Not that simple Polkadot Parachain Slot Auction

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First of all, we must make it clear that Polkadot has no real ecology before the parachain is officially connected to Polkadot or Kusama relay chain and cross-chain is realized.

Even if we see that there are about three or four hundred projects in the Polkadot Project, and most of them are based on the Substrate framework, we can only say that this is a relatively loose “confederation”, which does not already exist like Ethereum. To achieve a stable and sufficient asset scale, the flow and collaboration of resources within the ecology, a mature market environment, and the atmosphere and tacit understanding of cooperation between developers.

Polkadot ecology now only needs to wait for one thing

The narrative of the Polkadot ecology is largely based on the cross-chain. The outside world, including users, developers, investors, etc., look forward to the Polkadot ecology because of the infinite possibilities of the business portfolio brought about by the cross-chain. This is the absolute core. As for Substrate, Gavin Wood’s appeal, and Web3 Foundation funding, these are more supporting factors.

But even if we want to look at the Polkadot ecology objectively, we cannot ignore its potential . The high degree of free business combination brought by cross-chain and the huge developer power that the Substrate framework can create are enough to support the Polkadot ecology to become this. The new giant in the market. You know, according to Gavin Wood himself, Polkadot’s cross-chain is not only the interaction of information and assets, but also the free invocation and collaboration of smart contracts and business modules in the future, which will bring more money to the project. Opportunities, the Substrate framework and shared security have also greatly reduced the barriers to entry and costs for developers.

In the middle of this year, we can see that Polkadot’s parachain project has been popular for a while, and it can be said that it is the kind of up-and-coming in various fields. Recently, the attention of this area has dropped a bit, but it can be seen that the basic components of the Polkadot ecology have become more mature. Everyone is waiting for the parachain slot auction, so that many Polkadot ecology Recently, members have been actively seeking some external cooperation opportunities. The reason is that the ecology needs to pass through the empty window period from now to the parachain slot auction. Without the following preconditions, it is difficult to say that the project business can truly go on the right track and ecologically. The real start-up relies heavily on the launch of cross-chain functions, so the next priority of Polkadot’s ecology must be the parachain slot auction.

Another point is that more attention can actually be allocated to the main Polkadot test network Kusama. Kusama is now likely to form a cross-chain ecology before the Polkadot main network . This is generally ignored by most people. One is that Kusama’s progress is generally earlier than the Polkadot mainnet. In addition, Kusama’s strategy is more radical and free than Polkadot. For example, Polkadot’s pledge time is 28 days, while on Kusama it is 7 days. This means that projects can be quickly iterated and deployed quickly, and can be more free to try some new directions, which is more suitable for the majority of small and medium-sized teams.

More importantly, the auction of parachain slots will be earlier than the auction of parachain slots on Polkadot’s mainnet, and the cost is lower. So there will be many projects that will consider competing for the parachain slot auction on Kusama.

Auctions with huge uncertainty

There is a lot of uncertainty in current parachain slot auctions.

The first uncertainty is time. We used to think that this event would happen at the end of this year or early next year, but now this time is no longer a reference. Gavin Wood’s own response to the parachain slot auction is to wait until all the features are developed, debugged, and tested before the auction will officially start. What is certain at the moment is that all development work should have been completed, but the official has not disclosed when the debugging and testing can be completed.

The second is the uncertainty of competition. In fact, for the parachain auction, almost anyone can participate in direct competition, as long as you have enough DOT. Therefore, in addition to those parachain projects based on Substrate, there may be exchanges, communities, mining pools, institutions and even individuals participating in the competition, which will bring about the auction results and the intensity of competition. A lot of uncertainty.

Moreover, the candle auction method adopted by the Polkadot Parachain slot is different from the traditional one. You don’t know when the auction will end. Maybe when you are still bidding, the auction has ended, and the system will randomly select one to end. Time point, and then go back to the end point to see the bidding situation at that time. Therefore, everyone will submit their bids as many times as possible to increase the chance of winning the bid, which will increase the intensity of competition in the auction.

