Produced | Odaily (ID: o-daily)
Produced | Odaily (ID: o-daily)
Over the past year, the blockchain industry has undergone rapid changes as before. Bitcoin is still Bitcoin, but many of the "mainstream currencies" we have known in the past are gone. The price of the currency is sluggish, and the ecology is lacklustre. They have been replaced by a batch of new potential projects.
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Image via: Parity Technologies
The popularity of Polkadot lies not only in the strong appeal of the founder Gavin Wood, DOT ranked among the top five market capitalization shortly after its launch, but also in the enthusiasm and enthusiasm of developers who agree with the Web 3.0 vision to invest in the Polkadot ecosystem. Outside of Ethereum, Almost no public chain has such a vibrant community scene at the beginning of its launch like Polkadot.
The big exam is coming! According to the official information disclosed, Polkadot will officially launch the parachain slot auction as soon as possible in the next few months. As one of the most critical milestones in the Polkadot roadmap, the auction is closely related to all parties in the ecology and has long been the focus of attention.
Gavin Wood said on October 10 that the Polkadot mainnet plans to launch a parachain at the end of the year or early next year, and will test it on the Kusama network before that.
Jia Yaoqi, technical director of Parity Technologies Asia, also told Odaily that Polkadot has been debugging the parachain function through the dedicated test network Rococo, which will soon release a new v1.0 version.
The auction is approaching. Although there are many uncertainties in the specific plan, in the world of blockchain, if you fall behind, you may lose the opportunity to grasp the future. An important juncture is approaching, and many projects and the capital behind them have already prepared Horse, get ready for the top spot.
What is Parachain Slot Auction?
What is Parachain Slot Auction?
Why is the project going to auction? And how to participate?
What are the different incentives given by each company?
What do investment institutions, exchanges, and mining pools think, and what roles do they play?
What impact might the auction have on DOT?
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Tell you what a "parallel chain" is from the basic structure of Polkadot
Before explaining what is called a parachain slot auction, let’s briefly introduce Polkadot’s basic vision and structure. (Friends who already know this part can skip to the next paragraph to read.)
"Cross-chain" is Polkadot's core vision.
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Theoretically, in the future, any two parallel chains can complete cross-chain interaction directly or through the relay chain.
Image from: Plasm Network
Note: Based on different block generation logics, parachains can be divided into homogeneous parachains and heterogeneous parachains. Isomorphic parachains are created based on the Cumulus consensus engine, have the same block generation logic as Polkadot, and can interact directly with each other; although heterogeneous parachains follow different block generation logics, they can be accessed through a "bridge structure" , and then use the relay chain to realize the interaction with other parallel chains.
The operation of parallel chains needs to consume a certain amount of network computing resources, so there is an upper limit on their number. Gavin Wood said at the Polkadot China Tour event in July this year that the upper limit of the number of parachains will be around 100.
For the project side, it is necessary to rent limited slots through bidding in order to access the parachain.
Since the early system optimization work has not been completed and the network load capacity needs to be improved, it is expected that the number of initially opened slots will not be too many.
Jia Yaoqi explained to Odaily that in addition to participating in the auction, some lightweight projects can actually choose other ways to access the Polkadot network, such as using parallel threads (parathread), or directly deploying to some parachains that support smart contracts However, these methods will not be gradually realized until the parachain is actually implemented.
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Why do you need to auction "parachain slots"?
After explaining the basic concepts, let’s briefly analyze what the slot auction means to Polkadot, why project parties are preparing to actively participate, and why investors will pay attention.
For Polkadot:
Parachain slot auction is an important milestone in Polkadot's roadmap, which means that Polkadot's cross-chain vision has really begun to land.
It can enrich the usage scenarios of DOT.
It will affect the DOT locking structure and total locking rate of the entire network.
For the project party:
Successfully winning the slot means that the project will be able to share the security of the Polkadot network and achieve cross-chain interoperability with other projects.
Since key information such as the number of initially open slots and the release interval have not yet been determined, winning the first batch of slots will bring a certain first-mover advantage to the project, allowing the planned development work to be advanced as soon as possible.
