Polkadot’s ongoing Parachain auctions mark the final phase of implementation of its multi-chain fragmentation architecture after initial rigorous optimizations and tests implemented on test networks such as Rococo and Kusama’s Canarian network.

The first reference to Polkadot’s parachains surfaced in September when Gavin Wood indicated that they were “tech ready”. It did so in October with a proposal from the Polkadot board to open the network’s first parachain position auctions, which were then approved by on-chain governance, which meanwhile created buying pressure on the DOT.

September DOT price Source: TradingView

The auctions are divided into several tranches, with the first batch of 5 sessions taking place every week from November 11th, the winning projects will then be delivered on December 17th with a term until October 20th, 2023.

What is parachain?

Parachains are custom blockchains that are anchored in the Polkadot Relay Chain for up to 96 weeks at a time and offer an option to extend. Each location is determined by an on-chain candle auction mechanism, with successful projects binding DOTs for the duration of the lease.

Parachain teams can fund their auction bids with the help of a crowdloan campaign, which enables them to accept contributions from DOT holders and demonstrate the demand for the project idea. Crowdloan participants will have their DOT returned at the end of the lease, and projects can choose to reward Crowdloan campaign participants with native tokens.

Auctions and crowdfunding are vastly different from ICOs, IEOs, or IDOs in that holders are not required to transfer control of their DOT in exchange for the project’s tokens. In fact, if the projects lose the auction, the DOT will actually be returned. In the meantime, the winning project will return the DOT to backers when their lease expires.

And there is another crucial difference: Projects cannot use DOT or sell it on the market. Instead, they benefit from access to scarce network locations, the ability to generate fees, and the introduction of parachain tokens.

What’s next year

Acala secured its first parachain position on Polkadot after collecting 32.5 million DOTs (valued at around $ 1.27 billion at the time) from a community of over 81,000 users.

The success of the ongoing Parachain auction clearly shows the capacity and strength of the Polkadot community that DOT has hired for their favorite projects. After losing to Acala in the first round, Moonbeam won the second round with 35.8 million DOT commitments.

The number of blocked DOTs underscores the ubiquity of participants investing in the success of projects, rather than the speculative structure of other projects. This increases the responsibility for projects and they have to submit applications quickly due to the strict rental period of 96 weeks.

A healthier balance of participant and project incentives saw more than 205,000 participants, with more donations coming through exchanges like Kraken and Binance.

Assuming the trend continues, by the end of the first auction there will likely be around $ 4 billion to $ 4.5 billion in DOT.

Not only does this show the belief in Polkadot and DOT during this time, but it also encourages hundreds of thousands of supporters to become active users of the ecosystem in their best interests.

With contributors expected to keep growing, the Polkadot community and its growing ecosystem are sure to be remarkable over the next 96 weeks.

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