Polkadot has executed a proposal for the first batch of parachain slot auctions to get underway in November.
What is Polkadot?
Polkadot is sometimes also called a “blockchain of blockchains” since it allows data and not just tokens to be transferred across blockchains. It enables cross-chain registries and cross-chain computation, which means applications that get permissioned data from a private blockchain can use it on a public blockchain. An example listed by the official Polkadot website details how a school’s private permissioned academic records chain could send proof to a degree-verification smart contract on a public chain.
The layer zero chain uniting the network of blockchain is called the Polkadot Relay Chain, while the other chains are called parachains. Both the Relay Chain and the parachains connect with external networks via bridges. In that sense, Polkadot implements the blockchain architecture that its rival Ethereum is trying to build with its Ethereum 2.0 structure. The DOT token grants governance rights of the network, which includes determining network fees, voting on upgrades, and deployment and removal of parachains. DOT holders can also stake to facilitate network consensus and receive staking rewards for doing so.
What are Polkadot’s Parachain Slot Auctions
Polkadot recently announced slot auctions for its parachains, thereby confirming that “almost exactly five years after the vision of a heterogeneous multichain framework was first outlined in the Polkadot Whitepaper (aka the Polkadot Paper), parachains are now officially ready for launch on Polkadot.” The first batch of five auctions will take place with one new auction each week, and the second batch of six auctions will take place with a new auction every two weeks. After lease period six, beginning around December 17, 2021, the first batch of five parachains will be onboarded. The second batch of six parachains will be onboarded for lease period seven, beginning on approximately March 11, 2022.
This announcement elevates the Polkadot ecosystem to the next level since it will allow for decentralised finance and NFT applications to be built on its parachains. Consequently, Polkadot will be a much more serious rival to the dominating Ethereum ecosystem that thus far has been attracting most of the talent and capital.
The DOT price reaction the the news
Unsurprisingly, investors were more than happy with this news, with the price of DOT skyrocketing 18% on October 13, the day of the announcement alone. Since DOT is needed to participate in the auctions, this is not a case of “buying the rumour and selling the news,” but very much the opposite. With several rivaling layer one blockchains like Solana, Avalanche, and Fantom already seeing big capital inflows and liquidity incentives earlier this year, the announcement was eagerly awaited by investors that have long tipped Polkadot to be the one true candidate to knock Ethereum off the decentralised application throne. Headed by Dr. Gavin Wood, himself a co-founder of the Ethereum Foundation, the Polkadot ecosystem may have all the right ingredients needed to do so and holders are expecting further gains before the planned parachain launches in November.
