In Polkadot Decoded, the Polkadot community conference on May 19, Shawn Tabrizi, the core developer of Parity and one of the developers of the auction and crowd lending system, introduced the auction, crowd loan (Crowloan) and slots of the Polkadot parachain . This article is the dry content that PolkaWorld compiled from the speech.
I think this article may be the latest, most comprehensive, and easiest-to-understand introduction to the Polkadot parachain slot auction and crowd lending so far. Although the article is relatively long, it is recommended that everyone who cares about Polkadot and Kusama auctions read it carefully.
1. Background introduction
Before starting, I will introduce some background knowledge about what Polkadot is and what it can provide.
Polkadot: Creating a multi-chain future
The first thing to understand is that Polkadot's vision is to create a multi-chain future.
What exactly do you mean?
If we go back 10 years ago, Bitcoin was invented. It was the first public chain, and the only one that made sense at the time.
This situation lasted for 6 years until Ethereum went live. Ethereum provides a platform where multiple different teams can build their products on the blockchain. Ethereum is the beginning of a "multi-coin future". You can launch your own tokens on it, create smart contracts, and allow smart contracts to interact with each other.
But we have also witnessed that this architecture does not scale well. If we look at the current blockchain landscape, we will find that there are many teams building Layer 1 blockchains. These chains have specific functions and want to solve some specific problems.
This is where Polkadot comes in. Polkadot is actually a Layer 0 blockchain that can connect many Layer 1 solutions together, which is an unprecedented innovation. We believe that there will be many blockchains in the future of Web3, and Polkadot is a platform that can promote and realize this vision.
cold start problem
But the goal of "creating a multi-chain future" is not easy to achieve, and there is a problem of cold start.
The current blockchain community is not too big, and every Layer 1 blockchain is actually gathering people from the same pool to build a support system and win supporters for itself.
shared security
shared security
Polkadot solves this resource problem by providing shared security for all parallel chains. That is, Polkadot itself will motivate and collect validator nodes, and these validators will be assigned to different parallel chains to verify their state transitions.
Cross-chain communication
Cross-chain communication
Moreover, Polkadot also solves the problems of cross-chain communication and blockchain interoperability. The current blockchain is like the wild west world, everyone is designing their blockchain protocol on the back of a tissue. Polkadot provides a clear, upgradable, and scalable parachain standard.
So, with tools like XCM and XCMP, each parachain on Polkadot can immediately communicate and interoperate with other parachains.
With the bridges (Bridges) connecting Bitcoin and Ethereum, etc., Polkadot will act as a gateway to all information on the decentralized network.
The number of parachains is limited
Of course, we all know that nothing is perfect. Unfortunately, even Polkadot has its own resource limits. The process of adding new parachains to Polkadot itself is a problem of exponential expansion. So we can only give a limited number of parachain slots and run these parachains on the relay chain.
We do have a long-term plan to address this scalability issue by using a "Nested Relaychain". You can imagine a relay chain similar to Polkadot, but it is also connected to Polkadot as a parachain, so you can nest and continue to expand this decentralized network.
But these are future plans. In today's speech, let's talk about how to select those lucky parachains that can connect to the Polkadot network.
2. Slot
A slot is a term we use to describe the chance that a parachain can connect to Polkadot.
Slot Allocation
Optimistically speaking, we think Polkadot can support up to 100 parachains at a time, so we need 100 slots. Every slot is equal.
There are about 10-30 slots for "public interest parachains", which are chains for the entire Polkadot ecosystem. For example, a bridge connected to Bitcoin or Ethereum. There are also some practical chains, such as Statemint, which will serve as a multi-asset parachain for the entire ecosystem. There are also some system-level parachains that will strip some logic from the relay chain, such as balance, staking, governance and other logic. We can strip these things from the relay chain and transfer them to the parachain to release the middle chain. resources on the relay chain, so that the relay chain can concentrate all its energy on serving the parachain ecosystem.
There will also be 40-90 slots for rentals that will be auctioned off, which is the focus of this talk, so I'll expand on that later.
Socket online process
We will not have 100 slots overnight, instead what we will do is gradually expand the network, introducing new slots and new parachains over time. When we see that the network is stable, we can continue to open and expand new slots. But you need to know that this process does not happen overnight.
The question then becomes, how do we open up new slots? This requires an auction.
3. Auction
The auction we are talking about on Polkadot refers to the auction of parachain slots.
On Polkadot, the duration of each slot is two years, divided into 8 lease periods, each lease period is 3 months. This means that in each auction, you can have up to 8 auction winners, each winning a different portion of the two-year period. Or it may be that a parachain paid a very high price and rented it for a full two years. In general, each auction will provide two years of access to Polkadot, and you can bid.
candle auction
candle auction
Actually we have many ways to approach the auction system, but we actually chose the candle auction system.
Candle auctions became popular in the 17th century as an alternative to the English auction. You're probably familiar with the English auction, where everyone bids more until eventually no one else wants to bid.
