Parachains are launching on @kusamanetwork and @Polkadot later this year. This is kind of a big deal. It means that complex economic logic will come live on the largest network by value staked. But how is this actually going to play out and how can you get involved?
A thread 👇🏻
A thread 👇🏻
First off—the uninitiated among you will naturally wonder “what the heck are parachains?”
Parachains are application specific chains that are attached to the Polkadot Relay Chain. They can be tuned for specific use cases, but outsource security to validators on the main chain.
Parachains are application specific chains that are attached to the Polkadot Relay Chain. They can be tuned for specific use cases, but outsource security to validators on the main chain.
In essence you have a hub that guarantees security and continuity, and performant spokes with application specific logic that interoperate with one another.
Not unlike an airport hub and its various terminals servicing different geographies or airlines.
Not unlike an airport hub and its various terminals servicing different geographies or airlines.
Altogether, there will be about 100 parachain slots on each of Kusama and Polkadot. The way these will be allocated to projects is via auctions for fixed term leases—2y max.
The highest DOT or KSM denominated bid in each auction will win the slot.
Simple, right? Not so fast.
The highest DOT or KSM denominated bid in each auction will win the slot.
Simple, right? Not so fast.
There are several important nuances in the mechanism.
First of all, the tokens committed won’t be “paid” but rather will be provided as bond for the duration of the lease—to be released from the escrow at the end of the lease.
First of all, the tokens committed won’t be “paid” but rather will be provided as bond for the duration of the lease—to be released from the escrow at the end of the lease.
Second, the auctions will target multiple concurrent time windows of varying duration.
This is where it gets a bit more complex, so let’s break it down with an example.
This is where it gets a bit more complex, so let’s break it down with an example.
Bob bids 100 KSM for a 2-year [0...2] lease on said slot. At the same time Alice bids 100 KSM for 1-year [0...1] and Tom bids 150 KSM for the year after [1...2].
Absent other bids, the slot will go to Alice and Tom because the sum of their bids beat Bob’s by 50 KSM.
Absent other bids, the slot will go to Alice and Tom because the sum of their bids beat Bob’s by 50 KSM.
![Bob bids 100 KSM for a 2-year [0...2] lease on said slot. At the same time Alice bids 100 KSM for 1-...](https://pbs.twimg.com/media/ExZ5kk8XIAISJiP.jpg)
Third, they will take the form of candle auctions.
This means that the duration of the auction will be randomized—ie the auction will end when “the candle flame burns out.”
The end point will be determined by a random beacon. This is in place to deter snipers.
This means that the duration of the auction will be randomized—ie the auction will end when “the candle flame burns out.”
The end point will be determined by a random beacon. This is in place to deter snipers.
So far, so good! But where do YOU come in?
Well, in order to build up the token reserve for the bidding, parachain hopefuls have the option to launch a so called “crowdloan”.
Ok, I’ll bite—what’s a crowdloan?
Well, in order to build up the token reserve for the bidding, parachain hopefuls have the option to launch a so called “crowdloan”.
Ok, I’ll bite—what’s a crowdloan?
A crowdloan is where you commit your DOT or KSM to said project in exchange for a native parachain token. The project can use the tokens committed to amplify its ability to bid higher. The committed tokens are returned to bidders at the end of the lease.
Note: by deciding to do a para-team a solid and spot them some DOT, you don’t give up custody of those DOTs to the team. It’s all escrowed on chain through the crowdloan pallet.
Neat, huh?
Neat, huh?
But then you’ll ask “why should I give up staking my DOT or doing whatever else with it?”
Well, that’s totally down to you. Every parachain will offer different opportunities, and their tokens a wide array of value accrual mechanisms.
Well, that’s totally down to you. Every parachain will offer different opportunities, and their tokens a wide array of value accrual mechanisms.
Some will launch with staking and nominating on collators—others will not. Some will launch with token driven governance enabled. Others will launch with native protocols and applications that make the native token more useful and sink its velocity.
So many options!!
So many options!!
At the end of the day, it all comes down to your personal preference, appetite for risk and so on.
Now, for the million dollar question; when are these things actually going live?
The short answer is ¯\_(ツ)_/¯
Now, for the million dollar question; when are these things actually going live?
The short answer is ¯\_(ツ)_/¯
The longer answer, is that there’s still some work to do on the infrastructure side of things (cross parachain messaging etc). When that’s done, it’s a go!
As with most things in the Substrate ecosystem, auctions will first go live on Kusama, and after a while on Polkadot.
As with most things in the Substrate ecosystem, auctions will first go live on Kusama, and after a while on Polkadot.
If I were a betting man (which I am not, I assure you) and you gave me good odds on the over/under benchmarked on June 15 this year, I’d take the under.
But really, at this point it’s anybody’s guess.
But really, at this point it’s anybody’s guess.
All I know, is that it’s exciting times ahead. Parachains will be an important milestone to clear as we collectively realise the multichain future.
There will be ups and downs, thrills and frowns on the way—no doubt.
But we’re heading there.
There will be ups and downs, thrills and frowns on the way—no doubt.
But we’re heading there.
If you want to learn more about Polkadot, Kusama and the broader Substrate ecosystem, my friends at @BisonTrails have published some really great resources.
Get started 👇🏻
bisontrails.co
Get started 👇🏻
bisontrails.co
Loading suggestions...