Polkadot Crowdloan refers to the process of staking Polkadot (DOT) tokens to support specific projects in the Polkadot Slot Auction. In return, participants can receive rewards from the projects.
Polkadot (DOT) is an open-source protocol that allows different blockchains to exchange data and applications. In the Polkadot ecosystem, there are two types of blockchains. The main chain is called the Relay Chain, while parallel blockchains are each called a parachain. You can think of Relay Chain as the heart of Polkadot that can connect different parachains. Similar to ETHereum Plasma chains, Parachains can process transactions independently of the Relay Chain. This allows Parachains to greatly improve blockchain scalability.
In order to connect parachains to the Relay Chain, parachain projects need to lease a parachain slot via the Parachain Slot Auction. Projects can bid for a slot in the auction by staking DOT, the native token of Polkadot. Projects that are willing to stake the most DOT tokens can become a Polkdot parachain and lease the slot for 12 to 96 weeks.
To acquire more DOT tokens for the bidding, parachain teams can use Polkadot Crowdloan to obtain DOT from the community. Crowdloan is a crowdsourcing system that allows participants to support specific parachain projects by staking DOT. In a crowdloan campaign, participants that stake DOT can receive rewards from the project. These rewards can take many forms, such as tokens from the parachain they support. Once they participate in the crowdloan, the staked DOT will be locked up in the project’s slot auction bid. If the project wins the bidding, it can lease a slot to connect its parachain to the Relay Chain. The DOT tokens sourced from the polkadot crowdloan will be locked into the parachain slot for the entire lease period (between 12 to 96 weeks).
