The Full GIGA-BRAIN Plan 🧠

In crypto, opportunities are everywhere but the really great ones only show up every once in a while – we estimate them to happen 2/3 times per year only. We must also take into consideration that with time and the evolution of this industry, that frequency will only decrease.

For instance, the last one we jumped on that turned from a short-term to a long-term hold was SOL. We rode it from $10 until today, where it’s currently trading at $240+ – we like to call it our “accidental” 20X haha.

The latest one is the second part of an investment that started in August 2020, where we ended up being bottom buyers. Today, we look at what’s coming in its ecosystem and can only help feel like Leonardo.

With that being said, Cryptonary is proud to present to you their Full Giga-Brain Plan🧠. We’ll be going through our strategy in full as well as share our personal perspective on this one.

Disclaimer: Not financial not investment advice. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.

 

Yes, the answer is Polkadot Parachains and here’s exactly how we’re navigating the waters.

 

Disclaimer: Not financial not investment advice. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.

 

The long-awaited Polkadot parachain auctions are finally here. After analysing the hype around Kusama parachains and the interest and capital that has flowed there, we are extremely excited to participate in the Polkadot Crowdloan campaigns.

We have been covering the build-up to Polkadot Parachain auctions for a while now, but the time is finally here to reveal our Giga-Brain strategy. We have selected our top picks based on weeks of research – these are the projects we believe have the best mixture of fundamentals, rewards, the chance of winning, and backing.

Outlined in this journal is a brief rundown of the fundamentals of each project, the tokenomics of the Crowdloan campaign, bonus rewards, and the structure of the vesting schedule. We also have outlined our thoughts and why we chose these projects, as well as our allocation to each – one of the most comprehensive reports we have ever done! So without further ado, let’s get into it.

 

TLDR

  • The Crowdloan contract will launch on Wednesday 4th of November, 6.15pm GMT.
  • We will be allocating 50% of our overall DOT holdings to Parachain auctions.
  • 30% of this will be allocated to the first batch, with the remaining 20% to be allocated to the second batch. (The dates are listed here.)
  • Note: The minimum amount that can be loaned for each Parachain is 5 DOT.
  • Our top picks and allocations for batch 1 are as follows:
    • Acala: 7.5%.
    • Moonbeam: 7.5%
    • Parallel Finance: 4.5%
    • Astar Network: 4.5%
    • Manta Network: 3%
    • Darwinia Network: 3%
  • Our logic for these picks can be found at the end of this report.
  • For all projects on this list, DOT will be locked for 96 weeks in the event of a win.
  • If the project does not win a slot in the first batch, DOT will be returned around the 16th of December (as a rule of thumb).
  • Any funds returned to us in the event a parachain does not win their auction will be used in the next batch.

 

Parachain Analysis

There will be 10 projects participating in the first batch of Polkadot Parachain auctions, but there are only 5 slots available. In order to figure out what projects we would like to back we have to take into consideration a few factors:

  • What does the reward structure look like? (% allocation, any bonuses?)
  • What does the vesting schedule look like? (How many tokens are available immediately? How many vested, over how long?)
  • 2 years is a long time in crypto, is the vision for the project something we believe warrants conviction and an 18-24 month commitment?

The only point of reference that we have to analyse what could happen during the first batch of Polkadot Parachain auctions is the Kusama Parachain auctions earlier this year. Kusama is the canary network for Polkadot, a kind of testbed for trialling Parachain technology. Some projects looking to participate in the Polkadot ecosystem have “sister” projects on Kusama. We can look at how those projects performed during the first Kusama auctions to gauge potential interest.

For reference:

  • Karura is the canary network for Acala.
  • Moonriver is the canary network for Moonbeam.
  • Shiden is the canary network for Astar.
  • Bifrost is still Bifrost on Polkadot, but they will migrate from Kusama to Polkadot.
  • Khala is the canary network for Phala.

These are the projects that won the first 5 parachains on Kusama. Note that only Acala, Moonbeam, and Astar will be participating in the first Polkadot auctions.

In terms of who will win the first Polkadot auction – Acala if we go purely based on the Karura bids. As can be seen above, Karura massively outpaced the competition in raised KSM from the start, but past performance =/= mean future results. Moonriver came in second by a fair margin, which would suggest to us that Acala and Moonbeam are the obvious candidates for taking the first and second Parachain slots on Polkadot.

