Are Polkadot Crowdloans worth it?

recently the Polkadot ecosystem received some 
really great news parachain auctions have   finally been announced on Polkadots and this 
also marks new crowd loans in this video i'm   going to explain what the parrot chains are what 
these auctions entail and i'll also tell you if   these crowd loans are actually worth it my name 
is sam eugene and you're watching the long holder   so first things first what is parachain i'm going 
to keep it really simple and understandable for   everybody so think of Polkadot as a blockchain 
where we can do transactions with digital cash   this isn't really anything new because we can 
do the same with bitcoin and ethereum so what   is so special about Polkadots well the the 
thing with Polkadot is that they'll allow   multiple blockchains to connect and work together 
so instead of having one blockchain that tries to   do everything with polkadot we can have multiple 
blockchains that work together and each of them   specialized in one specific use case this has 
multiple other advantages like if the blockchains   work together they can process transactions in 
parallel think of ethereum for example where   we just have one blockchain that has to solve 
process all the transactions of the entire network   where we get huge bottlenecks and huge minor 
transaction fees another benefit is security   polkadot uses a proof of stake system where we 
have validators that check all the transactions   so we can't double spend well the entire 
network so all the connected blockchains   which are called parachains can benefit from this 
security in short you can think of a parachain as   a blockchain that is connected to the polkadot 
network and that can benefit and adds value to   the Polkadot network and ecosystem this is in 
a nutshell why Polkadot is called the answer   to chain maximalism instead of having trying to 
build one blockchain that can rule them all and   do everything with Polkadots we can just throw 
all blockchains that are good in specific tasks   together make them work together and just enjoy 
all the benefits so again in short a parachain   is just a blockchain that is connected to the bulk 
Polkadot ecosystem and that brings me to parachain   auctions so we know now what a parrot chain 
is what are these auctions well not just every   project can build on Polkadots you need to win 
a slot and these slots are auctioned off through   parachain auctions you can compare it to a 
regular auction the person or the project in   this case that gives the highest bid will win the 
auction and instead of using dollars or whatever   in these auctions you will use dots tokens and 
that is where these crowd loans come into play so   if we just have startup projects well it's not 
very likely that they have a huge amount of dots   but they might have a really cool or good 
concept that should be allowed to be built   on Polkadot well these projects can 
rely on crowd loans so they can ask   their supporters for their dot tokens to increase 
their chances to win a pair chain auction meaning   they'll their blockchain their project will 
be allowed to build on Polkadots and enjoy   all the benefit benefits it has to offer and you 
might wonder why is this interesting for us well   um to incentivize people to give them their doll 
tokens these projects can give rewards mostly it   will be in the form of their native token and 
if that project then wins and it performs well   well it's it might be likely that that 
native token that you received as a reward   could increase in value which is of course very 
interesting i went over all of it pretty quickly   and i hope it was a little bit clearer i'll just 
summarize it uh really quickly again uh parachain   is let's say a blockchain that is connected to the 
Polkadot ecosystem uh in order for a project and   their blockchain to connect to this ecosystem they 
will need to win a pair of chain slots and that is   done to a parachain auction and a project can 
ask for support ask for doll tokens from people   through a crowd loan that's in a nutshell 
the three concepts you need to understand   um yeah for to to understand the benefits or 
or the pros and cons of joining a crowd loan   so before we continue with the question 
are crowd loans worth it i first want to   thank you for watching please leave a like and 
subscribe if you do that will really help me   grow this channel i also have a twitter 
check it out on slash   ham and spleen uh don't ask why that's 
my name 7g mistaken just simple reason   i also have a telegram and discord server where we 
can talk about these concepts in detail i'll leave   a link to both of them in the description 
so are crowd loans worth it on Polkadots   let's take a quick look at the pros and the cons 
and i'll start with the pros so a first big pro is   that a pair of chain slots if you win the auction 
you don't have the slot forever it's for think   of it as a lease you rent it for let's say two 
years it's roughly that it's roughly two years   um so you if you participate in a crowd loan you 
have to give dot tokens in support and these dot   tokens get locked up for the period of that lease 
so after those two years you receive all your   delta tokens back and all the rewards that you 
received for participating in the crowd loans for   giving your dollar tokens you get to keep them so 
