Crowdloan

A crowdloan was a mechanism on the Polkadot and Kusama networks that let a project raise the tokens it needed to win a parachain slot by gathering contributions from supporters. Contributors locked their DOT or KSM tokens in a module of the relay chain for the length of the slot lease, usually up to two years on Polkadot, and received the same tokens back when the lease ended. Projects typically rewarded contributors with their own tokens in return for the use of their stake. Crowdloans were not loans to the project in the usual sense: the tokens stayed locked by the protocol and were never handed over.

Crowdloans were tied to the parachain slot auctions that Polkadot used from 2021 to allocate its limited number of connected chains. In 2024 Polkadot replaced those auctions with a system called agile coretime, under which projects buy blockspace directly, ending the need for new crowdloans. The episode remains an important example of community fundraising and staking design, and of how blockchain economics can change through governance.

Imagine a market where only a limited number of stalls are available, and they go to whoever can put up the biggest deposit for two years. A small business cannot afford the deposit alone, so it asks its fans to lend their savings to the deposit. The fans' money is held by the market, not by the business, and returned to them in full when the two years are up.

Because the fans give up the use of their money for two years, the business thanks them with something of its own, such as vouchers or a share of future rewards. That was a crowdloan: supporters lent their tokens to help a project win a "stall" on Polkadot, and were paid in the project's tokens for their patience.

A project hoping to win a slot would open a crowdloan with a funding cap and a deadline. The process ran as follows:

1. Contribution. Supporters sent DOT or KSM to the crowdloan through a wallet or exchange; the tokens were locked by the relay chain and could not be moved or staked.
2. Auction. The crowdloan's total counted as the project's bid in a candle auction, a format whose closing moment is chosen at random after the fact to discourage last-second bidding.
3. Win or refund. If the project won, the tokens stayed locked for the lease period, typically 96 weeks on Polkadot. If it lost, contributors could withdraw immediately or roll into the next auction.
4. Rewards. Winning projects distributed their own tokens to contributors, much like an airdrop, often partly at launch and the rest over time through linear vesting.
5. Return. At the end of the lease, the locked DOT or KSM was released back to contributors.

Polkadot's founder, Gavin Wood, designed the relay chain to support a limited set of parachains that share its security. Kusama, Polkadot's experimental sister network, held the first parachain auctions in June 2021. Polkadot's first auctions began in November 2021, won by Acala and then Moonbeam, which together attracted contributions worth billions of dollars at the market prices of the time. Centralized exchanges such as Binance and Kraken ran pooled crowdloans for their customers. Dozens of auctions followed, but interest faded as token prices fell and as projects questioned the cost of locking up so much capital.

In 2023 Gavin Wood proposed replacing slot auctions with agile coretime, in which projects buy units of block-production capacity, called cores, for shorter periods or on demand, much like renting computing time. After approval by Polkadot's on-chain governance, coretime went live on Polkadot in 2024, and new parachain slot auctions and crowdloans ended. Existing leases were converted to the new model, and remaining locked contributions were returned as leases expired. The change aimed to lower the cost of launching a chain and let smaller teams join.

Critics argued that crowdloans tied up large amounts of DOT that could otherwise have been staked to secure the network, reduced liquidity and favoured well-funded or exchange-backed projects. Contributors also faced an opportunity cost: by locking DOT, they gave up staking rewards, and many project tokens received in return later fell sharply in value. Some projects created derivative tokens representing locked contributions, similar to liquid staking tokens, to offset the lock-up. Supporters credit crowdloans with spreading ownership of new projects widely without the legal issues of a token sale such as an initial coin offering. The model is often compared with appchains on other networks that must secure themselves.

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