Acala spins up ‘Liquid Crowdloan DOT’ to allow crowdloan participants to access DOT liquidity

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Acala, the Ethereum-compatible DeFi and liquidity hub of Polkadot, has launched Liquid Crowdloan DOT (lcDOT) ahead of its upcoming crowdloan event, it said in a post yesterday.

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.

Why need DOT liquidity?

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.

The Liquid Crowdloan DOT (lcDOT) is 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. 

How the Acala crowdloan works?

Instead of losing access to the underlying DOT liquidity for 2 years, lcDOT holders will be able to collateralize for a self-serviced loan in aUSD stablecoin or trade trustlessly in Acala’s AMM-style DEX.

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:

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

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