Since the launch of Kusama Parachains, the tokens for these 5 projects have been listed on exchanges and so the market has an opportunity to value the projects.

The column on the left shows the USD value of the tokens allocated to each KSM raised during the auctions. For reference, the price of KSM at the time of writing is ~$440. Please note that these projects are still in development with new features being rolled out regularly, and some of them are still essentially in the testing stage.

We had a member ask if this was going to be the same as The Journey series that we did in the past. The short answer is no – these are longer-term bets on the Polkadot ecosystem delivering on its vision. We are not expecting short term gains here. It is also important to remember that the DOT is not being spent, it is being loaned – it’ll be returned after the lease period. The bet here is that the Polkadot ecosystem is at ground-floor level and will perform well as development and activity grows, and capital flows in.

We have our bets for the first and second Parachain slots, but what about the rest?

For that, we must look at the rewards structure and incentives, as well as the utility and vision for each project.

 

Project List

In no particular order, this is the list of projects that will participate in the first batch of Polkadot Parachain auctions. Let’s do a brief overview of the main contenders.

Moonbeam (GLMR)

We have covered Moonbeam in more detail here; however, here’s a quick recap:

  • Moonbeam is essentially a bridge that allows Ethereum developers to also develop on Polkadot using Solidity, the programming language used for Ethereum smart contracts.
  • GLMR is the utility token native to the Moonbeam Parachain and is used for collator rewards, governance, paying transaction fees, and “gas metering” for both Polkadot and Ethereum smart contract execution.

The Moonbeam Crowdloan rewards structure is as follows:

  • 100 million GLMR (10% of supply) will be allocated to Crowdloan rewards.
  • Crowdloan participants will be allocated GLMR proportionally to their percentage share of the total DOT raised for the project. Individual Allocation = (Individual DOT Contribution/Total DOT Contributions) * 100 Million GLMR.
  • 30% of individual GLMR rewards will be available immediately upon claiming, with the remaining 70% linearly vested (per block) over the course of the Parachain lease (96 weeks).
  • Loaned DOT will be returned after 96 weeks, or if a slot is not won then at the end of the campaign on the 16th of December 2021.

There are various terms and conditions for participation. Pre-registration is open and can be found here along with the T&Cs. An email address is optional, and a small amount of DOT is required to sign the terms and conditions on-chain.

Acala (ACA)

Quick recap of Acala:

  • Acala is a cross-chain DeFi project that aims to be the prime DeFi and stablecoin liquidity hub for the Polkadot ecosystem.
  • ACA is the governance and utility token for Acala network and will be used for voting rights in the DAO, paying fees, and as a contingency for recapitalising the collateral pool for the aUSD stablecoin in the event of insolvency.

One interesting aspect of the Acala Parachain auction is the implementation of Liquid Crowdloan DOT (lcDOT):

 

  • Investors in Acala can choose to participate in one of two ways.
  • The first way is loaning DOT exactly the same as any other Crowdloan campaign – DOT is locked for 2 years, after which the loaned DOT is returned.
  • Alternatively, they can loan their DOT through the lcDOT option.
  • If loaning through option number 2 investors will not only receive an allocation of ACA in proportion to the overall amount of DOT loaned, but they will also receive lcDOT on a 1:1 ratio equal to the DOT they have loaned.
  • This results in the investor remaining liquid (able to access their capital) and negates the opportunity cost risk we mentioned at the start of this journal.
  • The lcDOT will be redeemable for actual DOT at the end of the Parachain lease when the Crowdloan DOT will be unlocked.

Acala has also offered bonus rewards for completing a series of quests, here is the link. By completing these tasks (they are extremely simple to complete) a referral code will be sent to your email address which can be used not only by other people to get you more rewards, but you can also refer yourself and gain up to 10% extra as well (5% as a referrer, and 5% as the referee). To summarise, the quests are:

  1. Create a Polkadot Account and connect a wallet (50 XP)
  2. Verify an email to receive updates on Quests (100 XP)
  3. Put some DOT into the wallet (150 XP)
  4. Contribute DOT to the Acala Crowdloan to receive an ACA allocation (200 XP)
  5. Claim rewards – if you have 500 XP you will receive an additional 2% in rewards and an exclusive Acala NFT. Only Quests 1 and 2 are required for the referral code.

