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It’s raining Parachains! Polkadot’s [DOT] first 5 projects go LIVE

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Polkadot [DOT], a blockchain interoperability platform has announced the arrival of its five parachains into its network, marking a pivotal point in the interconnected blockchain technology domain as well as demonstrating its multi-chain capabilities. According to the press release, the name Parachain refers to a set of individual blockchains that runs in tandem with the ecosystem and is now finally released on the network after five years of meticulous research.

The first five to win the slot on the Polkaldot’s relay chain are Acala, Moonbeam, Astar, Parallel Finance, and Clover, which would continue to be under a lease up to 96 weeks at a time. Each of these para chain groups would be focusing on a variety of topics ranging from decentralized finance [deFi] to investments and loans, as well as smart contract functionality. The next batch of para chain auctions will be launched on Dec. 23, this year. and the winners would be announced on March 11, 2022.

It is noteworthy to mention that Polkadot has been hosting parachain slot auctions since Nov. 1, 2021. So, Projects aiming to win a slot host crowd loans to raise DOT tokens and staked the received coins to bid on parachain slots. The first such parachain slot was won by decentralized finance (DeFi) platform Acala with Moonbeam, an Ethereum smart compatibility protocol holding the second slot.

Talking about interoperability, despite the rise of several public blockchains, sending tokens and data across chains poses challenges because every blockchain ecosystem is fragmented and the emerging interoperable bridges are generally considered risky due to their reliance on centralized processes like token wrapping. 

Polkadot’s Parachain mechanism

In order to address this interoperability issue, Polkadot‘s network executes cross-chain communication at the protocol level and secures Layer1 parachains through a process called shared security. Speaking more on the parachain model and the value they create in the Web3 domain, Creator Gavin Wood stated,

“The parachain model was created with the belief that the future of Web3 will involve many different types of blockchains working together. Just as the current version of the Internet caters to different needs, blockchains need to be able to provide a variety of services. Parachains solve this.”

How to Choose Between Parachains and Parathreads?

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The third generation of blockchain technology is running full steam ahead, with the Polkadot ecosystem leading the charge. The reason Polkadot is such a hot topic right now is that it patches up the issues of scalability and interoperability. This means that developers can use their system to create multi-chain projects that run off blockchains in unison. Further, through chain bridges, projects can integrate with existing blockchains. To do this, they run a series of parachain slots that connect to a Relay Chain, with devs bidding on slots to win time. Alternatively, there are parathreads, which can give businesses access to the Relay Chain on a pay-as-you-go basis. To find out which is the best option, continue reading.

Parachains

What Are Parachains?

Essentially, parachains are blockchains that exist on the Polkadot network. They are connected to a central Relay Chain and allow for interoperability and scalability. Parachains take up a dedicated slot and can therefore be bid on by developers looking to create. Alongside publicly available parachains, there are common good parachains that are put aside for projects that benefit the central Relay Chain or the entire community. These slots are decided on by a public governance system. If you win a parachain bid, you have access to the Relay Chain for the entirety of the lease and your bond is your allotted a share in DOT.

 What are Parathreads?

Parathreads are essentially the same as parachains in terms of functionality. The only difference is that they don’t need to be bid on. Instead, they access the Relay Chain when they need to. Payment for a parachain is made for the time connected to the chain. The question of parachain vs parathread is dependent on the type of project being completed and the amount of revenue you have.

  Parachains or Parathreads?

When you bid on a parachain slot, you will need to start a bid at 5 DOT, which is worth around $200 depending on the market. To win the slot, you are going to need a heft fund alongside an invested community. To give you an idea, Acala won the first parachain auction with a lock-in DOT worth $1.3 billion. They can now use that parachain slot for the entirety of the lease. Once they’ve finished, their assets are unfrozen.

If you don’t have the financial backing yourself, or a supportive community, a parathread would be the best option for you. As well the financial side, the practical side of your project will dictate whether you need to invest in a full parachain slot. For instance, if your project runs mostly on your network and would only need limited interoperability, then there’s no feasible point in having a parachain slot. Just because you opt for a parathread now, doesn’t mean you can’t occupy a parachain in the future. The Polkadot ecosystem marks an exciting step forward in the blockchain space by allowing devs to work on interoperable projects. Their system of bidding and freezing assets for the duration of the lease will guarantee that the ecosystem keeps rolling forward.