What You Need To Know About Equilibrium’s Upcoming Parachain Lease Offering
After completing several noteworthy milestones while building up our Polkadot-based interoperable money market, we’re gearing up for a Parachain Lease Offering (PLO).
Since we began developing on Polkadot, we’ve released our core business logic on the public testnet, held a token generation event, and even won a grant from the Web3 Foundation for our efforts. As such, we are one of the best prepared projects on Polkadot and now we are turning our attention to our pending PLO, a two-phase fundraising mechanism that we’ll use as our launchpad into 2021.
We know our community will be interested to know some details on our fundraising strategy, and we’re ready to share those details now. We are coming from the assumption that it will take 1 million DOT to secure a Polkadot parachain slot, so we are taking the determination of the PLO’s exact dates very seriously. We’ll set the DOT cap for both phases of our PLO soon and announce accordingly.
Meanwhile you can register for the whitelist here and grab your bonus. Early birds will get a 1% bonus in EQ on their contributions to the PLO made from blockchain addresses indicated in the whitelist application form. Note, that all whitelist subscribers will also receive referral links which they can share to earn bonuses for other users they recruit for the PLO.
Here’s what else you need to know.
Where we are coming from
Despite some remaining white spots about the parachains on Polkadot, the fundamentals are known and we have used them to work out key assumptions on the auction process and required resources. These assumptions are based on the current DOT circulation supply and the technical requirements applied to parachains. Let us give you some numbers that have shaped our PLO strategy.
From these figures we see that there is roughly 400M DOT available for bidding on the parachain auctions (assuming that the remaining DOT will be used for validators and inaccessible during the auctions). This is where competition will happen between Substrate projects to secure one of the 100 available slots. Our strategic assumption: we expect a parachain auction participation rate of 25% of the DOT in circulation.
As such, we have an estimated the amount required to win a parachain auction — 1M DOT with a staking opportunity cost of 20%. These numbers lay the groundwork for our other considerations and overall strategy.
Equilibrium’s two-phase Parachain Lease Offering strategy
We are going to raise DOT as a means to secure parachain slots in two consecutive phases. Phase 1 will be a token swap, Phase 2 will be the crowdloan (the auctions on Polkadot).
During Phase 1 users will swap their DOT tokens for our EQ tokens. The crowdloan (Phase 2) will see users contribute DOT directly to the crowdloan module on the Polkadot Relay Chain to receive staking interest in EQ tokens during the parachain lease period.
Phase 1 — the token swap
During this phase, users can exchange their DOT for EQ tokens and earn a bonus that depends on the swap size and selected parachain lease period. Those who swap over 10,000 DOT and commit to the maximum lease period of 24 months get the maximum bonus of 25%. Here’s our latest thinking on how the bonus structure will work:
By swapping their DOT for EQ in this phase, participants are also selecting their preferred parachain leasing period — 12 or 24 months. After Phase 1, the majority of contributed DOT will determine the leasing period for which Equilibrium will actually bid in the parachain auction in Phase 2. Participants whose choice falls to the minority can either follow the majority or opt out immediately and withdraw their DOT.
All DOTs collected during Phase 1 will be administered by a reputable and well-known custodian that will be announced soon. The custodian will be responsible for all operations with DOTs in the interest of participants (including withdrawals and transfers). At the end of Phase 1 the custodian will bid for the selected lease period by transferring DOT to the crowdloan module on the relay chain.
The swap is free of risk since every participant gets the right to swap EQ back for DOT for free at the initial swap rate after the end of the parachain lease. This right will also be executed by the custodian. Participants who execute their right to the reverse swap keep their initial bonuses in EQ.
If Equilibrium fails to secure a parachain leasing slot after repeated attempts within 4 months after Phase 1 ends, all the DOT will be returned to the swap participants.
Phase 2 — Crowdloan / Parachain lease auction on Polkadot
During the auction in Phase 2, users can stake additional DOT and earn EQ tokens as a staking reward. We will match the interest rate that Polkadot offers for staked DOT (currently around 7% APR), while providing an additional premium for users who support Equilibrium by contributing DOT tokens to the crowdloan module.
The premium for a particular contributor will depend on the stake size and vary between 1.5% (minimum threshold) and 5% (ceiling).
Phase 2 is also a risk-free mechanism. At the end of the parachain lease, contributors will get their DOT back automatically. This refund is executed by the Polkadot crowdloan module, which is decentralized and permissionless.
Remember, if Equilibrium doesn’t secure your parachain slot for your chosen timeframe (12 months or 24 months), you will get all your DOT back.
Why you should participate
This PLO matters because it is a meaningful way to get your hands on our core system asset, the EQ token, while receiving bonuses according to the above schedule and simultaneously enhancing Equilibrium’s liquidity and functionality. Our token swap in particular will be a perfect way to gain and use your first EQ.
After a parachain leasing slot is secured, the path is free for the value of our token to grow. Since we are not planning token sales, if you would like to be among the first holders of EQ during the formative period of our platform and use them for our products and services, as well as participating in governance, then the PLO is an opportunity to get EQ.
If you hold DOT and you’re similarly committed to seeing the DeFi market achieve its full potential, then you’re in a position to help us achieve many more milestones in 2021. We’ll announce the dates for our token swap soon, so stay tuned!
Don’t miss registering for the PLO whitelist here: https://equilibrium.io/plo/whitelist and automatically get a 1% bonus on your contribution to the PLO. You will also receive a referral link and if anyone uses it to participate in the PLO, you will get a referral bonus.