OKEx Insights: Polkadot Parachain has launched v1, and the bidding war is about to start

Recently, Bitcoin has ushered in a rare bull market in the past two years, triggering a new round of crypto asset investment boom. At the same time, blockchain technology, the infrastructure of the crypto industry, is also developing rapidly: On November 6, Bastian, an engineer from Parity (top blockchain technology team), posted the latest developments of the Polkadot Parachain on Twitter: The V1 version has been launched and the consensus code has been updated.

According to Polkadot’s founder Gavin Wood’s speech at Polkadot’s China trip in October, the parachain slot auction is expected to start at the end of the year.

Former CTO of Ethereum

In addition to the revolutionary cross-chain technology, the founder’s strong background undoubtedly made Polkadot’s reputation even stronger, especially Gavin Wood, the co-founder and CTO of Ethereum. Although God V first proposed the idea of ​​Ethereum, Gavin was the one who really realized and built the foundation of Ethereum. He almost wrote the earliest C++ version of the Ethereum client cpp-ethereum, called Ethereum. Fang’s “invisible brain”.

Founder of Polkadot, Gavin Wood in the middle

According to the official website, Polkadot is a network protocol that supports the transmission of arbitrary data across chains, not just tokens. Polkadot is a true multi-chain application environment, in which transactions such as cross-chain registry and cross-chain computing can be executed, making it possible to build apps that obtain permission data from private chains and use them on public chains.

The Polkadot Parachain is a dedicated chain connected to the Polkadot mainnet. On the basis of the security protection of the mainnet, the Parachain has two major characteristics of customization and autonomy: each parachain can be differentiated from each other according to its use. The characteristics of the main network can also control its own governance capabilities.

In addition to sharing security with the main network, the parachain also has two major innovations: scalability and parallel transactions: the interactions on the parachain can be processed in parallel, thus realizing a highly scalable system; transactions can be dispersed throughout the chain, which can be in the same Process more transactions in the time period.

It can be said that Polkadot Parachain provides an excellent solution for the “king of public chains” Ethereum’s existing two major pain points, lack of scalability and congestion, and it is one step faster than Ethereum 2.0, which is still in the crowdfunding stage. Naturally, it will be favored by project parties and investors.

Clever bidding rules

Although the Polkadot parachain is good, a “chain” is hard to find. In July this year, Gavin Wood stated that the upper limit of the number of parachains will be about 100, and the development team also needs to conduct phased tests on the operation of the relay links into the parachains. There will be a large number of parallel chains within a short period of time. Link in.

Jia Yaoqi, Asia Technical Director of Parity Technologies, pointed out that in addition to directly using parachains, some lightweight projects can actually choose to use parallel threads (parathreads) or directly deploy to certain parachains that support smart contracts. It will be gradually realized after the parachain has really landed.

These methods are obviously not suitable for large-scale projects that have already taken shape. When the supply exceeds demand, the project party needs to rent slots through auctions and then connect to the parachain. Slots are like electrical sockets, while parallel chains are similar to electrical appliances. With limited cable carrying capacity, only a few necessary household appliances can be “powered on.”

Polkadot’s parachain slot auction has two interesting designs: candle auction and initial parachain crowdfunding (hereinafter referred to as IPO).

The project party will compete for the parallel chain card slot in the form of a candle auction. The candle auction method (CandleAuction) means that the auction will stop immediately at a certain point in anticipation, and the higher bidder will win the bid. To get the slot, the project party needs to pledge as many Polkadot DOT as possible.

According to the research literature of the Web3 Foundation, the parachain candle auction design is to hope that bidders with higher valuations in their minds have a higher chance of winning the bid, which is related to the difference between the valuation of the market and the market. A retroactive close means that bidders need to submit bid prices seriously after the auction starts. To put it simply, if bidders test or use routines, the risk of not being able to get the shot will increase.

If this is the case, wouldn’t the project with the most abundant funds and the highest bidding be able to shoot? Don’t worry, the project party can also crowdfund. The IPO allows the project to borrow from the outside, that is, to use the brains of the team to design their own incentive measures to attract investors to lock in more DOT to themselves. With the IPO, not only investors can participate in the slot auction, but also the project parties participating in the bidding can show their magic by distributing tokens.

Beware of malicious competition

There are already DeFi project Acala, privacy infrastructure Phala, IoT blockchain project MXC, decentralized wallet HashKey Me, and cross-chain networks ChainX, Darwinia, Bifrost and other projects announced that they will participate in the first round of Polkadot Parachain Auction of slots. In fact, in addition to practical applications, participating in the auction is also a proof of strength for the project itself.

In addition, the form of participating in auctions through pledges can also enrich the application scenarios of DOT, enhance value support, and reduce circulation. According to OKEx market, as of press time, DOT 24H has increased by 4.76%.

However, the form of bidding is bound to bring some problems. The founder of Acala once pointed out that bidding may lead to problems such as bad money driving out good money and institutional middlemen making price differences.

In the auction, the junk projects with strong funds may beat the high-quality projects, and then use the “Polka Parachain Slot” as a gimmick to issue coins and cut leeks; some institutions may also target the Parachain Slot. Fatty meat, personally bids to stock up the goods, and then resells them to arbitrage projects that are in desperate need of slots, which will increase the development costs of some projects that really need them.

For example, Zhu Weiyu, a partner of investment agency NGC Ventures, said: “If some well-known public chains are bidding in person, some high-quality projects with relatively insufficient financial strength may not get slots. This problem requires the Web3 Foundation and the ecology to come together. Consider how to solve it.”

to sum up

If the first round of auctions is held as scheduled, the first batch of projects can also successfully access the parachain. The Polkadot led by the co-founder of Ethereum is one step closer to the title of “Ethereum Killer”. “Should tie the bell” means.

As investors, if we want to support the bidding of the project with the DOT in our hands, we should not forget to judge the value of the project while comparing incentive measures. If we accidentally become a booster for bad money to drive out good money, we will ultimately bear the loss.