The Polkadot Parachain Auction

[sota]

To become a Polkadot Parachian, we have to win the Polkadot Parachain Auction. The specific mechanism is not revealed yet.

During the Parachain auction, we will have a DOT lockdrop. By locking DOT, you can get PLM tokens with the highest bonus rate. The calculation formula will be

Your PLM = Locked DOT × 2000 (Locked duration bonus) × α3

Since we have a redenomination, the α3 is not decided yet. To win the auction, we will decide the mechanism, etc here.

Goal

• Attract DOTs and win the auction.

Unknown Parameters.

• Parachain auction date
• The duration of the auction
• How often the slot is released

We need to decide the followings

• Whether we need a vesting period or not.
• Whether we need to set up a cap of PLM for DOT lockdrop

[Stakenode.dev]

Nice. We can discuss all Here.

Regarding points to decide:

1. Vesting period - Sota do You mean vesting Time for received PLM from 3rd Lockdrop? - If Yes, i think there should be No vesting Time. This could cause situation when DOT lockers will have No acces to their PLM on the Time of listing If i understand this correctly, and ETH lockers will have full acces to their PLM. This can efect in people will be sceptical to lock DOT and do not have acces to their PLM.
   (This is Just first thing which came to my mind when i read Your post, and this is like on hot, but let’s wait for others comments)
2. Regarding the cap, - How You see this? That one have a limit in locking DOT’s to have also a limit cap for PLM this way? - I think that If our goal is to win the first auction and this is the maint Point in pipeline Now, we should not make Any limitations. But i know that You are refering Here more to supply i think that there is a match calulations You mode regarding potential supply and further actions regarding that.

My question for that Point would be what would be the auction rules. If there will be like fixed cap we have to achive in Locking DOT’s to win the slot? Or this will be more first come first serve? How many slots will be available and do You maybe know How Big competition exactly will there be? Like How many project will try to get available slots?

I think the most cricial is to win the auction in first place So we have to adjust the lockdrop rules as much as we can for that. But untill we do not know auction details we can not set Any Strategy right?

[Stakenode.dev]

And i think we have to think about the lockdrop formula, or Im missing something.

If the formula would be alpadot quantity2000 this would mean that DOT lockes will have much less PLM when locking than ETH lockers.

If alpha would be around 0.37 (and i think this was the value around), So taking that as example:

I have 4000K usd and want to place in lockdrop and Now If i take prices as today:

0.4411 ETH360*1600= 2 787 840 PLM

0.37900 DOT2000= 660 000 PLM

Or am i missing something? I sleept like 3 hours So this could be possible

[public_sate]

Let’s keep it simple about marketcap.

The advantage of having a marketcap for PLM issuance volumes is obvious. This section discusses the metrics involved in establishing a Marketcap.

The amount of PLM issued per $1 of 1st Lockdrop’s 1000 days Lock is
0.536377303928577 * 1600 = 858.203686286…
Is.
In contrast, the original DOT Lockdrop was scheduled to issue at a multiplier of 2000, or 1.25 times the volume of issuance. Taking into account the number of days (2000 * 1000)/(1600 * 720[2 years]) = 1.73611… times.

That means that the amount of PLM issued when you simply lock the DOT for 1$ is
858.203686286 * 1.25 = 1072.75460786…
It is perfect from an incentive standpoint if you exceed the

Let’s keep it simple.
The amount of PLM issued per $1 of 1st Lockdrop’s 1000 days Lock is
0.536377303928577 * 1600 = 858.203686286…
Is.
In contrast, the original DOT Lockdrop was scheduled to issue at a multiplier of 2000 or 1.25 times the volume of issuance. Taking into account the number of days (2000 * 1000)/(1600 * 720[2 years]) = 1.73611… times.

That means that the amount of PLM issued when you simply lock the DOT for 1$ is
858.203686286 * 1.25 = 1072.75460786…
It is perfect from an incentive standpoint if you exceed the.

[public_sate]

From here, consider the DOT’s dollar price needed to win at the Parachain auction.
Assuming this is M$, we can take a cap to be M * 1072.75460786 PLM.

Assuming you need $10 million.
10,000,000 * 1072 = 10,720,000,000 PLM is issued.

The final number of PLMs issued after 2nd Lockdrop is closer to 10,000,000,000 PLMs. In this case, it is possible to simulate the final issuance of 20,000,000,000 PLMs.

[cooltigerjp]

• Whether we need to set up a cap of PLM for DOT lockdrop

It is important to have a cap of PLM for DOT lockdrop.
Too much PLM will be harmful to the contributor who do not have dots but only have eths
in first and secondary lockdrop.

It maybe good to set the cap in 3rd round equivalent to the total number in 1st and 2nd lockdrop.

[Poggi_Luca]

I agree with @Stakenode.dev about vesting period. We have to remove all barriers in order to attract investors using DOT.
In addition I don’t know if will have a cap for PLM only in 3rd lockdrop is a correct decision.
As written above, I suggest to remove all barriers and attract too much DOT lockdroppers as possible.

