Five years in the making, October 13 marked the date that Polkadot officially entered the fifth and final phase of its five-stage launch process, with the official introduction of the hotly anticipated parachains.
The implementation of this code means that projects can begin lining up to bid on coveted parachain spots.
Since its first phase of introduction in May 2020, Polkadot’s rise has been stratospheric. Polkadot’s native token, DOT, established itself in the top 10 cryptocurrencies within months of its launch. (See Analysts’ Top Stocks on TipRanks)
The hype surrounding this innovative blockchain platform is only growing stronger, as Polkadot founder Robert Habermeier just announced that Polkadot now has the technical capabilities to support its first parachains.
Following this announcement, the Polkadot Council passed a motion on October 13 to commence the network’s first parachain slot auctions on November 11, but the date is still subject to change.
The upcoming Polkadot parachain slot auctions may also attract a flurry of promising projects lining up to compete for the limited parachain slots.
Understanding Polkadot’s Architecture
Polkadot was developed by Gavin Wood, a British computer scientist who also co-founded Ethereum. It allows different blockchains to transfer value in a trustless fashion, while allowing them to share their unique features via one secure channel.
Due to its design and functionalities, Polkadot is considered the answer to Ethereum’s 2.0 network upgrade, and dubbed a “next-generation blockchain” by Web3 Foundation.
Compared to legacy networks like Bitcoin and Ethereum, Polkadot relies on four different components to establish itself as a blockchain network:
- Relay Chain – This is the central chain of Polkadot, composed of a relatively small number of transaction types, including the network’s shared security, consensus, and cross-chain interoperability. While the Relay Chain is deliberately designed to offer minimal functionality, it plays the critical role of coordinating the system as a whole, including parachains.
- Parachains – Parachains (parallelizable chains) allow the Polkadot network to parallelize transaction processing and achieve scalability while sharing the network’s security, and communicating with other parachains. These independent blockchains may have their own economies, accompanying native tokens, and allow customization to meet specific use cases.
- Parathreads – Parathreads operate the same way as parachains, but with a pay-as-you-go model. They are more suitable for blockchain projects that don’t require continuous connectivity to the network.
- Bridges – These allow parachains and parathreads to connect and communicate with external networks (independent chains like Ethereum, Bitcoin, and others).
Now that you have a fair idea about how Polkadot operates, let’s talk about the connection between parachains and relay chains, and why projects are eager to get their hands on the limited parachain slots.
Why Are Parachains in Demand?
There are two components involved in most blockchains: a consensus algorithm for security, and a state machine to provide security over the chain’s essential aspects.
At present, most projects and dApps (decentralized applications) deployed on sovereign blockchains are limited to the users of that particular network.
To safely and effectively tap into the larger market, developers will need to develop significant infrastructure on top of their existing products to facilitate cross-chain communication, increasing overheads and compromising security.
Polkadot solves this dilemma with its Relay Chain and parachains. By design, the Relay Chain can be classified as a “large blockchain” that enables connection and interoperability between several independent blockchains.
Parachains, separate, independent blockchains hosted on the Polkadot platform, allow projects to leverage Polkadot’s shared security features while concurrently supporting the development of individual governance systems.
To be eligible to run a parachain on Polkadot and leverage the network’s speed, security, and low-cost benefits via its Relay Chain, projects have to lease a parachain slot on the Relay Chain via a candle auction.
The catch, however, is that Polkadot supports a limited number of parachains, currently estimated to be about 100, which is why the Polkadot parachain slots are in huge demand.
Upcoming Polkadot Parachain Slot Auctions
Since the launch of Statemine on June 3, parachain slot auctions have been running successfully on Polkadot’s canary network Kusama. The first five Polkadot parachain slot auctions will be organized between November 11 and December 16.
Each slot auction winner is granted a parachain lease for 96 weeks. The seven-day auction for the Polkadot parachain slots consists of a starting period of one day and 21 hours, and an ending period of five days.
All bidding for a parachain slot will end on the seventh day. To help avoid sniping at the end of bidding, an on-chain randomness function (VRF) determines the actual time of the auction’s close retroactively.
How You Can Participate
Polkadot is growing in popularity with its slot auctions going online soon and the entire network’s capabilities drawing attention from investors and projects alike.
As such, if you want to support a project that you would like to see deployed on the Polkadot network, you can do that using DOT, Polkadot’s native token.
DOT serves three key functions: governance, staking, and bonding (used to connect an independent chain to Polkadot as a parachain). In addition, DOT being a transferrable token, also serves other functions.
To support any participating project in the Polkadot parachain slot auction, you can stake your DOT via the crowdloans they have created. During a parachain slot auction, projects will have to lock their DOT to secure a slot for a fixed period, which will be released back once the lease period for the parachain ends.
If you have already staked your DOT in a project and want to unstake them so you can partake in the upcoming auctions, bear in mind that there is an unbonding period.
So if you have staked your tokens in Polkadot, you can only unstake and transfer them after 28 days. The Polkadot support repository has a detailed guide on how to unbond your tokens, so make sure to check that out if you need any help.
Bottom Line
Backed by a renowned development team and a consortium of prominent investors and venture capital firms, Polkadot has grown by leaps and bounds within the last year and a half, cementing itself as the eighth-largest cryptocurrency in terms of market capitalization.
Several promising next-generation blockchain projects such as Karura Network (Acala), Moonbeam, Bitfrost, Khala, and Shiden, among others, are already leveraging the features and functionalities of the Polkadot ecosystem, underlining the immense potential the platform has in store.
With the degree of interest and anticipation surrounding the parachains, there is no doubt that the upcoming Polkadot slot auctions could prove hugely successful.
Disclosure: At the time of publication, Reuben Jackson did not have a position in any of the securities mentioned in this article.
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