For some isomorphic projects that are ready but have not officially launched the main network, the main network can be launched synchronously when the slot is taken, and Polkadot's verification mechanism can be directly used. This will reduce the development work of starting the main network first and then changing the code access. Therefore, the auction is also related to the main network launch process of such projects.
Taking the early slot itself is a high-profile marketing promotion, which is conducive to the later ecological construction.
Other access methods such as parallel threads are more suitable for lightweight projects, and development still takes time. Projects that urgently need access in the short term can only choose to participate in parachain auctions.
For investors:
The IPO design of the slot auction (initial parachain crowdfunding, which will be explained in detail below) provides a new way to participate in the Polkadot ecosystem. Since the auction design does not limit what incentives the project can adopt, the participation in the auction Compared with NPoS pledge (hereinafter collectively referred to as "node pledge"), the income is more imaginative.
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How to auction the "parallel chain slot"?
Let's talk about the auction method again. Its design is quite novel and contains many mysteries.
According to the now-disclosed plan, Kusama will test slot auctions prior to the Polkadot mainnet.
Before the auction is officially launched, some system-level parachains will be released first. The system-level parachain is also a parachain in nature, but it will not participate in the auction. Its main significance is to reduce the burden on the relay chain, and generally will not generate new tokens.
Things to keep in mind about auctions include:
Slots are only for rent and not for sale. The auction offers bids for four lease terms, each 6 months in length. Projects that intend to participate in the auction can bid for a single or multiple adjacent lease periods. After simple mathematical calculations, we can know that there are a total of 10 combinations.
The auction will only release one parachain slot at a time, and the release of the next slot will have a certain time interval (the interval has not yet been determined, it may be several weeks).
Reduce bid sniping with candle auctions. The slot auction will be divided into two phases - safety period and random period. DOT can be freely pledged in the two stages, and the auction will not end within the security 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 stake as many chips as possible before entering the second stage.
Slot Auction designed the "Initial Parachain Crowdfunding (IPO)" scheme, which allows projects to borrow from the outside, that is, through a series of incentives to attract others to lock more DOT to themselves. In turn, this also opens the door for investors to participate in the auction, and you can choose the project you want to support in the auction module to lock your own DOT.
Slot auctions will only lock DOTs, not sell them. After the lease period ends, all DOTs participating in the auction will be refunded. DOTs that have participated in regular pledges cannot participate in the auction at the same time. Conversely, DOTs participating in the auction can no longer receive regular pledge rewards—they instead receive different rewards from various auction projects.
Overall, Polkadot's parachain slot auction provides a brand new token distribution mechanism for projects planning to enter this ecology.
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Inside the arena: a hundred schools of thought contend
What is certain is that most projects that intend to build in the Polkadot ecosystem will try to bid before the parathread lands.
As mentioned above, the design of the auction rules is open, and the project party can borrow from the outside through the IPO model, and the incentives are not limited. Therefore, it is expected that the project parties will show their talents - come up with the most attractive incentives to leverage the DOT chips in the hands of more investors. This makes us believe that the subsequent "contending of a hundred schools of thought" must be very interesting.
At present, several projects have announced that they will participate in the auction, but none of them has announced a complete incentive plan. Tong Lin, the founder of Phala, told Odaily that part of the reason is that the auction is a game process, and disclosing the complete plan too early will make him fall into a passive position. Now it's like the "flop" stage in Texas Hold'em, and it's not yet time for the second round of opening and calling.
Based on this, Odaily had the honor to interview projects such as Acala, Phala, ChainX, Darwinia, Bifrost, Stafi, and Litentry. As contestants who are about to participate in the auction, their answers will reveal various potential possibilities in the slot auction competition.
At present, there are high voices in the ecosystem, and one of the most competitive projects in the first parachain auction is the DeFi platform Acala. Tong Lin, the founder of Phala, also said that there is a high probability that the first parachain on the mainnet will be taken over by Acala.
