This week saw several competitor projects participate in Polkadot’s first parachain auctions. This process tends to put buying pressure on DOT while giving emerging blockchain projects a chance to prove why they offer the most competitive solutions to various existing needs in the crypto space.
Parachain auctions are crowdloan powered auctions that are held on the Polkadot or Kusama network relay chain to determine which new blockchain will connect to the parachain slot. Once an auction begins, every project on the network is free to submit its bid to the relay chain.
Parachains are ultimately sold in an unpermissioned candle auction, which is a method used to auction ships in the 16th century where the relevant winner was the highest bidder when the flame went out. Auctions for both the Polkadot and Kusama network function similarly, and teams bid using two pieces of information: their bid amount and slot duration. Project teams bid using DOT or KSM tokens.
If you wish to participate in one of Polkadot or Kusama’s crowdloan auctions, navigate to https://parachains.info/auctions. Once a crowdloan kicks off, you will see a “JOIN NOW” button next to the participating project. This button will direct to polkadot.js.org or to a relevant parachain project website where you may get additional bonuses from a project team for your (sometimes time-sensitive, early) crowdloan contribution. Both ways use Polkadot’s native crowdloan mechanism. This ensures that the DOT/KSM which you contribute to a project will be received back to you automatically.
In case a project does not make the race to become a parachain member after the crowdloan event, you will receive your DOT/KSM tokens back in a few days after the auction’s end automatically. The minimum contribution for each individual Polkadot or Kusama crowdloan auction is 5 DOT for Polkadot auctions and 0.1 KSM on Kusama.
The launching and ongoing Polkadot parachain auctions follow the success of similar auctions on its sister canary network Kusama (KSM), where projects such as Moonriver (MOVR) and Karura (KAR) have each successfully secured a parachain slot for the following year.
The picture below shows the 5 most successful and qualified Kusama crowloan projects:
The Kusama parachain auctions started during a downturn in the broader crypto market and helped KSM recover from a price low of $148.85 on 19 July to its current price of almost $457 as KSM tokens committed to auctions were withdrawn from circulation. The same process, the committing and therefore locking of DOT tokens for 96 weeks for every auction participant, will now be applied for the Polkachain parachain crowdloan auctions. This, and other additional speculative factors, could significantly boost the Polkadot price in the coming weeks.
Here’s an overview of the parachain auctions currently running and coming on the Polkadot network. And again, similar to the Kusama crowdloan auctions, DOT could get a boost as an increasing number of DOT tokens will be removed from the circulating supply for a considerable time (96 weeks).
Let’s take a closer look at the some of the most anticipated participating Polkadot parachain projects:
Acala (ACA) is a layer-one smart contract platform nominated as Polkadot’s decentralised financial (DeFi) and liquidity hub. The protocol is Ethereum (ETH) compatible, has built-in liquidity and pre-built financial applications, including a trusted exchange, decentralised stablecoin (aUSD) and DOT liquid staking (LDOT).
Acala is the sister network to the Karura (KAR) DeFi protocol, which operates on the Kusama canary network and can offer many of the same features.
Given that DeFi is fast becoming one of the foundational sectors of the entire cryptocurrency ecosystem, having a widely established DeFi protocol that can attract liquidity and provide some return to token holders is a must for any network.
Moonbeam (GLMR) is a fully Ethereum-compatible smart contract platform designed to simplify the process for multi-chain projects to be launched on the Polkadot network.
Moonbeam’s sister network on the Kusama relay chain is Moonriver, which offered the highest reward score of all parachains that successfully launched on the Kusama network.
Simplifying the process of cross-chain migration to Polkadot is an important issue in the current crypto market, as high gas fees for Ethereum are still one of the main reasons why investors and developers have switched to lower-cost alternatives such as Polygon, Fantom and Avalanche.
If Moonbeam can help simplify this process for interested projects, it has the potential to increase the overall strength and activity of Polkadot.
Astar (ASTR) is a protocol that has its focus on creating a scalable and interoperable infrastructure for Web3.0 by creating a platform to support multiple virtual machines that connect compatible Layer One protocols to the Polkadot network.
Astar can further act as a highly scalable smart contract platform to help the Polkadot relay chain, which cannot support smart contracts.
Parallel Finance (PARA) is a DeFi credit protocol and automated money market (AMM) that supports both Polkadot and Kusama-based assets and also allows token holders to let their assets work for them through earning passive income (earning interest).
The protocol aims to provide greater liquidity, return and capital efficiency to the Polkadot ecosystem, and users will eventually be able to lend, invest and borrow assets from any of the supported networks.
With eleven sets of parachain auctions scheduled to take place weekly between 11 November 2021 and 10 March 2022, there is a strong possibility that the price of DOT will continue to rise as long as demand for parachain access continues or even grows.