Going, going…. Gone! Why parachains auction slots are crucial for the future of blockchain development.
With the Kusama parachain auctions creeping up again, we are revving up the engine for round two and this post sets the scene of why these auctions are a game changer, not just for Centrifuge, but for the entire blockchain ecosystem. Let’s take it from the top…
What is a parachain?
Ethereum was built with the vision to be the world’s computer, but one of its key downfalls is its scalability, and five years later, it’s still a huge pain point. Polkadot addresses this through its parachains. Its scalability derives in part from allowing projects to deploy their own parachains, most commonly in the form of other blockchains, that function on smart contracts and run parallel and connect to the main Polkadot “Relay Chain”. By being integrated into the Relay Chain, all parachains will also gain access to its base features. This means that each parachain can have its own parameters such as block times, transaction fees, governance mechanism and incentives, but benefit from the Relay Chain’s security and are able to pass messages securely between each parachain. Kusama is the first live Relay Chain for parachains to connect to by bidding on open slots. And Polkadot is coming soon!
How do parachains work?
The basic purpose of the Relay Chain is to provide security to the connected parachains. The Relay Chain has its own staked set of validators that verify the validity of blocks proposed by each parachain, providing shared security among all parachains, so they can focus on delivering their specific purpose features.
The Relay Chain has its own Governance mechanism, driven by the community and token holders. A positive side effect of defining a standard of communication between the Relay Chain and its parachains is that parachains can communicate among each other and exchange arbitrary data enabling a wide range of use cases.
How does one get a parachain?
Polkadot currently supports up to 100 parachains on estimation, therefore slots are limited and the race is on to secure one. Projects can be allocated one via three different methods:
- “Common Good” parachains are allocated by Polkadot’s on-chain governance system, such as bridges to other networks or chains, and thus deemed as “common good” parachains.
- Parathreads: scheduled for execution on a pay-as-you-go basis with an auction for each block.
- IPO (Initial Parachain Offering), granted through a permissionless candle auction via a crowdloan by the community and the participating project.
As there are limited slots available, winning one of them is of extreme importance to projects who want to utilise the Polkadot network for scalability and meet future demand. Connecting to the Polkadot Network is crucial for some projects to progress.
How will parachains enhance the blockchain ecosystem?
The variety of the parachain’s potential use cases are just as wide as the range of possibilities Polkadot as a network provides. Parachains will also allow for connection to external networks such as Bitcoin and Ethereum using bridges, thus increasing the building potential for any project that wins one. The flexibility of parachains address the problems of scalability, security and interoperability that have decelerated blockchain development so far, all prevalent pain points in the Ethereum ecosystem.
What does a parachain mean for Centrifuge?
Centrifuge’s DApp Tinlake currently taps into the DeFi liquidity that the Ethereum Ecosystem has to offer. Our partnerships with two of the main protagonists on the DeFi stage; MakerDAO & Aave are unlocking billions of capital for our Issuers, and the entire DeFi ecosystem. A parachain on the Polkadot Network will only expand Centrifuge’s already huge potential.
It will enable anyone to finance real world assets on the Polkadot Network, and connect it to all the projects that will eventually have a parachain. This will expand our partnerships and our ability to fulfil our mission, and enable access to financing to everyone.
The first teams we would love to work with are Acala, to provide a stablecoin to finance assets using Centrifuge, KILT to provide proof-of-existence to verify the authenticity of real-world assets in Tinlake, and Moonbeam to mint Tinlake NFT assets and connect to projects and use-cases building in Solidity.
What is Altair & how does it differ to the main Centrifuge parachain?
Altair is Centrifuge’s Kusama parachain. Think of Altair as Centrifuge’s wild experimental little brother. Altair will be the playing ground for anyone wishing to finance real world assets on the Kusama Network.
Altair will play a key role on Centrifuge’s product life cycle in two major ways:
- Feature promotion; Where we can verify new iterations of our products in a live network, ensuring the best quality possible before it reaches the Centrifuge Mainnet.
- A valuable playground where new, exciting, experimental capabilities and use cases will be tested in a live network.
A case for Altair and Art: financing the JPEG revolution
Want to get liquidity from your Cryptopunks? Altair’s flexible asset financing structure can help issuers finance experimental assets like Cryptopounks and other art NFTs. Imagine a Cryptopunk DAO, where Cryptopunk owners pool their NFTs into one pool on Altair. Investors can finance this pool to give the stakeholders in the Cryptopunk DAO, liquidity on their assets.
Ready for lift-off
Centrifuge’s Altair Crowdloan will be opening in the next few days so stay tuned to our channels (Twitter, Discord, Telegram) for more details and make sure to stake your KSM to Altair to make Real World Assets on Polkadot a reality!
If you have any more questions about parachains or auctions in general, or want to pick our brains more about the Centrifuge or Altair parachains, you can join us on Twitter spaces hosted by Dan Reecer, CMO of Acala & Karura on Thursday 26th August at 7pm UTC and ask us anything directly!