVM+. Whether it is Acala or Karura, we are not only a single Dapp, but a complete chain. We split the different functions into many modules and Legos, helping developers to use EVM+ to innovate.
• Our most important function is the over-collateralization loan agreement. It is the first decentralized stable coin for the Polkadot ecosystem. When users have capital needs but do not want to sell assets, they can use this protocol to borrow our stable coin aUSD. In real life, if you had a house, and you want to invest in the absence of more cash flow, you can consider applying for a collateral mortgage to the bank, using your real estate as collateral. Acala and Karura accept multiple assets as collateral, such as DOT and KSM, also bridged assets like BTC and ETH in the future, staking derivative assets like LKSM, etc., and then they will use Satemine to connect USDT and USDC and other assets
• The second function is the DEX based on the Automatic Market Maker mechanism. Users can easily exchange assets in this DEX. It supports a wealth of trading pairs. At present, we have opened trading pairs such as KSM/KAR/KUSD, as well as liquid mining.
• The third function is the L-Token. LDOT in Acala’s case. LDOT can help users not only enjoy the benefits of staking but also obtain flexible liquidity.

Finally, I want to mention that last month we cooperated with Current, a US mobile bank with 3 million users, and proposed the “HyFi” concept, which is hybrid finance that combines DeFi and traditional finance. We are cooperating to develop a yield engine, which will open up the bridge between traditional finance and DeFi. The dollar savings in the bank card can be directly used for DeFi, and the yield generated by DeFi can be directly spent with the bank card. Of course, we still will seek cooperation opportunities in traditional finance in many ways, and it will definitely be under the framework of compliance. Please wait and see.

Chris: Cool. I want to remind the community again that the Polkadot slot auctions are about to start on November 11, you can start to unlock your DOTs. Those who follow Acala are actually very concerned about Karura’s latest developments and what preparations Acala is doing for the auction. Let’s share this part, Yuzhu.

Yuzhu: Our Karura network has been online for 5 months in a blink of an eye, so in 5 months we have de facto become the real DeFi center on Kusama from 0 to 1. Then the current active TVL of the entire network has reached 270 million US dollars, our Karura Swap daily transaction volume is about 44 million US dollars, which is still very small compared to DeFi or traditional financial markets, but we are currently working with the first batch of Kusama projects such as Bifrost/Khala/Shiden. In the two-way cross-chain cooperation, assets like BNC/PHA/SDN can also participate in Karura’s DeFi activities such as Bootstrap and Liquidity Mining. In the future, there will be bridges to Bitcoin and Ethereum, and many assets will appear on Acala. You can also look forward to it.

Another important thing is to prepare for the upcoming Parachain slot auction. We have been preparing various warm-up activities and education from the end of September to help more and more people truly understand the advantages of slot auctions, and how can Acala facilitates the whole ecosystem if we win the parachain in the future.

Up to now, our first bidding strategy is launching lcDOT to help unlock the liquidity of everyone’s DOTs. The second strategy is to continue some Kusama bidding strategies. There is still a referral mechanism to help you get an additional 10% of ACA rewards. We also have a mini-game Acala Quests to help people understand the participation process. You can win an extra 2% auction reward and exclusive limited NFT in this game. Participating link: https://acala.network/acala/quests

Our strategy and all the latest news will be advertised in time on our official account and all community platforms. You can search “Acala Land” on WeChat, and we also have official channels for Telegram. You can search @AcalaChineseofficial/@AcalaChineseAnnouncement to join. Our overseas communities are more concentrated on the Acala Discord Chinese channel: https://discord.gg/7StkSWeCmP. If you are interested, you can start a discussion about Acala at any time here.

Finally, we are also recruiting Acala product experience officers. If you have insights, constructive comments and suggestions on Acala products, you can apply through https://jinshuju.net/f/g9H3qF.

Chris: You mentioned the lcDOT（Liquid Crowdloan DOT ）, which helps people to liquidate the locked DOTs when supporting Acala Crowdloan. Can you further introduce it?

Yuzhu: Sure. During the Kusama auction, Karura locked the most KSM in the auction, but this part of the KSM is only locked in the Kusama relay chain without any other purpose, occupying a lot of liquidity, so in order to make the community users better Participating in Acala Crowdloan, we have prepared a product that releases DOT liquidity for Parachain slot auctions-lcDOT (Liquid Crowdloan DOT) to help you obtain DOT liquidity during slot leasing. The slot leasing time for the Polkadot mainnet is 2 years. 2 years is a very long time in the blockchain industry. If you participate in the DOT bidding, you will need to be locked for two years, I believe it will discourage many small partners. Many people will say that “I can accept the KSM lock-in for one year, but the DOT lock-in for two years, I’ll have to think about it again.”