I said before that many people will focus on Kusama’s parachain slot auctions, but what we can see on the bright side is definitely the battle for the Polkadot parachain slot auction, and the most intense battle must be the “head slot” “The competition. Because the lease period of a slot is two years, the auction is based on 6 months as a unit. You can choose a single or several adjacent periods. If there is a competitor who is very strong and packs the first year of the first slot at one time, then this competitor is accessing the main network, debugging cross-chain functions and compatibility, and verifying the important projects of cross-chain business. The progress on this project is at least one or two months ahead of other projects. And unsurprisingly, the Web3 Foundation and Polkadot officials will definitely provide financial and technical gift packages to the winners of the head slot.

What’s more important is the super value of “head slot” in PR and brand, whether it is “getting the head slot” or “being a strong competitor of the head slot”, this information will enable competitors to gain great value in the Polkadot ecology. The volume and brand appeal of the company can attract a large number of users and funds for business development in the future. Therefore, no matter whether they can get the headspin or not, many participants will publicly announce that they will compete for the headspin. But in fact, no one has publicly disclosed a clear slot auction plan, and these will also be very uncertain.

The ingenuity of the auction design

First of all, the slot is only rented and not sold, and then 6 months is a lease period, because bidders can choose a single time or multiple adjacent lease periods, so there will be many auction combinations. This can balance the issue of fair competition, because the longer the lease term is, the higher the bidder’s cost.

Then, only one slot will be released for each auction, which will keep the market hot enough for the auction.

The candle auction of Parachain Slots is divided into two stages-security period and random period. DOT can be pledged freely in both stages. The auction will not end within the safety period, but will drop the hammer at any time according to the random number on the chain after entering the second stage. In order to successfully win the slot, projects need to pledge as many chips as possible before entering the second stage. This can try to avoid auction sniper situations.

Generally speaking, the design of Polkadot through the parallel chain slot allows the price of DOT to maintain a stable and high level in the early stage of startup, which is conducive to the stability of Polkadot’s ecology and the security of the relay chain.

Another point is that the Polkadot Parachain slot auction mechanism also has a good effect on balancing the equity distribution between projects and users.

First, the cost of parachain slot auctions is at least tens of millions. At present, only a few projects can participate in the bidding independently, so Polkadot officially allows projects to raise funds through IPO. Moreover, the project does not interfere with the raised DOT. Ordinary investors directly transfer the DOT to the account of the relay chain, but choose the project to be supported. And after the lease expires, the DOT must be returned in the same way. In order to attract investors as much as possible, the project will try its best to maintain and maintain its own credit, instead of running away like the ones we have seen before. Road project.

Second, DOT cannot pledge to participate in the auction, so there is no original income. Therefore, the project team will try their best to come up with sincere incentive plans to attract investors to contribute their DOT. At the same time, investors’ funds are also very safe, and they pay only the opportunity cost of giving up pledges or other benefits.

Third, under such a mechanism, the more centralized the forces will be subject to more constraints, because the opportunity cost will be higher, which can reduce the impact of oligarchs on the system.

An auction will greatly change the flow structure of Polkadot’s ecological assets.

In a sense, the Parachain Slot Auction is a mechanism for screening high-quality projects. Only strong and truly high-quality projects will receive support and win slots. For the project party, they only need to do a good job and prove that they are a high-quality project, and there is no need to prepare a large number of DOT by themselves, which virtually reduces the burden of the project.

However, after the parachain bid fails, the DOT participating in the bid will be released, and the huge amount of funds generated in a short period of time may have a certain impact on the price of DOT.

In addition, there are some problems that need to be solved. For example, some forces themselves do not need slots, and after they obtain slots, they will trade in the secondary market at a higher price. Such operations may destroy the parachain. The market order of slot auctions. This problem may need to be resolved by adjusting the supply relationship of parachain slots.

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