A few key information you need to know about Polkadot Parachain Slot Auction
First of all, based on the long-term research of Polkadot by Dealean Capital, we must clearly point out that before the parachain was officially linked to the Polkadot or Kusama relay chain and cross-chain was realized, Polkadot did not achieve a true ecology.
Even if we see that there are currently about 400 projects in the Polkadot ecosystem, most of them are based on the Substrate framework,we can only think that this is a relatively loose “alliance”. In order to achieve stability and sufficient asset scale, if the ecological environment allows, a mature market environment and the tacit understanding between developers are needed for resource flow and collaboration.
Now the Polkadot ecology may only need to wait for an opportunity. The narrative of Polkadot ecology is mainly based on the idea of “cross-chain”. Some developers, investors in the primary and secondary markets, communities, well-known exchanges, sub-applications of the Polkadot series, and other external worlds we have contacted are all looking forward to the ecological development of Polkadot. These are the absolute core forces surrounding Polkadot’s ecological construction, coupled with the structural foundation of Substrate, Gavin Wood’s own charm, and the financial support of the Web3 Foundation, which make Polkadot stand out as a star project in the blockchain.
Although we cannot ignore the huge potential of Polkadot’s ecological follow-up, even with the above halo, we must take an objective attitude towards the development of Polkadot’s ecology. The high degree of freedom of business mergers brought about by cross-chain, the Substrate framework, and the tremendous power of developers in the Polkadot ecosystem are all key factors that create and support the Polkadot ecosystem to become the “new giant” in the market. According to Gavin Wood’s own public speech or team’s internal exchanges and sharing, Polkadot’s cross-chain is not only the interaction of information and assets, but also the collaboration and free invocation of future smart contracts and business modules. These will bring more funds and opportunities to Polkadot. The Substrate framework and shared security also greatly reduce the barriers and costs for developers to enter.
From mid-2020 to the present, the “parachain” projects in the Polkadot ecosystem and the projects that have received the official Web3 grant have caused great repercussions in the community. Although the attention to this field has declined recently, it can be seen that the basic components of the Polkadot ecology have become more mature. At the beginning, the capital party judged whether to participate in a project based on the strength of the technical team, the direction of the project being developed, and whether or not to obtain an official grant. But now everyone pays more attention to whether the projects they are investing in have the financial strength and actively participate in the auction of parachain slots. Everyone in the Polkadot ecosystem is waiting for the parachain slot auction in the first quarter of 2021.
Recently, many Polkadot projects are also actively contacting institutions holding DOT, large DOT owners, node vendors and some exchanges, seeking cooperation opportunities in slot auctions. The real start-up part of the development project relies heavily on the launch of cross-chain functions, so the next highest priority event of the Polkadot ecology must be the “parachain” slot auction. Although it has not yet arrived, it carries the same expectations of different roles in the ecology.
Another point can be more focus on the previous version of Polkadot — Kusama. Most people may overlook this, because the progress of the Kusama network usually predates the Polkadot main network. For example, Polkadot’s pledge time is 28 days, while Kusama’s pledge time is 7 days, which means that projects can be quickly iterated and deployed, and they can be more free to try new directions for application testing. This is more suitable for most small and medium-sized teams. More importantly, the auction of the “parachain” slot on Kusama is earlier and cheaper than the auction of the “parachain” slot on the Polkadot mainnet. Therefore, some projects will choose to abandon the bidding of the Parachain slot of Polkadot’s main network and choose to participate in the cheaper Kusama “parachain” slot bid.
Uncertain auction
The current “parachain” slot auction will have a lot of uncertainty
The first is the uncertainty of time.
We used to think that this event should happen in the fourth quarter of 2020 or the first quarter of 2021, but it seems that the official has not clearly given a specific time for the Polkadot mainnet “parachain” slot auction. Based on the continuous follow-up and in-depth understanding of the progress of the “Parallel” slot auction by Dealean Capital, it is certain that all development work should have been completed, but the official has not disclosed when the remaining debugging and testing work can be completed.
The second is the uncertainty of competition.
In fact, as long as you hold enough DOT, almost everyone can directly participate in the “parachain” slot auction competition. Therefore, in addition to the Parachain project based on Substrate, there may be exchanges, communities, mining pools, capital institutions, and even large individuals participating in the auction. This will increase the intensity of the competitive slot auction and affect the final slot auction result to a certain extent. The participation of this part of the role adds great uncertainty to the results of the slot auction.
The third is the uncertainty of the “parachain” slot auction method
The candle auction method used in Polkadot’s “parachain” slot auction is different from the traditional auction method. You don’t know when the auction will end. Maybe the auction has ended while you are still bidding.
The auction system will randomly select a time point to end, and then return to the final end time point to check the bidding candidates at that time, and finally determine the candidates who won the bid. Therefore, Dealean Capital hereby recommends that every wealthy and gentry participating in the “parachain” slot auction should submit as many “tenders” as possible to increase the chance of winning the final bid. Meanwhile, this will also increase the intensity of competition in the entire slot auction.
We can foresee that the Polkadot Parachain Slot auction will be a fierce battle, and the most fierce battlefield will be the “head-slot” competition. Since the lease period of each slot is two years, the auction takes every 6 months as a time period, and bidders can choose one or several adjacent periods. If you encounter a very strong auction competitor, and he packs the first card slot for the first year, then the competitor will have priority to access the main network, debug cross-chain functions and compatibility, and verify cross-chain services. The Web3 Foundation and Polkadot officials may provide financial, media, or technical support packages to the top bid winners.
More importantly, the publicity value of the blockchain industry media information on the “first slot”, whether it is to “get the first slot” or become a powerful opponent in competition. These propaganda will enable the roles participating in the auction to gain part of the commercial value and huge influence in the Polkadot ecology. Therefore, no matter who “get the first slot” in the end, they can use this to attract potential ecological investment users in the future or obtain business development capital through other channels. So many participants will publicly announce their slot campaign plans. But in fact, Polkadot has not yet received the official Parachain slot auction plan, which also makes the time node very uncertain.
Originality of auction design
The right to use the Polkadot Parachain slot auction is not permanent, but a 6-month lease period. Because people participating in the auction can choose one time period or multiple adjacent time lease periods, there are many different auction combinations. This can ensure the fair competition of the parachain slot auction, because the longer the lease of the slot, the higher the bidder’s cost, and there is only one slot in each period.
We estimate that the cost of the first “head slot” auction should be between $1 million and $1.3 million. At present, only a few powerful projects can independently participate in bidding. In addition, Polkadot officially allows projects to raise bidding funds through an IPO. Ordinary investors can directly transfer the DOT in their hands to the relay chain account and choose the projects they want to support. After the slot lease expires, the DOT will be refunded to their original account.
The auction will profoundly change the flow structure of Polkadot’s existing ecological assets. In a sense, the Parachain Slot Auction is a mechanism for screening high-quality projects. Because only the team or community has strong funds, high-quality projects can get support and win this “award”. For the project party, they only need to do a good job and guarantee the quality of their projects, instead of preparing a large number of DOTs themselves, which actually reduces the burden of the project.
It is worth noting that if certain Polkadot ecological field projects or other role institutions fail in the slot auction, the DOT participating in the bidding will be released, and the large amount of funds generated in a short period of time may have a certain impact on the DOT secondary market price.
As an investment institution, Dealean Capital looks forward to the next year’s parachain slot auction, and looks forward to accompany the growth of the project on the path of Polkadot’s ecological development, we want to participate in the incubation of more high-quality Polkadot projects, let us work together to build the Polkadot ecology!