Fuyao, a member of the Acala Council, said that the Acala network and its leading network Karura will participate in the auction on the Polkadot main network and the Kusama network respectively, striving to become the first parachain on the Polkadot main network and the Kusama network.
Part of the reason why Acala went to great lengths to bid for the first slot is that the auction is directly related to its mainnet launch process. Fuyao said that Acala will create a founding block simultaneously after successfully bidding on the slot, and officially launch the pioneer network Kararu and the main network Acala.
On October 27th, Acala disclosed part of the incentive plan for Karura’s online bidding for the Kusama parachain at the "Karura Pioneering Network Private Sharing Session". Incentive strength; when Karura successfully takes the slot, the KAR (Karura token) in the reward part will be released linearly according to the locking period and quantity, but all KAR can participate in network governance and the use of other network function rights. Acala also said that the details of the bidding package, such as the scope of the lease period, will be determined by investors who support Acala's bid.
Fuyao also mentioned that the Acala testnet Mandala has successfully tested cross-chain interactions with Laminar, Plasm, Interlay, Phala, Darwina and other projects on the Polkadot parachain testnet Rococo.
After the mainnet goes live, Acala plans to launch the derivative product PDOT in the first half of 2021, which will be used to release the liquidity of DOT locked in the auction, and enrich the gameplay for users to participate in slot auctions.
The privacy infrastructure Phala has announced the general plan for the slot auction, and is currently discussing whether to set a hard cap, how to release incentive tokens and other details.
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Image from: Phala Trusted Network
Tong Lin said that Phala plans to "compete for three guarantees and ten" in the slot auction on the Polkadot mainnet, but hopes to compete for the first parachain on Kusama. In this regard, Phala's advantage is that it will directly take out the main network token (PHA) to motivate investors who support the project to bid for Kusama slots, while some other projects in the ecology will only take out the first token during the Kusama network auction. Web tokens.
Phala will also cooperate with some centralized institutions (such as exchanges) on the auction, but how to allocate the incentive pool ratio between centralized institutions and retail supporters still needs to be carefully considered. Tong Lin explained: “Cooperating with centralized institutions can obviously help the project quickly obtain a large amount of bargaining chips, but too much reliance on centralized institutions is not conducive to the community building of the project itself.
"In addition, the current DOT pledge rate of 66% in the entire Polkadot network is actually a relatively healthy state. There are not many DOT chips in the hands of the exchange, but if a large amount of DOT flows to the exchange due to the auction, it will affect the entire Polkadot Card ecology caused harm. As a project party, we have the responsibility to balance the distribution of incentive pools between centralized institutions and retail supporters.”
The cross-chain project ChainX has already officially announced that it will participate in the slot auctions of the Kusama network and the Polkadot main network.
In an interview with Odaily, ChainX Chief Operating Officer Kristen said that the ChainX main network was launched in May last year. After taking the Kusama slot, ChainX will set up another Kusama parachain to support functions such as smart contracts and X-BTC. Test; after the Polkadot mainnet slot is taken, the ChainX mainnet will also be officially connected and become a parachain of the Polkadot network.
Kristen said: "For the sake of first-mover advantage, ChainX will do its best to bid for the slot as soon as possible. The ChainX mainnet has been online for more than a year, and it can be said that it is currently waiting for the parachain slot to start bidding."
When talking about the specific incentive plan, Kristen said that ChainX plans to use 15-20% of the council fund and the entire network computing power (which can dig out ChainX native token PCX) to motivate supporters; at the same time, ChainX is also exploring how to Release the liquidity of KSM and DOT locked in the auction; in addition, ChainX also plans to attract users to lock their chips in advance through certain measures to seize the opportunity.
Kristen revealed that 90% of ChainX's overall incentive plan has been finalized.
Alex Chien, the co-founder of Darwinia, a cross-chain transfer bridge network, said in an interview with Odaily: "Darwinia has a general idea about the bidding. Of course we hope to bid for the slot as soon as possible, but due to cost-effective considerations, we have not yet Decide whether to grab the first slot. Before that, Darwinia’s testnet Crab will first bid for the Kusama slot.”
