How Polkadot’s parachain auctions make a decentralized Web3 possible

When Gavin Wood co-found­ed Ethereum, he stat­ed that it would “allow peo­ple to inter­act in mutu­al­ly ben­e­fi­cial ways with­out any­one need­ing to trust each oth­er.” In the­o­ry, such a plat­form would pave the way for Web3, char­ac­ter­ized by decen­tral­ized or dis­trib­uted net­work archi­tec­tures, that would lay the ground­work for a tru­ly open inter­net where we would not have to blind­ly entrust our data to monop­o­lis­tic cor­po­ra­tions or get per­mis­sion from them in order to participate.

Since its incep­tion in 2015, how­ev­er, Ethereum has sim­ply failed to adapt fast enough and keep up with the pace. Trans­ac­tions costs for decen­tral­ized appli­ca­tions (DApps) have been too high while trans­ac­tion speeds have been too slow. Wood left the Ethereum team in 2016 and found­ed the frame­work for a decen­tral­ized Web3: Polkadot. 

With its series of parachain auc­tions begin­ning to turn heads, the blockchain of blockchains is round­ing up a very excit­ing year, start­ing with the launch of Kusama, its canary net­work. Kusama’s mot­to is “expect chaos.” And, look­ing back, it’s clear that the network’s expect­ed chaos dur­ing its parachain auc­tions laid the frame­work for a stur­dy Polka­dot foun­da­tion and an even­tu­al decen­tral­ized Web3 in the com­ing years.

Relat­ed: What are parachains: A guide to Polka­dot & Kusama parachains

Polkadot

The capac­i­ty to com­mu­ni­cate is part of what sets Polka­dot apart from Ethereum and oth­er blockchains. Polkadot’s empha­sis on parachains, for­mal­ly a par­al­leliz­able chain, is a dri­ver in pro­pelling one of the core prin­ci­ples behind Web3 for­ward: The abil­i­ty to com­mu­ni­cate between dif­fer­ent sys­tems. With­in the ecosys­tem, parachains run in par­al­lel and any type of data may be sent between them due to Polkadot’s cross-chain com­pos­abil­i­ty, open­ing up pos­si­bil­i­ties for new use cas­es. Thanks to cross-net­work bridges, parachains can also be con­nect­ed to exter­nal net­works such as Bit­coin, Ethereum and oth­ers. By this token, parachains are unique, inde­pen­dent and designed for a blockchain’s spe­cif­ic needs unlike Ethereum’s shards, which are iden­ti­cal by design and less adaptable. 

Relat­ed: Build­ing mul­ti­chain is a new neces­si­ty for DeFi products

Essen­tial­ly, Polka­dot is built around the Relay Chain — the cen­tral chain of Polka­dot — which ensures inter­op­er­abil­i­ty between oth­er blockchains in the net­work, allow­ing devel­op­ers to safe­ly build their own pri­vate blockchains. While the cur­rent relay chain process­es trans­fers, applies gov­er­nance pro­to­cols and offers stak­ing ser­vices for the Polka­dot net­work, an upcom­ing series of parachains is expect­ed to pro­vide advanced fea­tures includ­ing improved func­tion­al­i­ty and cross-chain compatibility. 

If the Relay Chain rep­re­sents the prover­bial hub, parachains are essen­tial­ly Polkadot’s spokes. Each parachain is a blockchain capa­ble of run­ning its own con­sen­sus algo­rithm, util­i­ties, tokens and so on. Since the Relay Chain doesn’t sup­port smart con­tracts or oth­er spe­cif­ic fea­tures, those respon­si­bil­i­ties are passed onto parachains. 

It’s worth not­ing that parachains are not bound to any rules apart from the require­ment that they are trust­less­ly val­i­dat­ed. Polka­dot lim­its the num­ber of parachains to 100 — a hard lim­it cre­at­ing com­pe­ti­tion among projects hop­ing to con­nect to Polka­dot. To con­nect, poten­tial parachains must win a parachain slot auc­tion by out­bid­ding oth­er projects. Once a parachain wins a slot, it bonds Polka­dot (DOT) tokens to pay for its slot lease (parachain slots are nev­er sold, only leased). If these auc­tions sound com­pli­cat­ed or per­haps obscure, it’s because parachain slots are scarce and Polkadot’s inten­tion is to pri­or­i­tize seri­ous and high-qual­i­ty projects.

Relat­ed: How liq­uid stak­ing dis­rupts parachain auc­tions on Polkadot

Kusama

Offi­cial­ly speak­ing, Kusama is a net­work built as a risk-tak­ing fast-mov­ing “canary in the coal mine” for its cousin Polka­dot. As Kusama puts it: 

“It’s a liv­ing plat­form built for change agents to take back con­trol, spark inno­va­tion and dis­rupt the sta­tus quo.” 

The net­work billed itself as allow­ing for the most real­is­tic test­ing envi­ron­ment pos­si­ble for blockchain projects, and you’d be for­giv­en for assum­ing Kusama for some sort of dop­pel­ganger since it has an almost iden­ti­cal archi­tec­ture and struc­ture to Polka­dot apart from its capac­i­ty for fast upgrades. The net­work hasn’t only been used for parachain can­di­dates to inno­vate and test changes, but also as a proof of con­cept for Polkadot’s shard­ed model.

For Kusama, auc­tions have proved key to its scal­able mul­ti­chain archi­tec­ture where parachains con­nect to the net­work by leas­ing a slot on the Relay Chain via a per­mis­sion­less auc­tion. When Polka­dot ini­tial­ly report­ed on the launch of its parachain auc­tions, it not­ed how Kusama had suc­cess­ful­ly com­plet­ed 11 parachain auc­tions since begin­ning in June. Since then, over 2.4 mil­lion Kusama tokens have been con­tributed by more than 49,000 unique address­es, sig­nal­ing some rather sig­nif­i­cant com­mu­ni­ty interest. 

Fur­ther, the fact that there were no tech­ni­cal issues through­out the parachain auc­tions proved to gal­va­nize Polkadot’s prepa­ra­tion for its own auc­tions. It’s becom­ing clear that a grad­ual roll­out is cen­tral to Polkadot’s suc­cess, with the total num­ber of parachains onboard to Polka­dot not exceed­ing 75 per­cent of those run­ning on Kusama in a bid for qual­i­ty over quan­ti­ty. The suc­cess of Kusama unde­ni­ably spells a bright future for Polkadot. 

Relat­ed: How much intrigue is behind Kusama’s parachain auctions?

The path toward a decen­tral­ized inter­net starts with parachain auc­tions, begin­ning with those that are start­ing on Kusama. Web3 is focused on return­ing the con­trol of the inter­net to users and that is exact­ly what is hap­pen­ing with the parachain auc­tions where every­one is free to par­tic­i­pate. Polkadot’s ongo­ing parachain auc­tions are bound to be suc­cess­ful thanks to rig­or­ous test­ing on Kusama and will ensure a decen­tral­ized Web3 by con­nect­ing dif­fer­ent blockchains togeth­er. The future is like­ly to see Kusama bridged to Polka­dot for cross-net­work inter­op­er­abil­i­ty — the ulti­mate real­iza­tion of Web3.

This arti­cle does not con­tain invest­ment advice or rec­om­men­da­tions. Every invest­ment and trad­ing move involves risk, and read­ers should con­duct their own research when mak­ing a decision.

The views, thoughts and opin­ions expressed here are the author’s alone and do not nec­es­sar­i­ly reflect or rep­re­sent the views and opin­ions of Cointelegraph.