What is parachain?

Parachain is a globally linked application-specific data structure and can be validated by the Relay Chain Validator on Polkadot. Usually a parachain takes the form of blockchains, but not necessarily real blockchains. They owe their name to the concept of a parallel chain that runs parallel to a relay chain. Due to their parallelism, they can process transactions in parallel and achieve the scalability of the Polkadot system. They share the security of the entire Polkadot network and can communicate with other parachains via XCMP.

Parachain is maintained by the network maintainer (collator). The role of the matching node is to manage a full node of the parachain, maintain all the necessary parachain information, and generate new block candidates which are passed to the relay chain validator for review and submission to the shared state of Polkadot. The process of incentivizing node matching is an implementation detail of Parachain. They do not have to be set on Relay Chain or their own DOT tokens, unless this is required due to the Parachain implementation.

Polkadot Host (PH) requires that state transitions performed on the Parachain be specified as a Wasm executable. Evidence of new state transitions occurring in the parachain must be validated against a registered state transition function (STF) stored by the validator in the relay chain before Polkadot recognizes that the state transition is occurring in the parachain. The only restriction on the logic Parachain is allowed to implement is that it must be validated by the relay chain validator. The most common validation process takes the form of an accompanying proof of condition, a so-called Proof-of-Verification (PoV) block, which is sent by one or more parachain collations to the validators for verification.

Economies parachain

Parachain can have their own economy with their own native tokens. Strategies like proof-of-stake are often used to select a validator to handle the validation and finalization process, nor is parachain required. However, since Polkadot is generally about what parachains can provide, parachains can choose to implement token staking, but this is generally not required.

Comparators are stimulated by parachain’s native token inflation. There may be other ways to get nodes to match without inflating the original parachain token.

The native Parachain token transaction fee can also be an implementation option of Parachains. Polkadot makes no hard and fast rules for the parachain process, which determines the initial validity of transactions. For example, a parachain can be executed so that the transaction must pay a minimum fee to the collaborator in order to take effect. The relay chain amplifies this effect. Likewise, Parachain cannot include this in the implementation and Polkadot will continue to enforce its validity.

Parachains do not need to have their own tokens. If so, it is up to Parachain to make an economic case for their token, not Polkadot.

Buy position parachain

Polkadot supports a limited number of parachains, which is currently estimated at 100. Since the number of slots is limited, Polkadot has several options for assigning slots:

• Parachain granted by Polkadot Governance or “common interest” parachain
• Parachain is granted from an auction
• Parathread

Parachains of “common interest” are assigned by Polkadot’s on-chain governance system and are considered to be “common uses” for the network, e.g. B. as a bridge to other networks or chains. They are often referred to as system-level chains or public supply chains. They often do not have their own economic model and help to remove transactions from the relay chain, which enables more efficient parachain processing.

In addition, parachains can be issued in the auction without permission. Parachain teams can bid with their own DOT tokens or obtain them from the community via the crowdloan function.

Parathread has the same API as parachain, but is intended to be run on a usage-based basis via a block auction.

Position expiry

If a parachain wins an auction, the DOT it is bidding on will be blocked until the lease ends. Blocked credits are non-transferable and cannot be used for staking. At the end of the rental agreement, this DOT will no longer be retained. Parachains that do not have a new lease to renew a position automatically become a parathread.

At Crowdloan, the projects will reward them with their own tokens as “compensation” to offset the loss of interest premiums if donors are unable to get involved. And the interests of the donors are also more closely tied to the project.

Parachain “common interest”

Common interest parachains are function-specific parachains that benefit the entire Polkadot ecosystem. By assigning a subset of parachain positions to chains of common interest, the entire network can benefit from valuable parachains that would otherwise be underfunded due to the problem “spent”. They are not awarded through the Parachain auction process, but through Polkadot’s on-chain governance system.

The purpose of these parachains can fall into one of two categories: system-level chains or public supply chains.

System-level chain

The system-level chain transfers functionality from the relay chain to the parachains, thereby minimizing relay chain governance. For example, a governance parachain can move all polkadot governance processes from relay chain to parachain. Adding a system-level chain is generally not controversial as it only moves functions from one place (relay chain) to another (parachain) that stakeholders agree to.

Moving the logic from Relay Chain to Parachain is a streamlined way to make the whole network more efficient. All validators must process all relay chain transactions, but must be broken down into several subgroups in order to validate parallel parachains. By moving the logic at the system level into a parachain and allowing subsets of validators to be processed instead of all of them, space in the relay chain is freed up for the main function: the validation of parachains. Adding a system-level chain can enable the network to handle a few more parachains. Instead of taking a piece of the 100 parachain cake, the system-level chain takes part and creates a bigger piece of the cake.

Examples of potential system-level chains are parachains for balance, voting (for both staking and advice), governance, and identity. Finally, Relay Chain can become transactionless since it only validates Parachain state transitions in it and all of its current transaction functions are present in the Parachain.

Most chains of common interest are likely to be untapped system-level chains.

Public supply chain

Public supply chains add functionality that doesn’t already exist but that stakeholders believe will add value to the entire network. As public supply chains add new functionality, there is a certain degree of subjectivity in adding them: network actors must believe that the allocation of a valuable slot goes to the auction winners, and therefore there will be an objective opinion of proponents. Governance offers the opportunity to internalize the value of the Parachain location and distribute it across all members of the network.

Public supply chains will always be fully connected to their relay chain stakeholder base. This means that they will accept Relay Chain’s native token (i.e. DOT or KSM) as their native token and respect any messages coming from Relay Chain as well as system-level parachains based on surface value.

Some examples of potential public supply chains are bridges, DOT-priced smart contract platforms, and shared asset chains. All of this can work without a new token:

• The bridge can add its own native token for “crossing” fees, but in many cases the fees are arbitrary as it can only use the DOT and / or the assets of the bridged chain in the toll system.
• A layer 1 blockchain with a smart contract priced in DOT enables a Wasm smart contract to be executed using DOT as a native gas payment asset.
• A common asset chain that allows anyone to deposit into DOT to provide their assets in the chain. This on-chain asset can be covered by physical goods such as works of art, real estate or gold; or in paper goods such as shares in a company or fiat currency held by a trusted party that provide a stable, permanent launch pad for stablecoins and central bank digital currencies.

Public utility parachains typically grant Polkadot governance privileged business logic. Just as the relay chain on Polkadot has some privileged functions like setting the number of validators or assigning DOT from the Treasury, these parachains can have privileged functions like changing system parameters or registering assets.

As public supply chains add functionality beyond the scope of the relay chain, they are likely to be rarely approved by network actors.

Examples

Some examples of paracets:

• Encrypted Alliance Chains: These can be private chains that do not disclose information to the public, but can still interact reliably due to the nature of the XCMP protocol.
• High frequency chains: These are chains that can compute many transactions in a short time by making certain compromises or performing optimizations.
• Secure Chains: These are chains that do not reveal any information to the public through the use of new cryptography.
• Smart Contract Chains: These are chains on which additional logic is created through the …