basically you give your doll tokens for two years   after that you get get them back and all 
the rewards that you receive in the meantime   you get to keep them this is in contrast with the 
old ico system initial coin offering where you   were supposed to give your coins or tokens 
and you didn't get them back you just got   the tokens or whatever from the project that 
you supported and your initial investment   your eater or whatever was for the project to 
keep if the project then underperformed well   tough luck so in in in a way this new system with 
crowd loans is a little bit better if we compare   to icos there are multiple other pros like if you 
support good projects through crowd loans it will   be beneficial for the Polkadot ecosystem this will 
attract more people to Polkadots and that will be   good for the price that might have good impact 
on the price of dots and the token you received   as rewards but of course the most interesting pro 
that everybody wants to talk about is the rewards   so if you support a project you give them 
your dot for the lease period of two years   you receive a native token of that project as 
rewards and to put things in perspective we had   crowd loans already on kusama which is the canary 
network of Polkadots people won't like it if i   call it that but let's see let's call it for the 
sake of this video the test network of Polkadots   new functionality will always be deployed 
first on kusama before it moves to Polkadots   but people don't like it if you call it the test 
network because it's so much more but anyway um   we can check the results of those crowd loans and 
see the returns through the following websites   so here we have four projects that participated 
in the crowd loans on kusama one important note   is that kusama uses the native token ksm and 
Polkadot uses dot so for kusama crowd loans you   had to give ksm and for polkadot you will have to 
give dot so if we look at this chart we see that   moon river was a project where if you gave one ksm 
you would get a reward of roughly 3 325 dollars   that's because for one ksm you received about 
14 movr tokens and those are worth roughly over   three thousand dollars important to note here 
is that one ksm is worth roughly 300 dollars so   you did a nice 10x the reward in this case was 
huge this was the best performing project of   the crowd loans on kusama another very interesting 
project is the one on the third place we have   karua for every ksm you gave you got 22 car tokens 
and they're worth roughly so for every ksm you   gave you got rewarded roughly 184 dollars do keep 
in mind that you have to lock your dots or in this   case ksm tokens for the lease period for dot 
this is roughly two years for ksm this was only   about 48 weeks that's because kusama is a little 
bit more experimental so a bit more high based   this has pros and cons but that's out of the 
scope of this video but so keep in mind that   you give your tokens and after the lease 
period you get them all back and rewards it   is distributed you get to keep all of it so it 
would be an understatement to say if the kusama   crowd loans if the returns yeah they were just 
really great but of course there's no such thing   as a risk-free investment and there are also cons 
so one of the biggest cons is that during like i   explained before um during the crowd loan your 
dots tokens will be locked up for the lease period   that means that you won't be able to stake 
your dots now you're able to stake dots   and you get interest of about 12 to 15 percent if 
you stick it on a central exchange like crack and   i think it's 12 if you stake it directly through 
the Polkadots app or some other application you   can get returns of around 15 so for two years 
you won't be able to get any interest and   dots as well as ksm are inflationary 
tokens meaning they will lose value over   over time and i think they aim for about 10 per 
year so that's the first risk i wanted to discuss   and that brings me to the second risk and that 
has to do with the performance of a project we saw   some great returns on kusama um crowd loans but 
pesby behavior or isn't necessarily a guarantee   for future behavior so there might be issues with 
the the release or the deployment or there just   might not be that much hype meaning the token 
you receive as rewards doesn't perform that well   meaning it might become an issue because 
you're also missing the staking rewards that i   discussed in the first con and that brings me 
to the third con which is kind of intertwined   with the first one and that is that your dot 
tokens will be locked for the entire lease period   which is two years in case something happens a 
crash or if you need money you won't be able to   get to your dots they're locked and that's 
final and if you believe in the long term   if you believe in dots for the long term you might 
say you don't really care but you never know what   might happen i always prefer to have the freedom 
to do with my coins money or tokens or whatever   to do with whatever i want in this scenario if you 
participate well you won't be able to so another   really important con is that if you participate 
in a crowd loan you will get rewarded if that   project wins oh yeah maybe important to add 
is that if you support a project in perichain   auction and through the crowd loan and the project 
