#10 Phala Polkadot Slot Auction Strategy

This is a proposal to the whole PHAmily (both the Khala and Phala community)：

• If the proposal passes, we will use the proposed strategy to join #6 - #11 slot auctions.
• If the proposal fails, we will initiate a public referendum to update the Khala Network on Kusama to Phala's economics, effectively creating the Phala network on Kusama. Later, we choose the best time and strategy to join the Polkadot network as a parachain (but after auction #11).

TLDR: The strategy in short

• Phala Network will join as crowdloan to bid for auctions #6 to #11.
• The auction cap will be set to 8 mln $DOT.
• The total reward budget will be 10% of $PHA's total supply. Part of the $PHA reward will come from future on-chain treasury, guaranteed by Secure Mining rate in tokenomic paper.
• Basic reward: Contribution of 1 $DOT will return 12 $PHA as reward. 15% will unlock immediately, and the rest will be linearly vesting for 96 weeks.
• No whitelist, No early birds, No referral reward. We think you are already tired of this! We distribute bonuses directly to all contributors equally.
• The only extra reward will be:
  • Old Gangster bonus: Contributors from previous Khala Kusama auction will have a 5% extra reward. So will the ones who have over 300 $PHA on Khala address before blockheight #902400
• If we fail to win a slot between #6 - #11, we will drop out of the auction but initiate a public referendum to upgrade Khala Network into Phala Network on Kusama directly. We will join the auction when there is a better opportunity in the future.

What does the Phala community wish for?

Marvin Tong, the founder & council member of Phala Network published an open discussion for the strategy of Polkadot slot auction before. The Phala community had a month- long discussion and the major ideas are:

• We don't need to participate in the 1st batch slot auction. The most important thing is to focus on building actual projects on Khala
• People don't like whitelist, but KSM contributors for Khala definitely deserve bonus.
• People want simple rules.
• Handle the budget carefully and responsibly: Set the reward percentage to what the network can realistically afford to give up.
• Set a minimum reward based on a cap.
• A plan for the possible result of Phala losing the 2nd batch auction.
• Leave marks for the people contributed via CEX.

We want to listen to our community and support all of these ideas. We strive to give a simple, fair and long-term benefit plan.

Here it is:

Budget Strategy

10% of $PHA supply is the budget for this round of Polkadot slot auction.

In our tokenomic breakdown, we have reserved a total of 6.9% from our token supply for Polkadot and Kusama slot auctions. To secure a Kusama parachain slot, we have already used 2.5%, leaving 4.4% for the Polkadot slot auction.

So where does the rest 5.6% of the total supply come from?

The answer is the future Phala on-chain treasury. Because in Phala tokenomic paper, 70% of total supply is mint out and there is a 20% of mining tax. So we can get at least 70 mln $PHA for slot auction:

Months	Mining Rewards	Tax To treasury
6	129600000	25920000
12	97200000	19440000
18	72900000	14580000
24	54675000	10935000
Total	354375000	70875000

We also need enough budget to grow Phala's ecosystem and 5.6% from treasury will be enough for it. In total, 5.6% + 4.4% make 10% and that is the total amount allocated to reward crowdloan contributors.

Since part of the budget is coming from mining treasury, the rewards cannot be sent to accounts immediately after on-boarding. However, that is not a problem. Because paying out the rewards gradually works perfectly fine together with the vesting schedule, which means, some parts of the rewards are sent out gradually per block.

Basic Reward Rules

• Each $DOT contribution will have a reward of 12 $PHA
• Auction cap for Phala will be $8 mln DOT
• 15% of the total rewards (including basic and extra rewards) will unlock immediately, and the rest will be linearly vesting over 96 weeks.

Channels

We are planning to join the auction via the following Decentralized tools:

• Polkadot.js
• Parallel Crowdloans. You can choose to get liquid cDOT for each DOT contribution, or directly contribute to Polkadot pallet via your address
  ...

  Other tools are still under review

You could join the auction via following centralized platforms:

• Kraken
• Okex
• Kucoin
• Gate.io
• Huobi
• MXC
  ...

  Other platforms are still under review

Extra Reward Rules

We think Polkadot & Kusama community members are already tired of following so many rules to get rewards, so we abstain from using any incentives such as:

• Whitelists, because it takes a lot time to join tons of campaigns.
• Referrel links, because it gives the members who use CEX a disadvantage.
• Early bird, because people might miss the registration and feel very frustrated. It also forces users to lock up their tokens very early, which is unfair.
• Un-fixed ratio, because it induces a lot of uncertainty about future rewards for contributors.

We want to give the community a simple and clean plan and use as much as the bonus budget possible to reward all community members. If we win, we win; if we lose, we also win. While we abstain from giving early-bird or referral bonuses, we still want to value our supporters who helped us to obtain our Kusama parachain slot. Therefore, we will still use one simple bonus mechanism for our early supporters.

Old Gangster bonus

• All addresses that contributed to previous Khala Crowdloan will have a 5% extra reward, on top of the basic rewards.
• Based on the snapshot by Khala blockweight #902400 , every Khala address with more than 300 $PHA balance will also be in the old gangster list. If you use this address (each Khala address have a Polkadot address) to contribute to Polakdot crowdloan, you can win an OG bonus as well.

We will provide a tool that can help you verify if your Polkadot address is "old gangster" or not.

Strategy if Phala loses

In the case that Phala doesn't win during the campaign of auctions #6 - #11, your contribution for $DOT will be returned to your addresses. And Phala community will choose from the following strategy:

• Exit from 3nd batch of slot auction, but keep an eye on it to decide if we will rejoin the bidding at a better time with a smaller budget.
• Upgrade the Khala network to the economics of Phala. This will be a major update of the tokenomic parameters. For example, mining parameter will become Phala version, and we will also change the names on polkadot.js, explorers etc. Note, that this is subject to governance and it is up to the token holders to decide the outcome.
• All contributors to Phala slot auction, even though we do not win, can get on the whitelist for Phala World 1st generation NFT sales. Phala World is a metaverse for Phala community on top of Bit.Country, all players will use RMRK NFT to build and play around with PVE & PVP mode in the future. We are planning to launch the NFT sale and airdrop in Jan-Feb, 2022.

With this strategy, we are set for all possibilities and think that this is in the interest of the whole community.