Eleven projects joined the race when Kusama parachain auctions started on June 15. A few more got in during the latter auctions of the first batch. With impressive gains to the tune of 900,000 KSM (approximately $180 million, at the time of writing), are Kusama auctions still fair and democratic, or is everything already decided by whales? Let’s analyze the available data and attempt to illuminate the current standings.
Where we are now
As announced on June 8, the first batch of parachain auctions on Kusama includes five events, each of them one week long. During the auction, projects are bidding in Kusama’s native token, KSM, for their parachain slots, and it requires roughly 100,000 KSM (or about $20 million) to win. To fund their bids, projects run crowdloan campaigns. A crowdloan is an innovative crowdfunding mechanism that lets ecosystem participants stake KSM for their favorite parachain candidates and get rewards in their utility tokens.
The first auction ended, and Karura — the decentralized finance (DeFi) hub of Kusama — was distinctly in the lead with an incredible bid of 501,138 KSM (about $100 million). The second auction ended just a few days ago, and there was little doubt about its winner. Moonbeam’s canary network, Moonriver (205,935 KSM staked), was steadily winning by 50% over the nearest rival, Shiden Network (100,544 KSM). In turn, the latter is overcoming Khala Network (27,474 KSM) by 73%, and it looks like an obvious leader for the third auction.
Here’s the current leaderboard:
Based on this graph, readers may conclude that the first three auctions were bought by large-scale investors for their sock puppet projects, while the real competition is around the fourth and the fifth auctions. But both conclusions are far from reality, and I will explain why.
Parathread ID 2000
The first-ever crowdloan campaign was registered for a candidate under the ID 2000 and took the first line in the list of campaigns on the Kusama network. The name of the project, Karura, is symbolic. Kusama’s logo has a bird’s shape, while Karura is a hybrid with a human torso and bird head, which is symbolic in Japanese mythology. Perhaps this is directly related, as if an established connection with Kusama could make people godlike and inevitably stand Karura creators in line with gods who rule Kusama’s being.
Karura’s crowdloan kicked off on June 11, a few days before the first auction, and no other campaign saw such enormous interest. On June 17, Karura collected an unprecedented 400,000 KSM. The total amounted to 501,138 KSM, making Karura the unconditional winner of the first auction. Let’s take a deeper look at the breakdown of the campaign’s contributions:
The deposits on Kraken came evenly spread during the entire period of the campaign and we couldn’t outline any particular activity bursts. It looks like Kraken users demonstrated an elevated interest in the Karura crowdloan campaign, which was anticipated, given that Karura launched its crowdloan before others.
We can further aggregate the above tables into nominal whales (who gave more than 1 million KSM), average holders (who contributed from 50 to 1,000 KSM), and retail users (who contributed less than 50 KSM). The aggregated data looks like this:
Despite a substantial share of whales in Karura’s crowdloan (46.58%), the results still indicate extremely high activity by retail contributors. The total of 16,896 individual participants in this campaign is almost three times the number pertaining to Moonriver, the next-closest contender:
With all the positive sentiment around Karura, there are two questions left to be answered. First, without doubting its desire to make a safe bet, is it worth overpaying for the parachain slot by that much? Second, how is it planning to maintain KAR’s implied value to guarantee contributors some sort of reasonable rewards on their KSM, given that the token is not live yet and there will be inevitable selling pressure when it launches?
Whales don’t rule these waters (yet)
Interestingly enough, the overall picture isn’t changing much if we look at two other top leaders of the race: Moonriver and Shiden
Moonriver is bringing Ethereum smart contract functionality to Kusama. The parent project is quite popular in the Polkadot ecosystem, and its sister chain saw significant demand on Kusama as well. Moonriver was clearly winning in the ongoing second auction, with 205,935 KSM contributed by a crowd of 5,977 participants:
If we aggregate data by categories of retail, average and whale participants (as we did previously for Karura), it will look like this:
We will see almost the same lineup if we consider the second-biggest contender in the current race, Shiden. Shiden is a Kusama-based sister chain of Plasm, a network for DApps supporting the Ethereum Virtual Machine and WebAssembly.
Shiden has raised 100,544 KSM from 4,192 contributors, while having 50% less than Moonriver’s bid. Here’s the breakdown of contributions and, just like Karura, the biggest single contribution comes from the Kraken exchange:
When we group by category, we will see that Shiden enjoys slightly higher attention from retail and middle-sized contributors than Moonriver, with a bit less domination by whales:
As such, the whales share an average of 48% of the contributions in these three top crowdloans. Of course, any of these projects could hardly win a slot without their support. But the impact of retail (especially mid-sized) participants is impressive — over 50% of all participants on average.
As you can see, the notion that whales bought out the first three slots is incorrect. But let’s find out how much competition is around the last two auctions for now.
Is there life on Mars?
Since it’s all clear with the first three parachains, it may seem that activity around the last two auctions should be even more intense. On one hand, there are many more projects competing for the remaining slots (there are already 10 of them and a couple more joining the competition). On the other hand, there is no single project claiming to be an unconditional leader, so uncertainty should’ve incentivized the community to support their favorites.