doesn't end up winning that auction you get all   your adults tokens back so you don't have to 
worry about that but the con i want to discuss   is that if you participate you will get a reward 
if that project wins but you won't get the reward   entirely instantly you'll get 30 when of the 
rewards uh when the project is deployed and you   get the remaining 70 of the rewards throughout 
the lease period so over the two years so you   don't get reward instantly and yeah this might be 
important if you're strapped for cash or whatever   it's another really important point to take into 
account so knowing all of that the conclusion is   actually quite simple you just have to ask 
yourself do you think that staking your dots   and where you get let's say 15 interest per year 
will outperform participating in crowd loans where   you don't get the staking rewards but where you 
get the native token as a reward well those tokens   outperform the stake percentage or not it's not 
necessarily a gamble but we can't know for sure   we can look at what happened in the kusama crowd 
loans like i said that's no guarantee for what   might happen in the past but it looks like it's 
possible that they will perform very well and in   that case it will be better but if if the crowd 
lines on Polkadot aren't a success well then the   performance won't be that good and just staking 
might have been a better choice another important   thing i want to add here is that there are some 
exceptions if you take a look at a project like   Acala they are offering solutions where you remain 
sort of liquids if you participate in the crowd   loan you might get a token that is let's say in 
a way linked to dots so you're still free to make   some moves but i will discuss this in a future 
video because this is kind of out of the scope   i'm also going to discuss projects to look 
out for and um yeah discuss them in more   detail so be sure to subscribe and leave like and 
comment and all that really helps me thank you   and so that brings me to my strategy and like 
always it's all mindsets i'm just talking for   myself here this is in no way financial advice 
blah blah blah and all that but why did i buy dots   because i think Polkadots i think it really has 
long term potential i think it's going to be here   in the next couple of years and if a bear market 
happens you never know for sure but i think it has   a much higher chance than a lot of other projects 
to survive it so what is my strategy well to be   clear i'm just going to keep it really simple most 
of my adults i will just let it be staked i was   lucky enough to accumulate and buy a lot of dots 
when it's just released at the five dollar range   somewhere around that um and i'm really happy 
with the potential gains that it made already and   i'm not really in that position where i need to 
take extra risk and go all in in these crowd loans   but that being said i like to have a ticket 
to the party so around 20 to 30 percent of my   tokens i will allocate them to these crowd 
loans and participate i'm only going to do   it with projects i believe i'm not going to follow 
hype or any pump i'm going to use those dot tokens   um to par to support projects that i believe in 
and i will actually use a good example is Acala   they'll become they'll try to become the d5 hub 
of Polkadots and i've tried karua which is their   application that they released on kusama already 
everything works fine so i really think that Acala   will do well there might be other crowd projects 
that outperform whether rewards outperform Acala   but like i said it's all risk versus return i 
think Acala is going to do well there might be   projects that might perform even better but i 
believe in Acala so i'm going to support them   it's all about keeping it simple and nuanced i'm 
not going to go all in in a cola just 20 or 30   percent of my dot will be allocated to crowd loans 
i think let's say about 20 percent and part of it   will go to a cola and some to other projects that 
we'll discuss in future videos there's one more   important point um there's always an alternative 
instead of using your adults to participate in   crowd loans you can also just leave all your dots 
staked and buy the tokens when they are released   on exchanges to trade so you're still you're still 
able to enjoy the benefits of potential price   movements and you don't have to move your dots 
so that's also a possibility and i'll probably   do that a little bit as well so that was it for 
this video i hope it's a little bit more clear   what parrot chains perching auctions and crowd 
loans are and if they're worth joining or not i'm   i i told you my strategy and um all the pros and 
the cons and now i'm curious to know what you guys   are going to do is are you going to participate 
or not let me know in the comments not only am i   interested in that that's also a good way to get 
more interaction and that's good for pushing my   channel also subscribe and leave a like i also 
have a discord and telegram server where we can   discuss everything from crowd loans to investing 
related topics i'll leave a link to both of them   in the description please also check out my 
twitter slash ham and spleen i know   it's a weird name but sam eugene was taken and i 
like ham and spleen than how it sounds or whatever anyway i want to thank you for watching and bye

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