But if everyone participates through the lcDOT method, when Acala wins the auction and goes online, lcDOT and DOT will be distributed to participants at a ratio of 1:1, so you can regard lcDOTs as the equity certificate to be unlocked in the next two years, lcDOTs can be freely circulated, traded, pledged, and mined in the Acala protocol just like real DOTs. Of course, lcDOTs can also be used in the products developed on the Acala EVM and the two-way cross-chain parachain, helping everyone to be able to capture more profits and avoid market risks in the two-year locking period.

And if you participate through the official channel, the minimum amount is 5 DOT, while in the case of lcDOTs the minimunm is 1. Also, the lcDOT method does not conflict with direct official participation, you can participate in proportion according to your asset status. When the slot expires in 2 years, the DOT will be unlocked, and everyone can redeem the 1:1 lcDOT again to get back the DOT you originally contributed.

Chris: What if I sell out the lcDOTs in the Acala Swap during the slot period, but after 2 years I still want to get back my original DOTs?

Yuzhu: What I’m sure is that the ratio of lcDOT issued when participating in the auction is 1:1, and the ratio of redemption after 2 years will also be 1:1. So, if you sell within this period, then you still need to offer enough lcDOT to get back all the DOT contributed at the beginning. There will still be a certain price difference between DOT and lcDOT in the Swap, so you can decide your action according to different market conditions.

Chris: What are Acala’s goals for the Polkadot auctions? I remember that in Karura Crowdloan you got 51w KSM, so does Acala have some expectations for the Polkadot auction? And what are your short-term and long-term plans?

Yuzhu: For Acala, we all hope to get first place in the first bid and get the first slot, just as Karura did. We will release specific reward details in the near future. You can follow our official account, Telegram, Discord to know about our rewards as soon as possible.

Then, after getting the Acala slot, Acala will first complete the issuance of ACA rewards and launch lcDOT, as well as related trading pairs, staking functions, etc., which can help everyone to maximize the benefits of DOT and KSM after Acala is launched. As we build up the DeFi product matrix and realize the vision of cross-chain DeFi through Polkadot, in the near future, Acala as a one-stop DeFi center, will have many mainstream assets, and there will also be many combinations of products so that everyone can use low and flexible fees. Help Polkadot, Ethereum, and other mainstream asset holders to participate DeFi, and participate in on-chain governance, etc.

Chris：For users who want to participant in Polkadot auctions, what’s your advice for them? How to choose good projects to support in order to maximize our interest?

Yuzhu: In the first round of Kusama auctions, our research institute published a research article to help you have a few basic dimensions to judge. But first, you need to understand what Polkadot Parachain auction is, to understand the difference between auctions and the usual ICO and crowdfunding, and then decide whether to participate. Investment still needs to be very cautious, and it requires a certain basic understanding and cognition to participate in it. The several dimensions we have given you before are all viewed from the perspective of long-termism.

How to grasp the biggest benefits of the Polkadot ecosystem? Here I provide the most basic investment measures, which can be considered from the latitudes of community, market, institutional background, etc.:

• Does the community data show steady growth?
• Are the areas and countries of the community diverse?
• Does it have unique competitiveness in its core track?
• Does the team work hard to deliver products on time?
• Has the security code audit been completed before the product is connected to the parachain?
• Does the investment institution have a good background and sufficient funds?
• How is the expansion of market partners?
• Can the project’s own model achieve sustainable development?
• Is the design of the parachain slot auction reward model reasonable?
• Is marketing excessive, and the form is greater than the substance?
• …

Community Q&A

Z Y: What is the reward for participating in Crowdloan? What is the rate of return? Should I participate through the project side or through Polkadot?

Yuzhu: Crowdloans are actually more like borrowing DOTs to bid slots, and the rewards given by the project side are “interest”. I’d say if the reward given by the project is higher than the DOT staking income, I think it is worth participating in. You can participate directly in Polkadot.js (you will not get lcDOTs, then DOTs will be locked for two years), of course, you can also participate in the channel provided by Acala to get lcDOTs.

Joe: What is your reward strategy for users participating Acala crowdloan?

Yuzhu: The recommendation reward continues, plus there is an Acala Quest game. Both of these add up, you can get at least 12% additional rewards. We have many strategies that have not been announced to the public yet, there will be other additional rewards at that time.

swapdil：Can holding lcDOTs provide liquidity and enjoy mining income?

Yuzhu: Sure. If you have lcDOTs, you can provide liquidity to lcDOT/DOT pair in Acala Swap to do liquidity mining.