IMPORTANT: The account that is used to complete the quests must be the account used in the Crowdloan to receive additional benefits.

For those who are already set up, simply verifying an email, connecting a wallet with DOT in it, and clicking the quests will be sufficient.

The Acala Crowdloan rewards structure is as follows:

  • 170 million ACA (17% of supply) will be allocated to Crowdloan rewards, with 20 million of that allocated to bonus rewards.
  • Crowdloan participants will be allocated ACA proportionally to their percentage share of the total DOT raised for the project. Individual Allocation = (Individual DOT Contribution/Total DOT Contributions) * 150 Million ACA (excluding rewards).
  • 20% of individual ACA rewards will be available immediately upon claiming, with the remaining 80% linearly vested (per block) over the course of the Parachain lease (96 weeks).
  • Loaned DOT will be returned after 96 weeks, or if a slot is not won then at the end of the first batch of auctions.

Astar Network (ASTR)

Some of you may have heard of Plasm Network – they rebranded themselves as Astar Network in June 2021. What is Astar Network?

  • Where the primary focus of Moonbeam is bridging to Ethereum, Astar Network aims to become the multi-chain bridge to multiple Layer 1 blockchains.
  • Astar Network is a dApp hub that supports EVM and WebAssembly Smart Contracts (WASM), enabling many smart contract architectures to communicate with each other.
  • Astar integrates Layer 2 scaling solutions (Plasma, OVM, and zk-Rollups) to improve the Polkadot ecosystems scalability properties – for more information on Layer 2 solutions, click here.
  • ASTR is the utility token for the network and is used for staking, paying transaction fees, governance, and as a deposit/collateral for creating Layer 2 dApps.

The Astar rewards structure is as follows:

  • 4 billion ASTR (20% of supply) will be allocated to Crowdloan rewards, with 350 million of that allocated to bonus rewards.
  • Crowdloan participants will be allocated ASTR proportionally. Individual Allocation = (Individual DOT Contribution/Total DOT Contributions) * 1.05 billion ASTR (excluding rewards).
  • 10% of ASTR rewards will be available immediately after claiming, with the remaining 90% linearly vested over the course of the lease (96 weeks).
  • Loaned DOT will be returned after 96 weeks, or if a slot is not won then at the end of the first batch of auctions.
  • Vested tokens (90% of the total) can be used on the Astar Network for dApp staking.

In addition to the staking incentive, Astar has a rewards and bonus scheme:

  • Early Birds receive a 20% bonus on their contribution if they join before the end of the first auction.
  • Referral – for every 1 DOT contributed through the referral program, an extra 0.1 ASTR will be allocated to the referrer.
  • Early Adopters receive a 10% bonus on their contribution if they participated in the Plasm Lockdrop or Shiden Crowdloan on Kusama.

Manta Network (MANTA)

Manta Network is a privacy-preservation protocol that aims to offer privacy services to the entire Polkadot DeFi ecosystem. Here are the key fundamentals:

  • Utilising the same technology as MINA (zk-SNARKS, for more info click here), Manta is built on Substrate and leverages zk-SNARKs to provide a scalable privacy, offering a suite of products and services that blockchain projects can plug into and improve their own privacy.
  • Manta Network will also offer native products such as a private payment network, MantaPay, and its own decentralised exchange, MantaSwap.

The Manta rewards structure is as follows:

  • 156 million MANTA (15.6% of supply) will be allocated to Crowdloan rewards, with 36 million of that allocated to bonus rewards.
  • Crowdloan participants will be allocated MANTA at a fixed rate of 1:4 (4 MANTA per DOT) with another 1 MANTA available through the MantaPay liquidity event.
  • Rewards will be linearly vested over the duration of the lease (96 weeks). The amount unlocked at launch has not been specified yet.
  • Additional MANTA will be available through various means (outlined below).

The rewards and bonus scheme for Manta is as follows:

  • Early Contribution Incentive – anyone who contributes before the first Parachain auction (11th of November) will receive an additional 10% bonus MANTA, and anyone who contributes after the start of the first auction but before the end of the third will receive a 5% bonus.
  • Binance Early Bird – 6 million MANTA will be allocated to this scheme and can be claimed by anyone contributing through Binance between 4th of November and 11th of November (shared between all Binance contributors on a per-DOT basis).
  • MantaPay Liquidity Event – 30 million MANTA will be available to any Manta Crowdloan contributors that complete milestones on MantaPay when it launches in 2022. Exact details TBC. We’ll cover this in the future if they win their Parachain slot.