But when we see the actual KSM amounts contributed for these 10 remaining projects, they look quite modest. Altogether, these 10 projects have collected just around 10% of the funds raised by the top three parachain candidates. Given the 73% advantage of Shiden over its closest competitor among the 10, Khala Network, it’s very unlikely that there will be a real competition between them for the third slot.
Moreover, there is a dramatic gap in the number of contributors between Shiden and Khala Network, whose campaigns currently see the most activity in the community out of the other remaining projects (4,192 contributors vs. 1,426 contributors, respectively). The other nine contenders combined do not even have half of Shiden’s individual contributors.
Given the circumstances, is the interest around Kusama parachain auctions declining, or are there other reasons behind such modest results for these 10 projects? How will the situation develop as we approach the last of the auctions?
Looking into a crystal ball
By far, any particular forecast could be premature, given that the fourth auction starts on July 6, more than a week from now. The landscape can drastically change as we approach this auction.
Retail contributors are most likely striving to catch their last chance to participate in the major crowdloan campaigns by Moonriver and Shiden. The remaining campaigns are out of their scope for now, and their factual activity may show up closer to the last two auctions. In this sense, these major crowdloans are currently suppressing the smaller ones.
Additionally, the remaining 10 projects may have some whales or their own big allocations up their sleeves. It would be optimal for them to reveal those only when the third auction approaches its final phase. This strategy might be one of the reasons why we have yet to see as solid numbers here similar to major crowdloan campaigns.
To make further assumptions, we will group the remaining pretenders by the nature of the current participation in their crowdloan campaigns. As such, we are essentially coming to the following three groups:
Organic: The group where the distribution between retail and whale participation is similar to the distribution in the major crowdloans at its highest.
Here we can see Khala Network is the current leader among these 10 projects. KSM volume is evenly spread across user groups in these campaigns and overall distribution looks pretty healthy. There are not that many whales supporting them now, and their average contribution is around 2,700 KSM.
Monopolistic: The group where whales heavily dominate over retail participants.
Whale participation nears an even 90% in some of these campaigns amid quite moderate interest from the community and retail. On average, each whale contributed over 3,500 KSM to these crowdloans.
Democratic: The group where retail participation dominates over whales, or whales haven’t contributed anything yet.
As we can see, whales are not here yet, while most funds come from mid-sized contributors. Darwinia Crab network stands out among these projects, as it attracted the most community interest compared to others in this group.
Assuming that the retail interest will shift back to the remaining 10 projects after the third auction ends, each of these groups should follow some type of strategy to win:
Organic: They appear to be the most balanced while seeing consistent interest from both retail and whale contributors. Therefore, they should keep this level of consistency, but they need to keep in mind that both categories are extremely important for a positive outcome.
Monopolistic: Of course, it depends on the “hidden jokers” to better develop community engagement. In the end (and as we see from the experience of the top projects), retail support is crucially important.
Democratic: We don’t know if there are behind-the-scenes arrangements with whales, perhaps ones that they are keeping them secret until the right moment. If not, however, they could be in trouble. It is unlikely that their communities will carry them to the top positions by the end of the third auction. If so, the influx of new contributors will dry up, as the crowd will be avoiding the risk of missed opportunity by betting on a knowingly wrong horse.
Apparently, some projects did their homework to analyze the data behind the current campaigns. They recognized the impact of retail and mid-scale contributors, along with the importance of accumulating as many funds as possible before the fourth auction. These players are making attempts to align their strategies with these takeaways.
For example, on June 25, Khala Network — Phala’s canary network that brings confidential cloud computing to Kusama — announced an increase in its rewards on contributed KSM. Instead of 120 PHA, all contributors will receive 150 PHA if Khala Network manages to collect 30,000 KSM. It seems like the project considers the milestone of 30,000 KSM an important threshold that will let it win the slot. On top of that, it will be airdropping nonfungible token (NFT) gifts to all crowdloan participants who contributed more than 1 KSM. Altogether, these steps point out the retail focus of Khala’s campaign.
Another example is Genshiro, a canary network of Equilibrium and the second of two high-caliber DeFi platforms competing for Kusama parachains. On June 24, the day before Khala, the project announced amendments to its crowdloan campaign, including an improved reward structure where rewards for contributions under 50 KSM were doubled from 1,000 GENS to 2,000 GENS on each KSM. Additionally, participation over 50 KSM is considered large-scale now, and contributors will receive a 20% bonus, bringing rewards to 2,400 GENS on each KSM. Besides this, it decided to make 10% of the reward allocations unlock right after its parachain launch.
The bottom line
The first three parachain winners are already indisputable amid the high involvement of retail participants in their campaigns. Having said that, the outcome of the last two auctions primarily depends on the behavior of the crowd and the availability of “hidden” KSM allocations.
As we shall see, some projects like Khala Network and Genshiro are already preparing for the potentially hard competition for retail participants, as shown during the last two auctions. But eventual winners will rely on the successful combination of whale-backing and good marketing campaigns that will maintain elevated interest up until July 13.
Will the intrigue persist for the last auctions? This will depend on if the crowd’s interest and pockets get drained during the first three auctions. If so, all the competition will come down to the ordinary muscle-flexing in the whale support. Otherwise, we can expect a fascinating contest among the most qualified teams in the Polkadot and Kusama ecosystems very soon.
All the data used in this article is from the auction standings as of June 30 at 8 am UTC.