“Supply shock” predicted as Kusama (KSM) parachain auctions heat up
Almost all of the Kusam auction slots are taken, with the second to last auction ending on Thursday.
The Kusama ecosystem is filling out nicely as potential projects continue vying for auction slots.
According to Twitter user @DonnieBigBags, approximately 2.4 million Kusama tokens are locked in auctions, accounting for more than a quarter of the circulating supply.
Around 2.37 million $KSM tokens are now locked up in auctions.
Nearly a quarter of the entire supply. It's only going to continue to dry up.
I've know of 3 projects buying $KSM off of the market right now, fighting over the 2 remaining auction slots of this round. pic.twitter.com/rUG0XQ5r57
— Donnie (@DonnieBigBags) September 28, 2021
Add to that the over 5 million $KSM tokens being staked, and the total number of tokens locked up comes to around 7.4 million.
With a circulating supply of just 8.47 million tokens, tokens locked in auctions and staking equate to 87% of the circulating supply.
Given the squeeze on token supply, the circumstances for a negative supply shock are in place, likely triggering price rises.
What are parachain auctions on Kusama?
Self-described as Polkadot’s “canary network,” Kusama is an experimental blockchain that provides an interoperable and scalable platform for developers to work with.
It’s built on Substrate, a blockchain kit developed by Parity Technologies, and has a similar codebase to its cousin Polkadot.
The purpose of Kusama is to provide a testing ground for projects to innovate and deploy their own blockchain.
“Many teams will choose Kusama for their dapp or parachain and remain exclusively on Kusama. Other teams will join Kusama as a temporary preparation ground for deployment on Polkadot.”
To that end, developers make use of Kusama’s parachain architecture to set out their offering. But making the cut depends on being able to lease a slot on the Relay Chain via a permissionless auction mechanism.
Each auction has an open bidding period of around one week, and the winner is allocated a lease duration of up to 48 weeks, which is split into eight lease periods times six weeks each.
There are 10 auction slots available, with bidding for the tenth final spot ending on October 6, 2021.
What democratizes the process is the use of crowdfunding. Projects can set up crowd loan campaigns to bump up their auction bids. Supporters contribute by locking up their $KSM against their chosen project until the end of the lease.
Rewards are often distributed for supporters, but this is structured according to each individual project. They often take the form of airdropped tokens in a ratio dependent on the amount of $KSM contributed.
Who are the leading projects in the latest auction?
At the time of writing, we are approaching the end of the 9th auction.
There are two projects in the running. Leading is Heiko Finance, with 196,834 $KSM tokens bid. Heiko Finance is a DeFi offering providing lending, staking, and borrowing.
And there’s Altair, which has more contributors but combining to give a lesser total bid of 139,313 $KSM tokens. Altair’s use case is tokenizing real-world assets.
Markets appear to have bottomed from the recent downturn. Kasuma is among the top gainers, up 6% in the last 24-hours to $338.