Parallel Finance (PARA)

Parallel Finance is a decentralised money market protocol built on Substrate:

  • The Parallel Lending Protocol supports both Polkadot and Kusama assets.
  • Parallel also offers liquid staking where users can stake their DOT and KSM and receive xDOT or xKSM derivative tokens which they can then use for various purposes, one of which is “Leverage Staking”.
  • There are many planned and current use cases for Parallel Finance within Polkadot/Kusama DeFi – Parachain Auction Loans, Interest Rate Swaps, Algorithmic Staking, Parashares, and Decentralised Credit Scoring. The full list of products and services that Parallel plans to offer warrants its own fundamental report (stay tuned).

The Parallel Crowdloan rewards structure is as follows:

  • 5 billion PARA (15% of supply) will be allocated to Crowdloan rewards.
  • The minimum allocation for each Crowdloan participant, excluding bonuses, is set at 1:33 (33 PARA per 1 DOT contributed).
  • Rewards will be linearly vested over the duration of the lease period (96 weeks). The unlock at launch hasn’t been specified yet.

Parallel also has a unique bonus structure:

  • In addition to the base PARA rewards, users will also benefit from up to 40% bonus PARA rewards that will be available for those participating directly through the Fi app.
  • PARA rewards will also be given to users who choose to participate in the other Crowdloans through the Parallel app – more on this later.

Participants can sign up for the waitlist here. There are various tasks that can be completed (following them on Twitter etc.)

Darwinia Network (RING)

Darwinia is another bridging Parachain:

  • A more generalised bridging solution than the other projects outlined above, Darwinia will allow connections to many heterogeneous chains such as Ethereum and TRON.
  • The Darwinia bridge solution integrates zk and Optimistic rollup mechanisms, and offers efficiency, speed, and decentralisation of cross-chain tokens and NFT transfers, amongst other capabilities.
  • The main areas of focus for the Darwinia Network are DeFi, gaming, and cross-chain NFT trading – all key aspects of the growing Web 3.0 metaverse narrative.

The Darwinia rewards structure is as follows:

  • 200 million RING (~10% of current supply) will be allocated to Crowdloan rewards.
  • 10% of the rewards will be available immediately after Darwinia wins the auction, with the remaining 90% linearly vested over the duration of the lease (96 weeks).

Bonus rewards can be earned through the following programs:

  • Referral Program – additional RING can be earned through the referral program (5% for the referrer and 5% for the referee).
  • Early Bird – up to 25% additional rewards for contributing before the second auction (the earlier the better).

There are other incentives but mostly for the top participants (10,000+ DOT contribution). We’ve omitted those to reduce the length of the report.

These projects represent our top picks. Next, we’ll explain our strategy in detail.

What’s the thesis?

Since we will be holding the majority of our DOT for at least the next 2 years, we have decided that allocating a portion to Parachains will be highly beneficial. The main risk is the opportunity cost of having our DOT locked up for 2 years. On the other hand, the reward is that we receive tokens for our loaned DOT – consider it like a form of interest. These tokens give us ground-level exposure to projects developing on the Polkadot ecosystem at no additional cost other than time.

We plan to allocate around 50% of our DOT to Polkadot Parachains, across all batches. This keeps us liquid enough to capitalise on any euphoric moves in DOT price, whilst also adequately exposing us to the Polkadot ecosystem.

After looking at the potential projects and their unique selling points, we have come up with a thesis for each project we think will succeed based on their vision, rewards, and performance of the Kusama equivalent. We have selected 6 projects to improve our chances of backing the right horse – any funds returned from a bid that fails to secure a slot will be used in future batches.

Due to the dynamic nature of the auctions, we may find that one of our picks is massively underperforming in the auctions and so we may re-allocate some DOT to pick another project later in the campaign – we will update if this occurs.

For the first batch of auctions, we will allocate 30% out of the 50%, with the remaining to be allocated over the next batch.