And candle auctions add some randomness to the process. You can imagine that the auctioneer lights a candle, and then starts the procedure of the English auction, and everyone starts bidding, but if the candle goes out at a certain moment, the auction will end immediately, even if someone still wants to bid, it will not count. , the last person to bid before the candle goes out wins the auction.
This approach means that no one knows exactly when the auction will end, so bidders are encouraged to treat each bid as if it were their last. Of course this also encourages early discovery of healthy prices and discourages last-minute sniping. Because if everyone suddenly bids a very high price at the last minute, it will actually destroy the entire auction economics.
How to close an auction
If you are familiar with the blockchain system, you will know that anything involving randomness is actually not simple. This is how we implement candle auctions on the blockchain.
We divide the auction into two parts:
In the first part, we have an Opening Period (Opening Period), which is a period of time after the auction has just started, so that the teams can adjust their status, establish a preliminary strategy, make an initial bid, and see what competitors are there.
In the second part, we quickly transition to a random ending period (Ending Period), during which the auction may end at any time and determine the winner of the auction.
This is how we manage the randomness of random endings. We traverse the entire random end period, take a snapshot for each block of the random end period, and find out the current winner of each block. We will keep these snapshots until the end, and when the entire random end period is over, we will use a verifiable random function to trace back and select which snapshot is the actual end time of the auction, so as to determine who is the real winner By.
While there may be higher bids throughout the auction than the snapshot we choose, it is the snapshot we choose that will determine who the real winner is.
The cost of the auction is just the opportunity cost
There is one more thing to remind. That is, when you participate in the auction, you use DOTs to bid, but in fact, you did not actually spend these DOTs, but just locked these DOTs during the period of time when the slot was leased.
It means that when the lease period of the slot ends, no matter whether your parachain is about to be withdrawn or you want to continue bidding later, you can get back all the tokens you locked.
When tokens are locked, you cannot perform operations such as staking, voting or transfer. That is to say, the only cost of becoming a parachain is actually just an opportunity cost.
So when you bid for parachains, you are saying that the value you can bring to yourself and the network is higher than the value you can use for staking and other operations. So the great thing about this is that you don't actually have to spend a penny.
auction winner
The bidding process can be a little more complicated than you might think. Here we look at a hypothetical snapshot of a random ending period.
You'll see the result not just one bidder, one winner, but multiple bids every time. Remember that slots are divided into 8 lease periods, so at the time of bidding, each bidder can choose the lease period they want from these lease periods.
For example, here Alice is bidding for all 8 leases and is willing to lock 200 DOTs for each lease.
And Bob only wants to rent the first and second lease periods, bidding 100 DOT for each lease period.
When we evaluate everyone's bids, we don't really care about the book value of their bids, but add up all the locked time bids.
So Alice bids for the full 8 lease periods, and bids 200 DOT for each lease period, so the 200 DOT will be locked for the entire 8 lease periods. So her locked value is 1600 DOT.
And Bob only rents for two lease periods, each bidding 100 DOT, so his locked value is 200 DOT.
On this basis, we will actually make a horizontal comparison to make the lease period as saturated as possible. So you will find that Alice fills up 8 lease periods by herself, but Bob and Charlie need to "combine" to fill up the complete 8 lease periods. So we look at Bob and Charlie together in our final evaluation.
In this auction, Bob and Charlie will be the final winners. You'll see that neither of these two bids was the highest, but the combination of their bids gave the highest overall locked value, which allowed them to win the auction.
4. Crowd lending
Next comes the most exciting part, which is Crowdloan.
What is a crowd loan? Crowd lending is a fundraising system that allows parachains to win slot auctions. In simple terms, DOT holders can lend tokens to parachain teams, and teams can use these tokens to bid in parachain auctions.
In order to encourage users to lend tokens to themselves, the team can create some incentives. A common example is to distribute their own tokens to crowd lending participants.
Of course, this is just a loan. As with the auction process, all crowdlending participants, all DOT holders, will get all their coins back at the end of the slot lease period. We use the logic on the chain to guarantee this process. So in the same way, the price of crowd lending is just an opportunity cost, so this thing must be very cost-effective.
Realize your ideas through crowd lending
What does this mean?
This means that in the Polkadot ecosystem, you don't need to be super rich to be a parachain, you just need to have great ideas. If you have a great idea, a solid development team, and some hard work, then Polkadot will give you everything you need to put it into production.
We talked about Polkadot sharing security for different teams before. And now we find that the Polkadot protocol even provides a way to raise funds to win slots, which is crowd lending.
Support your favorite team with crowdfunding
As a DOT holder, crowdlending is a great way for you to shape the future of the Polkadot network. You can support the teams that you think provide the most value, and you can also get some parachain tokens or other rewards. Remember, the tokens you lend through crowdlending will eventually be returned to you.
As a parachain team, crowdlending is an easy way to make your token distribution decentralized from the start. Therefore, crowd lending is actually a win-win situation.
5. Future plans
Below is a schedule of auctions to give you an idea of where we are and what to expect in the near future.
Last Thursday, we launched the Shell chain (empty shell chain) on the Westen testnet. Last Friday, we upgraded Kusama to support parachain registration, auction and crowd lending processes, so these functions are actually already on Kusama. This Monday, we launched the Shell chain to Kusama.