Alex Chien said that the number of projects connected to the parachain in the early stage will not be too many, so the significance of the so-called cross-chain interaction is not very significant within a certain period of time, but taking the slot as soon as possible will definitely bring a better market Propaganda effect.
In addition, it is still uncertain how many slots can be released in the early stage. The most suitable access in the early stage is actually those infrastructure projects that can bring more value to other parachains and even the entire Polkadot network. Darwinia belongs to this category. Its cross-chain transfer bridge network can open the door for external heterogeneous blockchains to enter the Polkadot ecosystem.
In terms of incentive plans, in addition to the regular token (Ring) incentives, Darwinia will also provide land (Land) rewards to investors who support its bidding in the cross-chain virtual world game "Evolution Odaily (Evolution Land)". Alex Chien said that for projects like Darwinia whose tokens have been listed, the calculation of income is relatively transparent, and the imagination space is slightly insufficient compared with those projects whose tokens are not listed, so it is necessary to have some features in addition to the native tokens motivation.
Bifrost, which specializes in the release of pledged asset liquidity, said in an interview with Odaily: “Bifrost will participate in the auction of parachain slots, because Bifrost’s main network needs to use Polkadot’s consensus and verification mechanism, and we will successfully bid for slots. After that, the mainnet will be launched synchronously. But to take a step back, if the auction does not go well, Bifrost can also choose to use parallel threads.”
In the recently released new white paper, Bifrost announced that it will launch the IPO Liquidity solution, which can provide vsDOT and vsKSM (Voucher Slot DOT / KSM) derivatives for other parachains to solve the liquidity problem of DOT and KSM during the slot auction process. Realize the transfer of rights and interests of users participating in the parachain IPO process at any time.
Bifrost also stated that it will provide transaction scenarios for vsDOT and vsKSM through internal transaction pools, parachain DEX, CEX, etc.
Let me explain with an example. For example, an investor chooses to support a certain project in the auction module and locks 100 DOT / KSM. According to the original design of the slot auction, the 100 DOT / KSM locked by the investor will be locked during the entire lease period, but Bifrost can distribute freely tradable derivative tokens vsDOT / vsKSM to investors 1:1, in this case It is 100 vsDOT or vsKSM, and the value of the derivative token is equal to the sum of the locked original asset value and its locked income.
In an interview with Odaily, Kaba, the founder of Stafi, a pledge asset liquidity release project, said: "We have planned for the slot auction."
Kaba said that there are still many uncertainties in the parachain slot auction, so Stafi is still discussing the specific bidding plan. In Stafi's vision (to solve the liquidity problem of pledged assets), Polkadot is an extremely important relationship chain, so Stafi has a demand for slots, but it needs to judge when it is suitable to access according to the relationship between supply and demand. There is an option to wait on a parathread or smart contract layer.
For a project like Stafi that has launched the main network, it is not too difficult to adjust the code to connect to the parachain. The most difficult thing to change is the economic model of the project itself. Stafi has reserved 40% of the community tokens at the beginning of its launch , which can be used to design incentive schemes for IPOs. In addition, Stafi has made preparations for whether it will be able to successfully access the parachain in the future, as well as the different situations after the slot lease expires.
The decentralized cross-chain identity protocol Litentry is the latest star project to emerge in the Polkadot ecosystem. Litentry recently completed a million-dollar seed round of equity financing. Participating institutions include FBG Capital, Candaq Group, Signum Capital, NGC Ventures, BlockVC, D1 Ventures, Altonomy, Hypersphere Ventures, PAKA Fund, Digital Renaissance Foundation, RockX and LD Capital et al.
In an interview with Odaily, Cheng Hanwen, the founder of Litentry, said that the specific bidding plan has not yet been determined, but it is expected to be launched on the mainnet before the auction. In the previous seed round financing, Litentry also considered the DOT chips in the hands of investors.
In summary, although every project that intends to build in the Polkadot ecosystem hopes to participate in the auction, each project is different in terms of development progress, capital reserves (token reservation), business volume, etc. The enthusiasm for the auction is also slightly different.
