What impact does the parachain slot auction have on the future of the Polkadot ecosystem?
Here are the questions that our CTO Keric answered at an event on jinse.com:
1. The hype around Polkadot Parachain Slot auctions reminds many people of the EOS super nodes elections. The hype around EOS has long died down for various reasons. Do you think that Polkadot will follow a similar path to EOS? Will Polkadot auctions bring the same results as the EOS auction mechanism?
Polkadot will not follow the path of EOS for various reasons. First of all, the EOS super node elections had almost no support from the technical and developer community. Mostly big capital and speculators did get involved in it. This is very different for Polkadot: Projects that want to apply for Parachain slot auctions are required to participate in the Roccoco test network. Additionally, most projects that build for the Polkadot ecosystem obtained grants from the Web3 Foundation which ensures a certain quality of these projects. Thus the Polkadot parachain slot auctions are mainly driven by technological innovation and not merely by speculators and capital investors who just want a quick return on their investment without a deep interest in the underlying technology. In EOS super node election people can just vote for a super node that will become a validator and get network fees. There is no incentive for innovation and development for the validators. Thats fundamentally different to Polkadots auction system.
From the perspective of software architecture, Polkadot is a more complex blockchain protocol than EOS. The interconnected network of multiple chains realises Eth2.0 vision step by step. Polkadot’s nominated proof of stake (NPOS) is more decentralised than EOS’ delegated proof of stake (DPOS). Thats why the consensus algorithm of DPOS has been abandoned by many blockchain projects. Currently, there are only contracts and Layer 2 projects on Ethereum, while Polkadot can have contracts, runtime, transit bridge, Layer 2 and other projects. The ecological diversity in the Polkadot network is much greater than in the Ethereum network. The combination of forkless on-chain upgradability in Polkadot, its on-chain governance and its multi-chain interconnection makes Polkadot a strong competitor to even Ethereum 2.0.
2. If we look at the blockchain space we can observe that in the current cycle DeFi projects are the hot topic in the crypto market. What applications can Polkadot offer to serve this important segment of the crypto market?
First of all, projects that are similar to Ethereums DeFi applications will also appear on Polkadot. In addition to that these Polkadot projects will be compatible with Ethereum and they will have transfer bridges to the Bitcoin and Ethereum network and to the multiple other smart contract blockchains on Polkadot.
DeFi projects however cannot work properly without valid real-world data. This data is transferred to the blockchain via oracles. That is the reason for the huge success of ChainLink and its surge in price. Polkadot and its DeFi applications need similar bridge infrastructure that connects the real-world and assets on the chain. Thus oracles will play a vital role in the success of the Polkadot ecosystem and especially for its DeFi applications. Oracles can provide high-quality price-feeding for DeFi loans, automated market makers, synthetic assets and stable coin protocols. It can also supply decentralised insurance protocols, IoT devices and decentralised identity management protocols with off-chain data.
3. What do you think about the design of Polkadot’s parachain slot auctions? What impact will it have on Polkadot and it’s ecosystem?
It is certain that the slot auction is beneficial to the Polkadot ecosystem and a reason for continuously attracting the attention of the community. The card slot auction requires a large amount of Dot to be pledged. The decrease in circulation will bring expectations of a price increase, resulting in more people participating in the auction. Polkadots parachain slot auction ensures that only the best and most promising projects get a parachain slot. Low quality projects are filtered out. Even projects that won the auction have to constantly deliver since their slot expires after a certain period and they have to apply for it again.
Another benefit of the parachain auctions is that community members who pledge for projects get rewarded with their native tokens. As a team that paid attention to the card slot auction in the early days, we have launched our PC1 testnet on Rococo, which can be viewed in Polkadot.js.org/app. 20% of our total token supply is reserved for community members who support our project during the slot auction and vote for Ares Protocol.
4. Which projects do you think have the best chances to win the parachain slot auction?
Infrastructure projects are more suitable and will have a better chance for a parachain slot. At present, Polkadot has reserved some system parachains for crititical infrastructure projects such as: 1. Bitcoin and the Ethereum transfer bridge to bring mainstream blockchain assets to Polkadot 2. Smart contract plattform projects also needs to be integrated into the Polkadot network because it can easily deploy contracts. 3. Oracles are critical for the Polkadot ecosystem because projects need to obtain off-chain data. Chainlink is an oracle mainly for the Ethereum network. Even without its own blockchain network, it can bring such great value. We would like for Ares to be for Polkadot that what is ChainLink to Ethereum. It is more appropriate for the Polkdot ecosystem to have and oracle that is at the same time a prachain. Ares protocol is just that: Built with the substrate stack it has low gas fees, small threshold for validator nodes and it offers on-chain verification of the data. It is highly scalable and decentralized at the same time with the combination of Babe and offchain workers.