About phases, the order should be: end of 2nd lockdrop, community reward, 3rd lockdrop + auction, redenomination, transition from PoA to NPOS, …

[sota]

@Poggi_Luca @Stakenode.dev Winning a Parachain auction is important but in this case, the supply side can be too much and the market can be crashed. How could you manage this?

[Stakenode.dev]

Sota, i read the @public_sate post regarding the maths for the supply.

For me all is clear Now, - we have fo fix the cap for DOT lockdrop on the auction requirements.

Assuming there will be 10MLN usd needed to win the auction - than we have to fix the cap to reach 10MLN Just like @public_sate described.

This is what i had on my mind, that If we will know the requirements to secure the auction - we have to set the supply on that level, to match the requirements and the cap should be set regarding needed value to secure the auction. We should not let unlinited locks, only as much as needed to secure the auction and nothing more - that is How i see it Here

[public_sate]

Here’s a discussion of the token lockup.

This section discusses the needless of lockups.
At the start of DOT Lockdrop it is extremely likely that PLM will have value in the market. In this situation, the following strategies are possible when distributing it in the same manner as a real-time lockdrop

1. lock the DOT.
2. Get the PLM.
3. Sell the PLM.
4. Buy the DOT with the proceeds of sale in 3.
5. go back to 1.

This assumes that the price of the PLM will be arbitraged against the DOT’s opportunity loss as a benchmark.
Estimating the opportunity loss from DOT Lock over two years would be difficult to realistically estimate given the volatility. As a result, there is a significant potential for a downside effect on the value of PLM.

Therefore, DOT Lockdrop will wait until after the Parachain Auction results are announced.
In this case, there would be nearly double the amount of new PLMs issued from the aforementioned Cap estimates. A significant dilution in value would occur at this time. This is not negligible, especially for prior holders.

For this reason, it is better to adjust the number of PLMs issued under the DOT Lockdrop by allowing for a fixed period of lockup to be released gradually, so that the number of PLMs issued increases as the PLMs grow.

[public_sate]

Now, let’s consider a realistic lockup rule.
I don’t know of a framework for determining a specific lockup period.
So the key will be how participants are incentivized to participate in the DOT Lockdrop to increase or decrease their incentive to participate.

Suppose that the PLM issued in DOT Lockdrop has the following Lockup rules

• The entire PLM would be locked up for two years.

This can be thought of as follows

• A European call option that allows you to purchase the PLM for $0 after two years.
• You can get this right by paying an option fee for the opportunity to lock up the DOT.

In other words, there is an incentive to participate if the value of the PLM after two years is higher than the price of the opportunity loss.
Here are a few issues.

• In practice, the user undertakes liquidity risk.
• A simple value comparison with 1st/2nd Lockdrop is no longer possible.

Do you have any question, opinion or advice?

[cooltigerjp]

List the PLM on exchange before parachain auction like Phala network , and show the value of our community.
If the plasm is a real good project , there will adequate doter investors join us.
There will be a positive feedback on the PLM value during the auction.

the scenario like below:

while auction
  if  
      1 PLM = 0.01 u
      1 DOT= 5 u
      1 Parachain VALUE  =  10,000,000  u
 then
     CAP of issue =  1,000,000,000 PLM 
     DOT locked amount  =   2,000,000  DOT

My conclusion is let the value of PLM determine the 3rd round issue amount.

[Poggi_Luca]

yes, but as I know parachain auction is capped…so also DOT lockdrop will be capped automatically

[Poggi_Luca]

I think that lock PLM from DOT Lockdrop for 2 years is too much and it will be a disincentive for users…but we can lock PLM for the time of auction! In addition we avoid the arbitrary problem above

[public_sate]

The theoretical upper limit for Parachain Auction is not realistic.

The current total supply of DOT is approximately 1,000,000,000 DOT.
About 30% of this is assigned to Auction. It’s 300,000,000.
Assuming 10 Parachain Slots for 2 years, we need 1/10 of this, 30,000,000 DOT.

Current

1 DOT = 4.307 $

So

30,000,000 DOT = 129,210,000 $

And the PLM cap that must be secured in this case is
It’s 129,210,000,000 PLM. This is about 12 times the total supply of now.

[neo]

That is correct but you may only need 1/100 as the assumption is there will be 100 parachains. So 3,000,000 DOTs instead of 30 million.

[neo]

I agree that some people may sell PLM but if the project is food, you may get the opposite.

I don’t think the DOT lockups should be treated differently then ETH. The PLM should be released instantly. DOT holders waited for 3 years from initial sale back in 2017.

[Poggi_Luca]

We have to wait for Web3 info, news and updates… We don’t have enough infos to disclosure about 3rd lockdrop atm

[woxiet]

I think the third round of dot lock-in needs to limit the total amount,Otherwise it will cause major damage to the token economy, Setting the cap of plm will also motivate people join in.Like me,if set up the cap i will continue to participate in the third round If the total volume keeps rising, people may stay on the sidelines

[public_sate]

There is a claim that you shouldn’t lock up, but what if you get option for getting PLM?
This option can be available for sale in the market.