Polkadot’s first round of five parachain auctions have concluded and the winners are now producing blocks, setting Polkadot’s sharded ecosystem into motion for the first time.
The launch of parachains ushers functionality for smart contracts and other specialized computation on the Polkadot network, allowing top developers to begin building out Polkadot’s DeFi and the broader ecosystem.
The first five parachains belong to fintech-focussed DeFi hub Acala Network, EVM-compatible smart contract network Moonbeam, WASM and EVM smart contract platform Astar Network, decentralized lending and staking platform Parallel Finance, and cross-chain compatibility platform Clover Finance.
Each project went live as a parachain and began producing blocks on Dec. 18. The winners now predict their dapps and liquid staking derivatives will go live before February, with the initial tranches of tokens distributed through the auctions also slated to unlock during January.
Ethereum co-founder Gavin Wood left the Ethereum Foundation in 2016 amid disagreement over the roadmap for Ethereum 2.0’s upgrades. He founded Parity Technologies and published the Polkadot whitepaper that October.
The document articulated Wood’s vision for a sharded multi-chain, proof-of-stake ecosystem in which shards or “parachains” offering specialized computing communicate with a central “relay chain” to validate transactions. The design allows for shared security and unlocks significant scalability for decentralized applications.
Polkadot went on to raise more than $140M in a 2017 ICO, however it later lost more than half of the funds after a series of catastrophic bugs plagued Parity’s Ethereum wallet. Polkadot later conducted two private sales in 2019 and 2020.
Since Polkadot’s mainnet launch in May 2020, only the network’s relay chain has been live. It supports a small range of transaction types, including DOT transfers and staking functions. The relay chain does not support smart contract functionality, with parachains tasked with enabling specialized computation on the Polkadot network.
Parachains are allocated on a lease basis through auctions, where projects compete to lock up DOT for the duration of the lease by crowd-sourcing funds in exchange for their governance tokens. Auctions take place in batches of five, with 100 slots available in total.
Once the 100th slot is filled, the first parachain will go back up for auctions, meaning that Polkadot’s parachain ecosystem will change over time.
The first slot was highly contested, with “DeFi hub” Acala narrowly beating out Moonbeam to win the first auction on Nov. 18 with roughly 32.5M DOT contributed by 81,000 participants.
Developers building on Acala will be able to launch customizable advanced financial applications using its open-protocol layer EVM Plus, with Acala expecting that “major fintech companies and neobanks” will choose to build using the layer.
“Every single specialized area in the financial domain has different requirements and compromises,” Acala co-founder Bette Chen told The Defiant. “Without the ability to customize you will never provide projects with the best platform.”
Chen added that the protocol is suited to supporting “programmable banking systems, financial instruments, and structural products.”
Acala will also host its aUSD collateralized stablecoin protocol, an automated market maker DEX called Acala Swap, and its Liquid Crowdloan DOT (lcDOT) and Liquid Staking DOT (lsDOT) derivatives.
In a recent blog post, Chen noted that lcDOT and unlocked ACA tokens will be distributed within the next four weeks, with the aUSD and Acala Swap protocols set to launch alongside token transfers and other features during Q1 2022.
Following Acala’s victory, Moonbeam received an influx of contributions, prompting the project to stop accepting contributions before the second auction finished and increase its reward pool by 50% to 150M GLMR tokens. In total, Moonbeam received nearly 35.8M DOT from more than 200,000 individual contributors.
Moonbeam’s Ethereum Virtual Machine (EVM) parachain is positioned as the leading gateway for popular EVM-based DApps looking to launch on Polkadot, with the team describing it as the “easiest on-ramp” to the Polkadot ecosystem.
The project has announced partnerships and integrations with leading protocols including Chainlink, Balancer, SushiSwap Lido, The Graph, and Ocean Protocol, alongside many others. The protocol also plans to enable bridges between other Polkadot parachains in the future.
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Moonbeam aims to complete its full launch in January, after which developers can port EVM-based protocols onto the parachains and unlocked GLMR tokens will be distributed to crowloan participants.
Astar won the third parachain auction on Dec. 3 after raising 10.3M DOT from more than 100,000 unique wallets.
Astar, previously named Plasm Network, describes itself as a smart contract hub supporting EVM and WebAssembly based programming and rollups.
Unlike most proof-of-stake protocols, Astar supports a unique dapp staking mechanism where users nominate their nominative native ASTR tokens to decentralized applications launched on the network.
Based on its current design, the Astar treasury and dapp developers each receive 40% of inflation as rewards, while nominators and nominators each take 10%. However, Astar plans to redesign its dapp staking tokenomics to allow dynamic returns for nominating to individual dApps in 2022.
Astar also plans to launch on-chain governance on top of dapp staking next year.
Parallel Finance secured the fourth auction with a bid of 10.7M DOT from more than 30,000 contributors on Dec. 10. Parallel describes itself as a decentralized lending, staking, and borrowing platform.
The protocol emerged as the largest decentralized crowdloan platform, with more than 22M DOT or 20% of all parachain auction contributions being made through Parallel’s Auction Loan platform. Overall, Parallel is the second-largest crowdloan platform behind Binance, including 1.5M DOT from Alameda Research.
.Parallel rewarded all parachain contributions on its platform. The team plans to soon launch a money market and AMM allowing holders of Parallel’s governance token PARA and liquid staking derivative cDOT to generate yield.
Clover won the fifth auction with 9.75M DOT from more than 11,000 participants on Dec 17.
Clover describes itself as a “foundational layer for cross-chain compatibility” and “passport to the omniverse.” The project enables high-speed compatibility with EVM-based assets and Layer 1s while emphasizing decentralization.
Clover’s wallet allows users to connect with multiple EVM-based chains simultaneously, which has received more than 300,000 downloads to date.
On Dec. 10, Clover announced it is working in partnership with scaling solution Polygon Network to launch a bridge enabling Polygon-based assets to be used in the Polkadot ecosystem.