Acala, a DeFi platform native to the Polkadot ecosystem, announced last week that it had raised almost $1.8 billion AUD from 25,000 contributors during its crowdloan.
What is Acala?
Acala is the DeFi hub of Polkadot, an EVM-compatible platform with classic DeFi functionality like automated market makers, a Polkadot-native decentralized stablecoin (aUSD), and a trustless staking mechanism. Unlike on other platforms, gas can be paid in any token. For instance, users can settle transactions with stablecoin or BTC, ETH, DOT, and other coins not native to Polkadot.
What are crowdloans?
Crowdloans are a fundraising mechanism designed by the Polkadot community and a way for new projects to summon support to connect to the Polkadot parachain system. Although the term implies that users loan money to the platform, crowdloans are actually more a form of staking. Users lock up their DOT tokens for a project, which are returned after a lock period (usually 1-2 years) together with a reward, usually in the form of the project’s native token.
What happened with Acala’s crowdloan?
In November, Polkadot hosted its first-ever round of parachain auctions, during which projects were competing for one of the coveted parachain slots connecting them to the Polkadot layer-zero blockchain. Acala won this first auction, raising a total of 32.5 million DOT ($1.8 billion AUD at the time of the auction) from almost 25,000 contributors. Acala will have to return these funds and a token bonus over two years.
In the second parachain auction, Moonbeam, an Ethereum-compatible smart contract platform designed for building interoperable applications, easily beat out its competitors by raising more than three times the amount of the second-placed project.
What’s the impact of crowdloans and parachain auctions?
The blockchain space eagerly anticipated the parachain auctions, as they marked the start of real functionality in the Polkadot ecosystem. Even though Polkadot is still in development and falls well short of competing blockchain ecosystems like Ethereum, Solana and Avalanche, many expect it to do well and become a credible challenger to Ethereum’s smart contract dominance thanks to the ingenious parachain design Polkadot employs.
Led by Gavin Wood, a former co-founder at Ethereum, Polkadot is built as an ecosystem from the very beginning, something that its competitors like Ethereum only now are transitioning to. The Polkadot mainchain serves as a layer-zero chain. At the same time, up to 100 parachains are connected to it and process transactions outside the mainchain, thereby avoiding typical blockchain problems like congestion and poor scalability.
These parachain slots are in high demand since controlling their own blockchain equips any project with an entirely different set of tools and opens up many development opportunities. Crowdloans were designed to determine which projects eventually have the most grassroots support.
Considering all of the development work happening around Polkadot and its superior infrastructure design, it’s not surprising that many experts expect the ecosystem to take off in 2022. However, many a blockchain have come and gone when it comes to challenging Ethereum, so time will tell whether Polkadot parachains will be able to execute on what surely looks a very promising approach in theory.