Parachain Auctions on Polkadot: the Best Projects
The Parachain Auctions on Polkadot, one of the most anticipated events of the year, after eip1559 on Ethereum and Taproot on Bitcoin, are underway. But what exactly are they?
The Web3 Foundation led by Dr. Gavin Wood, one of the former Ethereum developers, announced months ago that it would be conducting an auction to select the best projects to go and collaborate with. The 100 lucky winners of the auction will have the right to develop a project on Polkadot's Relay Chain. Before going on though, let's clarify and explain what Parachain and Relay Chain are:
- The Relay Chain is Polkadot's main substrate, its beating heart, responsible for security, consensus and cross-chain interoperability
- Parachains, on the other hand, are smaller substrates that can be used by other tokens to be able to create an alternative blockchain while continuing to enjoy the reliability and security of the main relay chain.
It is clear, therefore, that the 100 winning projects that will be awarded a slot to build their own project on Polkadot's parachains, will enjoy great privileges. How does a project win a slot? The various contenders, in order to win a place on the parachain, must compete with each other in an auction mechanism, in which whoever "offers" the most DOT tokens is declared the winner. In a nutshell, the various candidates, starting next week, for 7 days, must make offers in DOT blocking the tokens themselves as collateral for 2 years. At the end of those 7 days, whoever has bid the most DOT will be awarded a valuable slot. Help from Home It is possible to request a kind of "help from home" from the various contenders. Users, through Cex (Binance, Kraken) or through polkadot.js, will be able to "lend their DOT" to various projects aiming to increase their chances of winning. In return they will be issued rewards in the token in which they have chosen to bet. At this point 2 things can happening :
- The project on which you "bet" wins the auction: in this case you must lock your DOT for 2 years. As a reward you will receive rewards for 2 years.
- The project on which you "bet" does NOT win the auction: you will get back your DOT at the end of the auction (about mid-December 2021) + rewards accumulated.
Small DILEMMA Is it convenient for users to lock their cash in DOT for 2 years, while receiving rewards in return? Some users, including the most speculative ones, might turn up their noses... In order to solve this little dilemma the CEX of the day, such as Binance or Kraken, offer to lend a synthetic token called BDOT to the winning users of the auction. So if we choose to lend DOT to a project that turns out to be the winner of the auction, when our tokens will be blocked for 2 years, the exchanges mentioned above will "reward" us with a token (BDOT) that will start from the price of 1:1 with DOT (then the market will decide the price). BDOTs (synthetic tokens) can immediately be traded on the market, or they can be traded back for DOT at the end of 2 years at a 1:1 ratio. So if you're a Polkadot fan and you're excited about the auction mechanism, all you have to do is choose your project and bet your chips!
Acala, Moonbeam and Efinity: which project to choose?
ACALAAcala is undoubtedly one of the most popular and anticipated projects for parachain auctions. Acala is an all-in-one defi hub built on Polkadot where it is possible to perform liquid staking operations and exploit all the opportunities offered by De-Fi through its own DEX. In addition, Acala aims to create a decentralized stablecoin (similar to DAI) collateralized with cross-chain assets. Currently Acala has collected more than 8.5 million DOT to be allocated to the auction and can rely the funding of 32 companies that have decided to invest in the project. Currently, the ACA token is not yet listed on exchanges. MOONBEAM Moonbeam is also one of the most shill projects for auction fans on Polkadot. Moonbeam is the counterpart to Moonriver, a project built on Kusama that has been quite successful. Moonbeam is a smart contract platform that is interoperable with EVM (ethereum-virtual-machine) and the Bitcoin blockchain. It therefore allows developers to easily build projects thanks to native Polkadot compatibility and bridge-based integrations, all with the advantage of very low fees. Moonbeam has raised over 5 million DOT so far and has not yet been listed on any exchange. EFINITYEfinity is a project that is still in the testing phase, therefore in a phase of latent development. However, it has a very high potential. It is a project developed by the famous Enjin team, so there is a lot of hype in the air given Enjin's past results. Efinity is a platform dedicated to the world of NFTs, a next-generation blockchain built on Polkadot that proposes a new standard of tokens, namely paratokens. Unfortunately at present, existing blockchains do not offer incentives to NFT creators, fees are often hindering, smart contracts are inflexible and interoperability is disconnected. Efinity, through its first prototype of paratokens and its innovative platform, aims to solve all these problems. Currently Efinity is listed on some exchanges such as Gate.io and Coinlist pro at a market price of $1.80 (price at the time of writing). At the moment it can rely on the participation of 23 institutional investors. We'll see if the Enjin team will be successful in this project too!