On October 7, Polkadot officially disclosed on its official blog"The implementation details of the first parachain issuance (IPO) plan, and said that half of the parachain slots will be pledged by DOT holders. As the Polkadot parachain auction approaches, the announcement of the details of the Polkadot IPO plan means that Polkadot IPO distance from the real landing, is close at hand.

As soon as the news came out, the industry paid close attention. Some people compared the Polkadot IPO with the Ethereum ICO and IEO, thinking that "it is just another way to cut leeks", and some voices believed that "it will set off a huge wave of capital."

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Polkadot ecological IPO?

The IPO of Polkadot Ecology refers to the first parallel chain issuance, namely Initial Parachain Offering. The Parachain here refers to the parallel chain, which is completely different from the stock market IPO.

So what is the nature of an IPO?

According to Polkadot's official explanation, it is "investors pledge their tokens and then 'loan' to the project party to support them in bidding for the Polkadot parachain slot. After the project party successfully bids for the parachain slot , and then the process of obtaining project tokens/USDT/DOT rewards, when a slot lease period ends, investors can get back the DOT tokens they loaned out.”

To understand it simply, it is "the process of putting your hoe in my house for a while, and then returning it to the original owner, with a handful of corn kernels as a gift."

Then why does the project party have to bid for the parachain slot?

The Polkadot architecture can be simply understood as relay chain+parachain (Relay chain+Parachain). The parachain must be linked with the relay chain, and the slot (Slot) is the only channel. There are two ways to obtain the slot. One is bidding, and the second is to lease slots in the form of Parathreads.

If the project wants to link with the relay chain in a long-term and stable manner, bidding is the best choice.

However, because some participate in slot auctions, a large number of DOTs need to be locked. Although these DOTs will be unlocked and returned after the auction is over, even so, the lockup will bring a huge financial burden to the project party.

To this end, Polkadot officially designed the Substrate crowdfunding module, through which the project party pays interest for DOT investors (project tokens/DOT/USDT), and then obtains DOT support to participate in parachain auctions.

Regarding the upcoming Polkadot IPO, some people think that this is a form of public "fundraising" that is completely possible to rival ICO and IEO, while some people think that this is just a very small funding game. Which view is correct? ? What are the differences between Polkadot IPO and Ethereum ICO and exchange IEO?

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Polkadot IPO, a completely different way of "fundraising" from ICO

Polkadot IPO is fundamentally different from ICO.

This is because, after the parachain slot auction is successful, the pledged DOTs will be returned in the same way after a period, and these DOTs will be locked in the smart contract of the relay chain, which can guarantee absolute security, so investors' The actual participation cost is almost 0, and the asset safety factor is extremely high, which is very different from ICO in essence.

As we all know, in the process of participating in ICO, investors often face the risk of "returning to zero". For example, they need to directly deliver their BTC and ETH to untrusted accounts. completely irrelevant to investors.

Let’s take the amount of ICO financing as an example. In the ICO frenzy from 2017 to 2018, in just two years, the ICO framework quickly attracted 15 billion US dollars of investment, and thousands of projects participated in ICO fundraising. But in the end, a large number of running events occurred, and the bursting of the ICO bubble also directly triggered the big bear market after 2018.

Then, in 2019, there was IEO in the blockchain world.

An IEO kicked off by cryptocurrency exchange Binance allows the exchange to raise funds for new projects seeking funding. However, in this way, it is still unavoidable to do evil, and incidents of fraud and "cutting leeks" still occur frequently.

Now, the Polkadot IPO is coming, and you don’t need to pay any assets. All you need to do is pledge your own DOT, “loan” to the project party, and then get their tokens/USDT/DOT.

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The big difference between Polkadot IPO and ICO and IEO

In the ICO boom, after investors sent assets to a team, the team ran away the next day, and investors lost their money.

But the Polkadot IPO is completely different. The team can run away, because investors can easily get back their DOT tokens at the end of a lease period.

Or, if the project party participating in the chain slot auction has an "improper attitude" during the IPO process, or if a scandal is exposed, then the IPO will simply fail completely during the IPO process, and investors can immediately get back their pledged DOT tokens.

This is completely different from ICO.

However, investors are not completely risk-free. The risk here refers more to the opportunity cost, which means that the voting rights are given to A, and the higher income of B is lost.

Let's take an example. Investor Alice gave her 10,000 DOT voting rights to project A and got the aToken reward from project A. Bobe gave her 10,000 DOT voting rights to project B and got a The token bToken of Project B was rewarded, but after a few months, both aToken and bToken were listed. As a result, aToken rose by 50%, but bToken rose by 80%. At this time, Alice missed the opportunity of higher income of project B.

We found that during the Polkadot IPO process, almost no value exchange was involved, and there was no "cutting leeks".

In this way, the Polkadot IPO not only protects the interests of investors, but also conforms to the legal supervision of any country in the world, because there is no transaction involved, just "put your hoe in my house for a while, and then return it to the original owner. And it also comes with a handful of corn kernels."

In addition, compared with IEO, IPO also has many advantages.

IEO refers to the initial public offering of exchanges, namely Initial Exchange Offerings. We know that projects conducting IEOs must be carefully vetted by exchanges, but is such a review really useful? This also needs to be considered by investors.

However, in the Polkadot IPO, investors invest in projects based entirely on their own judgment, and there is no possibility that the project party will cooperate with Polkadot officials to do evil. In addition, if the assets you invest in IEO are replaced by "garbage coins", Your real money is really gone. But the DOT you invested in the Polkadot IPO is still yours.

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A Flawed Crowdfunding Mechanism Attempt? A tens of billions of business?

While the Polkadot IPO is still in the early stages of development, certain projects have already announced that they will conduct such an IPO.

For example, Polkadot and Kusama’s decentralized finance project, Acala Network, will be one of the first projects to crowdfund DOT and KSM through an IPO.

Acala’s co-founder Bette Chen has said that Acala chose the IPO because it seemed like an ethical crowdfunding method that would distribute tokens to “well-intentioned community members.” Acala aims to be the first parachain in every network, she said.

The IPO framework forces companies to create real value during the parachain slot lease period, because once the project party does not "sharp their heads" to make the project progress rapidly, DOT holders are bound to abandon the project after an auction period ends and turn to And look for better projects.

So, where are the challenges of Polkadot's IPO?

For example, Mauric mentioned that as more parachains are connected together, creating a community of parachain supporters may become difficult, as stakeholders may be spread across multiple projects. In addition, the Polkadot IPO will benefit the Polkadot community, not the entire blockchain community. It turns out that the Polkadot IPO may be more niche than ICO or IEO.

So will the Polkadot IPO really be a niche “business”?

Not really!

Since the outbreak of ICO in 2016, four years have passed, and the total funds raised by ICO have reached 15 billion US dollars, nearly 100 billion yuan. Even if Polkadot's IPO influence is only half of that of ICO, there will be 50 billion. However, this type of comparison is relatively rough and arbitrary. We will wait and see how the IPO will turn out.