Acala Announces Liquid Crowdloan DOT (LCDOT) to Give Polkadot Crowdloan Participants Ongoing Access to their DOT Liquidity

LCDOT joins Acala’s suite of derivative products to enable new DeFi use cases within Acala’s DeFi Economy

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Acala

5 min readOct 13, 2021

Update: Parachain slot auctions have been officially announced by Polkadot to begin on November 11th, so you can now begin unbonding your DOT in preparation for the Acala Crowdloan.

Acala, the Ethereum-compatible DeFi and liquidity hub of Polkadot, has launched Liquid Crowdloan DOT (LCDOT) ahead of its upcoming crowdloan event. The product joins Acala’s suite of derivative products including its recently launched KSM Liquid Staking product (LKSM), now available on Karura, as well as DOT Liquid Staking (LDOT), which will launch on Acala.

In preparation for the parachain slot auctions, parachain teams like Acala will receive DOT contributions in a crowdloan — a model which invites supporters to strengthen each team’s bid to launch on Polkadot’s multi-chain network. By directly contributing to a crowdloan, not only can a participant support a parachain’s path to launch, but they can also qualify for various rewards offered by each team’s crowdloan event. However, supporters must also agree to a two-year lock on their DOT assets, as any contributed DOT is locked in a contract on Polkadot’s Relay Chain and never touched by the parachain teams.

While it’s clear that the Polkadot community is eager to support parachain teams through crowdloans, a common concern is the long duration of the lock on their DOT. Fortunately, the Acala team has a solution.

Introducing Liquid Crowdloan DOT (LCDOT)

Acala is pleased to introduce Liquid Crowdloan DOT (LCDOT), a derivative that enables Crowdloan participants to stay liquid while contributing to the Acala Crowdloan. With LCDOT, contributors can utilize an unlocked token, representing their DOT contribution to the Acala Crowdloan, in Acala’s DeFi protocols. Now, instead of losing access to the underlying DOT liquidity for 2 years, LCDOT holders will be able to collateralize for self-serviced loan in aUSD stablecoin, or trade trustlessly in Acala’s AMM-style DEX.

What’s more, the product will be available for future parachain teams to offer during their Crowdloan events on both Polkadot and Kusama.

Here’s how it works

The Acala Crowdloan will now offer two on-chain options for contributing DOT: directly contributing through the crowdloan module with a two-year lock, or contributing via Acala’s Liquid Crowdloan vault. With lcDOT, users will follow a simple process to participate in the crowdloan while maintaining access to their liquidity:

Contribute DOT to the Liquid Crowdloan Vault managed by Acala.
Receive Acala (ACA) tokens, your share of the network. The more DOT you lock, the higher the rewards.
Receive Liquid Crowdloan DOT (LCDOT), a liquid token representing your locked DOT.
Use in DeFi. LCDOT lets you access the underlying DOT liquidity. Swap, use as collateral to mint aUSD, and more.
Redeem the underlying DOT locked in the Acala Crowdloan with your LCDOT tokens.

Transition to Fully Trustless

Since Acala is not live on Polkadot yet, this product must go thru a transition to be fully trustless.

At first, the Acala Liquid Crowdloan vault (technically called a ‘proxy account’) will be controlled by a multisig wallet from Acala Foundation initially, so there will be a temporary trust component.
This vault will then contribute the DOT to the Acala Crowdloan which is held trustlessly by the Polkadot Relay Chain itself (not touched by any person or team).
As soon as the Acala parachain is live (and we make sure cross-consensus messaging (XCM) works), the ownership of the vault will be transferred from the multisig vault to the Acala parachain account, a fully trustless account controlled by Acala’s on-chain governance.
Then, after 2 years, the LCDOT can be used to redeem the original crowdloan DOT from the Acala parachain account. From a technical perspective, there will be a “Liquid Crowdloan module” on Acala to facilitate this process, and the LCDOT will be burned when redeemed for DOT.

Watch the LCDOT Overview

Acala co-founder Bette Chen recently gave an overview of Liquid Crowdloan DOT on a community call ahead of the Acala Crowdloan. Learn more here:

Prepare for the Acala Crowdloan

Although there is no date announced yet for Polkadot crowdloans, the Acala team is gearing up for the launch of the Acala Crowdloan as our goal is to win the first slot on Polkadot. Acala’s launch will bring an Ethereum-compatible DeFi platform to Polkadot, along with essential products to serve Acala developers, Acala users, and any parachain in the Polkadot ecosystem. These products include the Acala Dollar decentralized stablecoin (aUSD), the Acala Swap decentralized exchange, and DOT Liquid Staking.

Anyone can contribute to the Acala Crowdloan to earn a share of the network before launch. Simply lock DOT in the crowdloan (directly or using lcDOT to stay liquid), then you will earn crypto rewards in ACA for the contribution. Then after two years, all original DOT contributions will be automatically returned to contributors; hence, the name ‘crowdloan’. Sign up for updates, and start completing Acala Crowdloan Quests to earn an additional 7% in crypto bonuses and a free NFT.

New to crowdloans? Learn more as Acala’s VP of Growth Dan Reecer explains:

About Acala

Acala is an all-in-one decentralized finance network offering a blockchain platform secured by Polkadot, as well as a suite of cross-chain financial applications that let users trade, issue self-serviced loans, become liquidity providers, access staking derivatives, and earn high-interest APY on their digital assets. The network is scalable, Ethereum-compatible, and optimized for DeFi.

Acala was founded in Oct 2019, and today has received five Web3 Foundation grants, has backing from Coinbase Ventures, Pantera Capital, Polychain Capital, TQ Ventures, Arrington Capital, and other top firms, and has a distributed team in New Zealand, China, Europe, South America, and the United States.