Ankr Docs
Parachain Liquid Bonding
**About Kusama and Polkadot Parachain Liquid Bonding **
Kusama and Polkadot Parachain slot auctions are among the most widely discussed and anticipated events in the blockchain space. They provide the winning projects with access to innovative multi-chain infrastructure while offering an opportunity for regular audiences to be involved in the vibrant Polkadot ecosystem. Through crowdloan campaigns, anyone can contribute KSM and DOT to support the bids of their favorite projects, and receive their tokens as a reward.
However, these rewards have their limitations. Once a winning project secures a Parachain slot, crowdloan participants find their tokens locked up for up to two years with Polkadot, and 48 weeks with Kusama.
To tackle this issue, Ankr introduces Parachain Liquid Bonding – an innovative instrument that unlocks the liquidity of bonded DOT, collects rewards from winning Parachain slot auctions, and distributes token rewards from the winning project’s to Parachain Liquid Bonding token holders.
Rewards from winning slot auctions are expected to become higher than Polkadot and Kusama staking rewards, which incentivizes more Parachain Liquid Bonding token holders to contribute their DOT and KSM tokens and benefit from a higher ROI.
Why Parachain Liquid Bonding
Like Liquid Staking, Parachain Liquid Bonding has other benefits beyond liquidity and solves a general problem specific to Proof-of-Stake, as well as Parachain slot auctions: capital inefficiency
By solving the capital inefficiency of Parachain slot auctions with Parachain Liquid Bonding, Parachain Liquid Bonding token holders benefit from:
  1. 1.
    Liquidity: Parachain Liquid Bonding enables liquidity on bonded DOT through an upcoming auction marketplace on Bounce Finance.
  2. 2.
    Higher Rewards: Ankr StakeFi collects rewards from projects winning Parachain Slot Auctions and enables Parachain Liquid Bonding token holders to claim rewards. To compensate contributors for the illiquidity risk of bonding KSM/DOTfor up to 48 weeks/24 months, rewards are expected to be significantly higher than KSM/DOT staking.
  3. 3.
    Lending/Borrowing: OnX Finance is developing a lending contract enabling it to collateralize Parachain Bonds and borrow DOT, which can be used to free up liquidity, or buy more Parachain Bonds on Bounce Finance.
  4. 4.
    Opportunity to become a DeFi Parachain Bond Market Maker
    Estimate the fair value of Parachain Liquid Bonding tokens and buy below your fair value and sell above your fair value. The bid-ask spread (difference between your buy and sell price) will become your market marking revenue.
How Parachain Liquid Bonding Works
User contributes with DOT or KSM to their preferred project that is currently running a Polkadot or Kusama Parachain crowdloan to participate in the Parachain Slot auction.
DOT or KSM gets allocated to the project's crowdloan on Polkadot.js wallet making the user an indirect participant in the crowdloan (through Ankr StakeFi)
The project uses the crowdsourced DOT to participate in the Polkadot Parachain Slot auction.
If a project where a Ankr StakeFi user contributed with DOT wins a Parachain slot, the Ankr StakeFi user will be able to claim a Polkadot Parachain Bonds from that project (aDOTp Project Name) as ERC-20 tokens, for which rewards will be claimable during the duration of the lease period and are calculated based on proof of time. Initially, only projects having existing ERC-20 tokens will be supported.
Once the user gets the reward, Ankr will charge a 5% fee on the rewards, out of which 2% goes to Ankr’s corporate treasury and 3% will go to Ankr’s buyback program.
For liquidity, the Parachain Liquid Bonding token holders will be able to either sell on Bounce Finance auction marketplace, or collateralize the Parachain Bond and borrow DOT on ONX Finance.
Get started
Parachain Liquid Bonding is available here!
Last modified 6d ago
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