For the project party, the size of the incentive is directly linked to the success of the auction, but excessive incentives—such as taking out a large proportion of native tokens, or providing too many external token incentives—will also bring The huge pressure is not conducive to the long-term development of the project.
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Outside the arena: Undercurrents surge
In addition to the project parties directly participating in the bidding, other roles in the Polkadot ecosystem (investment institutions, exchanges, mining pools, etc.) are already ready to go, and the huge chips in their hands will be the potential armaments behind the project parties that charge forward.
What do investment institutions think?
In an interview with Odaily, Hashkey Capital (portfolio includes Acala, Darwinia Network, Edgeware, Moonbeam, Zenlink), Digital Renaissance Foundation (portfolio includes Acala, Darwinia, Zenlink, Bifrost, Plasm, Litentry, Dipole), Delin Capital (investment portfolio includes Bandot, Litentry, BOOL, Opensquare) and other institutions have expressed their intention to participate in the auction, and will give priority to helping projects that have invested in the auction, and will also pay close attention to other high-quality new projects.
Li Kunyun, the founder of Delin Capital, mentioned that some project parties have come to ask for help in private, hoping to "borrow currency" to bid.
In this regard, Li Kunyun said: "Actually, from the perspective of the project itself, if you want to develop better, this step (borrowing currency) must be taken. Whether it is borrowing currency from large households, institutions or exchanges, it is actually for the project. Construction considerations, in order to gain a place in the Polkadot ecosystem. After all, no matter how powerful the publicity is, it is only showing soft power.”
"And the matter of borrowing money is not simple. Behind it is a set of reward mechanisms, just like staking, which must have certain benefits. Now everyone may be more sensitive to this matter, but in a few months, when the slot auction starts, This situation will be very common. On the contrary, I have a little good opinion of the projects that start to borrow coins now, because it shows that they are treating the slot auction as a big event, preparing in advance, and fighting for chips. I also hope that Polkadot will hold Coin users can actively participate in the slot auction.”
In addition to the above three institutions, other investment institutions are also paying close attention to the slot auction.
Zhu Weiyu, partner of NGC Ventures, said: "The slot auction will be a win-win opportunity for Polkadot itself, successful bidding projects and investors in the medium term, so it may support high-quality projects to bid. NGC has been deeply cultivating Polkadot The card ecology has a large number of layouts in DeFi, storage, aggregators, privacy protection, etc., and has also invested in multiple ecological native projects including Polkastarter, Crust Network, Litentry, and Bifrost.”
Yuan Hao, a partner of Fundamental Labs, said that he is indeed paying attention to the slot auction, but currently he will only hold the currency (DOT / KSM) to wait and see, and will consider participating after some star projects run through the process.
For ordinary investors, if they intend to participate in the slot auction, in addition to simply calculating the book incentives given by each project, they also need to carefully consider the release time of tokens, the long-term prospects of the project, whether the economic model can support the lease renewal fee and many other details question.
As a reference, Cao Yin, managing director of the Digital Renaissance Foundation, gave his own investment logic - focus on the fundamentals, that is, whether the project provides the lowest infrastructure; whether it can prove the ability to realize the product; There are close technical ties and the ability to quickly deploy the latest Polkadot technological achievements.
What about exchanges and mining pools?
Different from investment institutions, institutions such as exchanges and mining pools have a large number of user resources, and they can choose to directly cooperate with the project party to open up a channel for users to participate in the auction in the exchange (it can be compared to when many PoS projects were popular before. and nodes will provide Staking services).
Binance told Odaily: "The parachain slot auction may bring higher returns to our users, so we have been paying attention to it. We have made some product preparations and will officially announce it after the parachain slot auction starts. Some projects are also actively contacting us. Since the time for the official opening of the auction has not been determined, we currently have no formal cooperation projects, but we will keep in touch with the Polkadot ecological project, and participate in Polkadot while increasing our user benefits. The card ecology is developing."
