2021 Blockchain Industry Review and Polkadot Parachain Outlook

As 2021 comes to a close, looking back at the development of the Blockchain industry over the past year has been truly spectacular. From the DeFi boom to the global popularity of NFTs, and now the current focus on GameFi, Blockchain technology is gradually integrating into people's daily lives, leaving behind many well-known applications and concepts.

It is worth noting that Blockchain technology has developed to a new stage. People are no longer asking "What is Blockchain?" but are more concerned about the specific applications and the ways products are implemented. This may be the most significant progress in the past year.

However, returning to the Blockchain itself, we still face many challenges. For example, the high transaction fees of Ethereum, the balance between on-chain security and efficiency, and issues like transfer delays continue to trouble users. In addition, the cross-chain issues that received much attention last year continue to generate expectations in the industry.

Fortunately, at the end of the year, Polkadot finally welcomed the parachain slot auctions. This means that the criticized cross-chain operations may undergo significant changes due to the emergence of parachains, and the issue of information not being able to communicate between chains is also expected to improve.

Next, we will explore the changes that may occur in the Polkadot ecosystem after the parachain begins to operate, as well as the potential impact on the entire Blockchain industry.

Polkadot Parachain Slot Auction

1. The concept of parachain slot auction

Parachain slot auctions are essentially slot leasing. 80% of the slots will be auctioned on the market, while 20% are reserved for supporting community and ecological development. Each parachain lease period is 6 months, and participants can choose one or more consecutive periods, with a maximum of 2 years. To participate in the auction, DOT must be locked, and it will be released after the lease period ends.

Polkadot uses a candle auction with random parameters. The auction is divided into two phases: during the security period, DOT can be freely staked, and after the random period, the system randomly selects the end time. This method effectively prevents "auction sniping" and encourages participants to engage at a reasonable price early on.

2. The significance of parachain slot auctions

Parachains consume network resources while running. Currently, the Polkadot Relay Chain only supports 100 slots, and resources need to be allocated through auctions.

Polkadot is a scalable heterogeneous multi-chain Blockchain, with the relay chain and parachains as its main components. The relay chain is responsible for consensus and network security, while the Blockchain can connect to the Polkadot ecosystem through slots, sharing security and interacting with other parachains.

Slot auctions are also a type of screening mechanism. Obtaining a slot requires a high cost, and long-term leasing has stability requirements for projects. Therefore, only high-quality and strong projects can succeed, achieving a strong alliance through integration with the Polkadot network, enhancing the composability between projects, stimulating ecological innovation, and bringing new value to the Polkadot network.

The Impact of Normalization of Parachain Slot Auctions

1. The impact on Polkadot

The normalization of slot auctions means that the Polkadot ecosystem has successfully launched. At this point, Polkadot will become a huge cryptocurrency economy, divided into two major sectors: internal and external, and three tiers.

The official focus will shift towards the development of parachains and public interest parachains, such as cross-chain bridges. In terms of the economy within the ecosystem, the usage rate of Polkadot technology will be increased through hackathons, improved funding programs, and other means, supporting more teams to join the ecosystem.

The cost of slot auctions is expected to gradually decrease. The intense competition in the initial phase leads to high costs, but as normalization occurs and slots become less scarce, competitive pressure diminishes, resulting in a natural decrease in cost. The launch of parachains will also provide more options for projects.

2. Impact on ecological projects

Projects that have obtained slots will enter a two-year assessment period. The mechanism of Polkadot inherently includes survival of the fittest, encouraging projects to operate diligently to ensure lease renewal. This is beneficial for retaining high-quality projects and avoiding the bad driving out the good.

After the normalization of auctions, the integrated parachains will accelerate the development of their own ecosystems and explore cross-chain scenarios. How to become a leader in their respective fields will become a focus. A multitude of incentive measures and benefits are expected to emerge.

Projects that have not obtained a slot can pay attention to the opportunity of reduced auction costs or consider using parachains to access Polkadot in advance. Application-based projects can adopt a multi-chain deployment strategy, deploying on multiple well-operating parachains to achieve rapid expansion.

3. Impact on Ordinary Users

The normalization of slot auctions provides users with long-term "new investment" opportunities, and DOT will become a means of participating in proof of stake. Various parachain projects are beginning to strengthen their own ecosystems and may launch incentive programs similar to public chains, bringing investment opportunities to users.

Choosing high-quality parachain projects and accompanying their growth makes it easier for users to obtain development dividends.

Conclusion

With the Polkadot parachains set to officially launch, this may bring new opportunities for cross-chain issues. As one of the most professional and focused teams in the field, Polkadot is expected to showcase the allure of "interconnectivity of thousands of chains" in 2022, preparing for the arrival of the Web 3.0 era.