Polkadot celebrated the launch of its long-awaited Parachain Auctions, as the first round of auctions began on Thursday last week. Here is a quick rundown of the four key things you should know about it and the top contenders bidding for the first parachain slot this week.
- Parachain are Golden Tickets
“Parachains” are essentially Polkadot’s version of build-your-own level one cross-network chains to connect Polkadot (and its canary network, Kusama) to external blockchains, like Bitcoin and Ethereum. The announcement of Parachain Auctions is monumental for Polkadot because it is the first-time developers have been able to apply for the coveted parachain slots with Polkadot. Before now, these parachain slots have been “off-limits” and inaccessible until now, much like the Golden Tickets to Willy Wonka’s Chocolate Factory.
- Parachain Auctions – What to Expect
The Parachain Auctions will run as 7-day auctions. Whoever wins the auction for the week will gain one of the coveted 100-odd parachain slots and the right to access capital-locked crowdloans. The parachain slots for auction will be granted for 96-week lease terms. Once slot lease terms expire, slots will be relisted for auction.
To bid in an auction, parachain teams must agree to lock up (or bond) a portion of DOT tokens for the duration of the lease (96 weeks). While bonded for a lease, the DOT cannot be used for other activities like staking or transfers. Likewise, supporters can contribute towards parachain teams through crowdfunding by hitting “join now” next to their team name on the Parachain Auctions site.
The first batch of auctions will take place over the next five weeks, with one auction planned to take place per week. The second batch of auctions will then take place over the following twelve weeks, with one auction scheduled per fortnight.
In the first week of auctions, there have already been standout projects bidding for the first available Parachain slot, including Moonbeam, Astar, Acala and Parallel Finance (outlined below), with projects garnering over $2.5bn in initial support and counting. Greater projects and support are expected to follow in the coming weeks.
- “Candle Auctions”
Parachain Auctions follow a lesser-known method of auctioning called “candle auctions”. This was an old-school style of auctioning used in the 16th century to sell ships, where the auction winner was determined at random: whoever was the highest bidder when the candle blew out was the ultimate winner of the auction. Parachain auctions use that same method. Only, instead of waiting for a candle to blow out, bidding in Parachain auctions close on the seventh day, but the auction close time is determined retroactively by an on-chain randomness function.
Dan Reecer shared his take on it late last week:
The 7-day @Polkadot auction starts today 💪 but the first two days don’t count, they’re a warm-up period. Days 3-7 starts around 5pm UTC Saturday: from this moment on, the winner could be selected at any moment, but we won’t know the random selection time until the end of day 7.
— Dan Reecer 🅰️🕊⚪️ (@danreecer_) November 11, 2021
Reecer further added:
This element of randomization prevents bid sniping at the end of the auction like you may have seen in an eBay auction. At the end of day 7, Polkadot randomly selects a point in time during days 3-7. Whoever had the highest bid at that moment wins the auction.
— Dan Reecer 🅰️🕊⚪️ (@danreecer_) November 11, 2021
- Crypto Gems Without the Rug Pull
Polkadot’s Parachain Auctions are a welcomed relief for crypto supporters looking for low-risk opportunities to back new projects. Because all the principal raised in Parachain Auctions and crowdloans are returned to supporters by the end of the relevant term, it mitigates the risk of scams and rug pulls common with the many other unverified initial coin offerings in the market. So, if a project gains a parachain slot and is successful, the supporter can reap the rewards of having invested early before the project went parabolic. But if the project fails, then at the very least the supporter will have their principal returned at the end of the 96 week term. This is the perfect solution for risk-averse crypto enthusiasts wanting to invest early without the risk.
First Round Top Contenders
The Parachain Auctions only opened last week, and already we are seeing top contenders lining up for the first round of parachain auctions. Here’s a run down on the first round top contenders: Moonbeam, Astar, Acala and Parallel Finance.
Moonbeam is a relative project of Moonriver. It helps to build decentralized applications on Polkadot, and Moonbeam dapps can integrate with Bitcoin and Ethereum as well. Partner with Acala and Karuna. Investors include Coinbase Ventures, Arrington XRP Capital.
Astar (formerly Plasm) is a scalable, interoperable and decentralised web 3.0 platform. It aims to connect Ethereum and Cosmos blockchains to the Polkadot ecosystem. Investors include DFG, Fenbushi Capital and Hashkey.
Acala is the defi hub of Polkadot, an Ethereum compatible platform for smart contracts. The platform offers a trustless staking derivative (liquid DOT), a multi-collateralised stable coin backed by cross-chain assets (aUSD) and an AMM DEX that’s an automated market maker decentralized exchange. Partnered with Chainlink, Moonriver, Shiden Network and other great projects as well. Major investors like DCG, Polychain Capital, Alameda Research and Coinbase Ventures have invested.
Parallel Finance is a lending staking protocol. It supports assets in both Kusama and Polkadot, and Parallel’s staking derivative is an interest stacking module for lenders and stakers. Parallel finance and Heiko Finance are close relatives. Major firms like Polychain Capital, Alameda Research and Pantera Capital have all invested in Parallel Finance.
Polkadot’s Parachain Auctions present an unprecedented opportunity for developers and crypto supporters alike. With another 11 weeks of auctions in the pipeworks, these are exciting times for Polkadot to finally realise its mission to build the scalable multi-chain architecture needed for web 3.0. You won’t want to miss it.
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