The person in charge of Huobi’s related business also said: “It is expected that the slot auction will boost the exponential ecological explosion and technological upgrading of the entire Polkadot track. Huobi will cooperate with the Polkadot Foundation and the developer community as soon as possible. Provide professional and convenient service channels to help users participate in slot auctions."
Li Chen, CEO of Hashquark mining pool, said in an interview with Odaily: "Hashquark is also paying attention to the auction. For the mining pool business, if a large number of DOTs participating in node pledges are transferred to participate in slot auctions, then the node pledge The rate of return will also increase accordingly, which is beneficial to us, so Hashquark will continue to focus on node staking. As for whether to choose to participate in the auction, there are still too many uncertain factors. From an ecological point of view, we Will also consider participating."
Whether it is for investment institutions, or for exchanges and mining pools, slot auctions are a brand new battlefield, and whether to participate and how to participate still need to be carefully considered. Conversely, the project party has already "stared" on the huge bargaining chips in the hands of these institutions, and is expected to do its best in the next few months to absorb and hoard more "food and grass".
Since the organization can help the project party win the slot, of course, it can also directly bid for it. Many interviewees mentioned to Odaily their concerns about this extreme situation-some institutions may take slots themselves for arbitrage purposes, and then resell them to project parties that are in urgent need of slots.
Zhu Weiyu said that if some well-known public chains or exchanges go to the auction in person, some high-quality projects with relatively insufficient financial strength may not be able to get slots. This problem needs to be considered by the Web3 Foundation and the ecology how to solve it.
However, institutions need to assess risk factors when bidding directly. As mentioned above, the value of slots will gradually be diluted as the development work progresses. Before the situation becomes clearer, institutions may not rush to sell.
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How will the slot auction affect DOT?
Judging from the only information available at present, it is too arbitrary to guess the specific currency price trend, but we can drop one dimension and talk about the impact of slot auctions on the DOT pledge structure and pledge rate of the entire network.
Note: The parachain auction brings a new DOT locking method. In order to distinguish, the term "stake" below only refers to node pledge.
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Image via: PolkaWorld
According to Polkacube data, the current DOT pledge rate of the entire Polkadot network is about 66.52%. Therefore, it is expected that after the parachain slot auction starts, the DOT pledge rate of the entire network will gradually fall back to 50%, and the rate of return of node pledges will also gradually rise. Fuyao predicted that when the first parachain is launched, it is expected to attract 3% - 5% of the DOT participation in the entire network.
With the release of more parachains, it is expected that the total DOT lock rate (node pledge + auction lock) of the entire network will exceed the current pledge rate (66.52%).
Tong Lin predicts that this number will exceed 70%, or even 80%; Alex Chien also gave a similar prediction, saying that more than 20% of DOT will choose to participate in the auction - if about 50% of DOT will choose Calculated by participating in node pledge, the total DOT lock-up rate will also exceed 70%.
postscript
postscript
Although the forces of all parties are gearing up, there is still a period of time before the official launch of the slot auction, and the finalization of various key information also needs to wait for the actual test results of the new version of the Rococo network.
Polkadot's vision for Web 3.0 is a grand plan, which is not achieved overnight, and requires long-term collaborative construction of all parties in the ecosystem. Project parties also need to be more patient and maintain reasonable expectations while actively preparing to participate.
References:
References:
Polkadot Wiki;
Polkadot Ecological Research Institute: "4D Report丨Why Polkadot Can Become the Next Generation Blockchain Infrastructure";
PolkaWorld: "How to bid for Polkadot parachains? ";
Bluemountain Labs: "What You Need to Know About Parachains";
Hash CIB: "Hash CIB Polkadot Research Report - Is Polkadot worth looking forward to?" "
Acala Network: "Focus on Kusama Parachain Lease Offering (PLO), Karura is the first to participate";
PolkaWorld: "Phala Releases Parachain Slot Auction Guidelines, Up to 5% PHA Will Be Incentived";
ChainX community: "ChainX will issue Kusama parachain and participate in slot auction";
Bifrost: "Bifrost New White Paper Officially Released".