In the next section, we’ll detail our thoughts behind each selection, with our % allocation for each.

Moonbeam (GLMR)

  • Moonriver (MOVR), the Kusama equivalent, has performed extremely well and has recently started integration with SushiSwap, a decentralised exchange.
  • We have high hopes for successful Moonbeam Parachain bid within the first one or two auctions.
  • Connecting Polkadot DeFi to Ethereum DeFi is extremely important and Moonbeam is in the best position to implement this bridge. Coupled with the success of Moonriver on Kusama, supporting Moonbeam is a no brainer for us.

Considering that Moonbeam is one of the more developed projects on our list with links to Ethereum DeFi, we have decided to allocate Moonbeam 7.5% of our DOT.

Acala (ACA)

  • ACA has a deflationary tokenomic model, with a fixed supply of 1 billion ACA.
  • ACA is used to pay transaction fees and those fees are burned.
  • The budding Polkadot ecosystem will need a stablecoin and liquidity hub, and we believe that Acala is in the best position to fulfil that role.
  • Additionally, Karura (the Kusama equivalent) was by far the best funded Crowdloan and so we expect Acala to perform well in the upcoming campaign.

The lcDOT program also adds the additional benefit of opening up some of our loaned DOT liquidity to be used on the Acala network for other purposes. Or, if we choose to, we can sell those tokens and use the liquidity somewhere else entirely. This kind of flexibility is another attractive unique selling point.

Owing to the lcDOT liquidity incentives and the stage of development that Acala is at, we have decided to allocate 7.5% of our DOT to Acala.

Parallel Finance (PARA)

  • Parallel Finance is built to accelerate liquidity and adoption of the Polkadot ecosystem.
  • With a few innovative new concepts, such as Leverage Staking, Parallel has a promising roadmap and should attract substantial liquidity to both the Polkadot and Kusama networks.
  • The Auction Loan product that Parallel will offer when they secure their Parachain should also provide additional incentive for investors to participate in future Polkadot Parachain auctions – beneficial for the entire Polkadot ecosystem.

Due to the innovative roadmap and ambition of the project, we have decided to allocate 4.5% of our DOT to Parallel.

Astar Network (ASTR)

  • Scalability problems have plagued many Layer 1 blockchains.
  • Astar offers a platform where dApp developers can integrate Layer 2 scalability from day one.
  • In addition to scalability, Astar offers developers EVM and WASM compatibility which opens doors for further interoperability – this is important for attracting developer talent to the Polkadot ecosystem.
  • Astar’s focus is providing a scalable, decentralised, and interoperable platform for Web3.0 development.
  • Vested ASTR can be staked which is an additional benefit over the long term.

Due to the versatility of the project in terms of Web3.0 and dApp development, we have decided to allocate 4.5% of our DOT to Astar.

Manta Network (MANTA)

  • We are big fans of the zk-SNARK technology and its one of the main fundamental aspects in MINA protocol that sold it to us.
  • Manta aims to become the on-chain privacy layer for the Polkadot network, amplifying Polkadot’s advantage in decentralisation and interoperability.
  • Calamari, the Kusama related project, performed well in the second batch of Kusama auctions and so we hope that interest translates to the Polkadot Crowdloan campaign.

Manta is still in an early stage of development. However, Calamari network on Kusama won a Parachain slot and so there is obvious interest in the project. We will be allocating 3% of our DOT to Manta.

Darwinia Network (RING)

  • Darwinia Network is our “wildcard” play – it is a bet on the metaverse hype spilling over into the Polkadot ecosystem.
  • If Darwinia secures a Parachain slot it will open up the door to interoperability with various gaming sectors on other Layer 1 blockchains. This is a fast-growing sector, and we believe that Darwinia can spur growth in that area within the Polkadot ecosystem.
  • Darwinia was included in the Polkadot light-paper and has been highlighted as one of the projects to watch by Gavin Wood, the creator of Polkadot.

Crab Network, the Kusama counterpart for Darwinia, failed to secure a Parachain slot in the first batch of Kusama auctions; however, this was in July. We speculate that the increase in metaverse hype since the beginning of Q4, Darwinia may be in with a chance of success – for this reason, we have allocated 3% of our DOT to Darwinia.

 

Oh and yes, we do expect DOT to hit $100+ by EOY.

Alright now, LFG!

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