What is a 'Crowdloan' in Polkadot?
The blockchain space is dynamic.
Projects innovate, rolling out new products to improve on existing solutions. There is a history to prove this. After ICOs were banned, crypto exchanges introduced IEOs then came the trustlessness of IDOs coinciding with the parabolic popularity of DEXes.
Polkadot, besides offering interoperability, has a new way of allowing projects to receive funding and at the same time claims a slot of one of the few 100 parachains available.
Crowdloan is an exciting way where investor-popular projects can receive DOT coins as a fair way of being a Parachain. This feature is not yet active in Polkadot but Kusama—an experimental chain. Think of Bitcoin and Litecoin synergy.
This new style of popular projects garnering support from investors to become a Parachain is expected to be a game-changer. All DOT contributed by investors are locked into a Polkadot sponsored account for a period.
During this period, investors—or participants who contributed to the Crowdloan are eligible to receive rewards—often tokens in the form of airdrops from supported projects. At the same time, DOT contributions are used to cover the cost of the lease—that is, the amount required to secure the Parachain slot.
If a project can't secure a slot becoming a Parachain, funds are reimbursed to contributors.