What will happen immediately will include upgrading the Shell chain to Statemine, which is Kusama's asset chain, which is similar to Statemint, but on Kusama.
Once Statemine is running smoothly, we will announce the official auction schedule. Of course, we will give you 7 days in advance so that you can unbind your staking KSM.
Kusama's Auction Length
Kusama's auction will last for 7 days, with 2 days being an open bidding period and 5 days being a random closing period. This should allow enough time for teams to bid and crowdlend, and for participants to participate in Kusama crowdlending.
auction plan
Do 5 auctions first
One auction is held each time, and a new auction is held every week (since the time of each auction is exactly one week, it is equivalent to consecutive auctions)
Each auction is for the current lease term (once an auction has a winner, you'll see that chain plugged in immediately, and you can see it start producing blocks that day.)
So, actually thinking about it, I feel very excited. We are so close to the real launch of the parachain team to Kusama.
Polkadot {.js} crowd lending interface
For crowd lending participants, we have the Polkadot.js APP, which will provide you with all the tools you need to participate in crowd lending. I hope you are already familiar with the use of Polkadot.js.
Polkadot.js address: https://polkadot.js.org/
You can choose the "Network - Parachain - Crowdloan" tab, then you will see all the ongoing parachain crowdlending activities, and you will see that different crowdloans have some differences options and configuration. Of course, these lists are not all information, you may be able to find more information from the parachain team, about incentives, participation and reward curves, etc. Combining this information with the information on the crowdfunding interface should give you enough information to make an informed decision.
Let's take a quick look at the screen and you'll see that there are 4 crowdlending here.
Bob's crowdfunding is over, he has raised the maximum amount he wants to raise in the crowdfunding, so can no longer accept new contributors.
And Charlie, David, and Alice have crowd loans in progress, and each crowd loan is bidding for a different lease period, and the end time of each crowd loan is also different.
The end time is very important and worth paying attention to. When you participate in a crowd lending activity, it means that your funds will be locked in the crowd lending process. If the crowdlending you participate in wins the auction, your funds will be locked until the end of the parachain lease. If you do not win the auction, your funds will be locked until the end of this crowdfunding campaign. So you need to consider the end time of crowd lending.
Of course, you can also see how many DOTs each crowdlender wants to raise, and how much has been raised so far. This information will let you know how many tokens you will get for the amount you contribute when tokens are distributed.
When you have made a wise decision, you can easily click the "Contribute" button on the right, fill in the DOT or KSM you want to contribute, and you have successfully participated in crowd lending.
auction winner
Depending on the stage of the auction, there are different definitions of current "winners", so if you're following the auction process, you definitely need to know what each type of "winner" is.
During the open bidding period, it is simple, whoever bids the highest for each specific lease period is the winner. If someone bids more, or a crowdlender raises more money, you'll see that the list of winners keeps changing, with old winners names disappearing and new ones showing up.
And then we get into the random end period, where there are a lot of different snapshots for different bid changes. So you'll see multiple sets of snapshots of the winners, with corresponding block numbers. Every time there's a new bid, a new snapshot comes out, and then you get a list of all the possible winners. Each of these snapshots may be the final winner of the entire auction. We'll know who the final winner is when the random ending period is over.
Finally, when the auction ends and a random number seed is generated that selects the winner, we effectively select a snapshot, which determines the winner. We run an algorithm to decide who is the best candidate for this snapshot. You will then be assigned a lease term.
In this example, Bob and Charlie won the auction, and their lease periods have already been allocated. If this lease period is the current lease period, then the parachain can go online directly.
What to do vs what not to do when crowd lending
In the process of participating in crowd lending, there are some points to pay attention to.
What should be done:
Be sure to pay attention to the announcement of the start of the auction (note: the PolkaWorld official account and the community will announce simultaneously at the first time), so as to unbind the KSM in staking in time to participate in the auction.
Be sure to investigate and study the parachain team well. Since crowdlending is an open and permissionless process, be aware that there may be groups with malicious intentions and it may not be worth locking up KSM for it. We have conducted several rounds of parallel chain and crowd lending tests on Rococo before, you can go and study what teams are doing on the Rococo testnet.
Never transfer money to another person to participate in the crowdlending process for you. The entire crowdlending process should be done on-chain by yourself.
Don’t lock up all your capital in the first crowdlending. Keep in mind that crowdlending is done by many teams and may start at different times. So if you lock up all your funds in the first crowdloan, then you won't have the funds to participate in the next one. You should think about the functions provided by these parachains in advance to make a reasonable fund allocation.
Things not to do:
6. Summary
Recap what we talked about:
Parachain slots allow Layer 1 blockchains to access the Polkadot ecosystem.
The auction is the mechanism that determines which parachains get these limited slots.
The crowd lending mechanism allows DOT holders not only to shape the future of the Polkadot network, but also to get a share of the rapidly developing Polkadot ecosystem.
So we know why Polkadot is the best platform for the future of Web3.0.Polkadot is designed to attract the best and most innovative development teamsOriginal link
