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Polkadot's Parachain Auctions Ensure Scalability

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Pavan A Follow


Nov, 22 2021

Nov, 22 2021

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Polkadot announced its plans to hold the highly anticipated parachain slot auctions following the success of two successful Kusama parachain slot auctions, in which more than $1 billion worth of KSM tokens have been contributed.

Polkadot began its highly anticipated parachain auctions on Nov 11, and two projects have gained an advantage over their competitors.

In the auction ending on Nov 18, Acala and Moonbeam are battling it out for the victory with a combined total value of more than $2.5 billion in DOT pledged.

Along with the winner of the next five auctions, the winning project will be onboarded as a fully-loaded Polkadot parachain on Dec 18. Once the first ends, the second will begin and the runner-ups can begin the crowd loan battle.

Gavin Wood, one of Ethereum’s eight co-founders, launched the Web3 Foundation in 2017 to realize his vision for a shared proof-of-stake Ethereum using Polkadot.

Polkadot's central relay chain has been operational since its inception in May 2020. There is no smart contract support in the relay chain, and it can only perform DOT transfers and stake functions.

The upcoming Polkadot auctions will provide parachain slots to projects that build on top of the Polkadot network, realizing its vision of sharded blockchain ecosystems.

Defi protocols cannot be hosted on Polkadot networks without parachains. Parachains are allocated to projects coming up on Polkadot through lease-based bidding. This involves them pledging to lock up large amounts of DOT for three-month terms up to a maximum of two years.

An innovative token issuance model dubbed the parachain lease offering (PLO) arose from the model. In the PLO, the participants will receive both native tokens and governance tokens of major Polkadot projects. They will get back their DOT if the project bid fails or at the end of the parachain lease period if they land a slot.

In the wake of the parachain auction hype, the price of Polkadot's native token soared to just under $55 on November 4. Staked tokens are temporarily removed from circulation so that they can be used to gain rewards for crowd loans.

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Pavan A

CBW - External Analyst


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