Welcome to Bulliscoming, Polkadot has started parachain auction on its ecosystem since Nov. 11th, 2021. Over USD 3 billion has been flowed into the Polkadot utility token (DOT) via the parachain auction event.
If you would like to know the best Polkadot parachain projects, then this article is a must-read for you as I will outline different best Polkadot parachain projects that I believe they have gained more traction and also has a tangible uses case in the blockchain technology sphere.
But before I proceed, I would like to give you more insight into the Polkadot parachain, so you can know what it means and also what it has to offer in the blockchain and crypto space.
What Are Polkadot Parachains?
Blockchains like Bitcoin and Ethereum do not communicate with one another, while Polkadot wants to enable this as an interoperability project that is wanting to unite all blockchains.
Polkadot was created to build a bridge between different blockchains. Scalability is the key feature that will allow Polkadot to reside at the center of an interconnected blockchain network and this scaling is thanks to Polkadot’s parachain architecture.
So a Polkadot parachain is a parallel blockchain, Polkadot is made up of one main relay chain which performs governance, staking transactions, and shares security with the entire network. Smart contracts and other energy-intensive processes will take place on the other various parachains that branch out from the relay chain.
The parachains frequently communicate with each other, which prevents the main relay chain from becoming congested with every single transaction that comes through the network.
In the current proof of work version of Ethereum for example, every node that is connected to the blockchain has to process every transaction in its history, which makes the process slow and expensive.
For this reason, Ethereum is moving to a Proof-of-Stake consensus mechanism so that validators can focus their computing resources on the relevant data.
However, what’s unique about Polkadot’s approach is that the parachains are for sale and can be bought by other crypto projects.
To secure one of these precious parachain slots, projects will have to win an auction that will take place once the parachains have been tested and are ready to be deployed.
While the utility currency for this auction will be the Polkadot native currency DOT.
Projects won’t know how many DOT tokens the other competing projects are offering, so they’ll need all the help they can get from DOT holders in the form of crowd loans.
Once a project has successfully gathered and bid enough DOT tokens to win a parachain slot, they will have to lock up the DOT tokens for a fixed period that will range from 6 months to up to 2 years.
Investors who loaned DOT tokens to the successful projects will likely be rewarded with a steady stream of the project’s native token for the whole period in which their DOT is bonded, although projects may also offer compensation in either stablecoins or DOT tokens.
This compensation is primarily to make up for the loss of DOT staking returns that participants would otherwise have been entitled to.
However, once a project has bought a parachain they can customize it to suit their needs.
The fact that the slots need to be won with huge amounts of DOT means that most parachain slots will go to serious projects that are prepared to run core elements of the Polkadot network, like scalability, privacy, smart contracts, and cross-chain DeFi protocols.
The upper limit of available parachains is expected to be 100, although parachains can also be broken down into shared ‘parathreads’, for smaller projects that require less computational power.
The Polkadot team estimates that it will take several years for all of these Parachains to be deployed, but also anticipate being able to open up more slots in the future, once the network has scaled sufficiently.
Best Polkadot Parachain Projects
You may have been thinking about making an investment decision on or interacting with any of the Polkadot parachain projects but you don’t know which of the projects are worth your investment, below are the best Polkadot parachain project with which you may want to put into consideration.
Moonbeam is a new Polkadot smart contract platform that seeks to provide developers with a scalable and accessible alternative to other developer projects.
The project believes that the future of blockchain is a “multichain of many chains.” It focuses on bringing smart contracts and the interoperability of the Polkadot blockchain to Ethereum developers.
Moonbeam provides integration and connectivity between Polkadot Parachains as well as with other chains such as Ethereum and Bitcoin via bridges. Moonbeam was launched in January 2020 by Derek Yoo of Pure Stake.
While there are many projects focused on the interoperability of blockchains, Moonbeam focuses on providing a framework for blockchains to interact with Ethereum seamlessly. The Polkadot parachain brings smart contracts and interoperability with Ethereum to the table.
The Moonbeam network when its mainnet is launched will let Ethereum developers extend their influence into the Polkadot ecosystem. Polkadot’s blockchain will ensure seamless sharing of workloads on a new layer.
Through Moonbeam, developers will be able to port their existing Ethereum DApps to Polkadot or easily create new permissionless decentralized applications (dApps) using familiar Ethereum development tools. The tools on Moonbeam ensure that there is minimal change when front-end dApps are moved between chains.
By using Moonbeam, Ethereum developers (which is the largest market of existing blockchain developers) will be able to bypass the scalability challenges due to the expense and constraints of the Ethereum network.
The network and token bridges of Polkadot mean that Moonbeam will support token movements, state visibility, and message passing with Ethereum and other chains.
Acala is an all-in-one decentralized finance network offering a blockchain platform secured by Polkadot, as well as a suite of cross-chain financial applications that let users trade on Acala Swap, issue self-serviced loans with the Acala Dollar stable coin (aUSD), become liquidity providers, access staking derivatives with Liquid DOT staking (LDOT), and earn high-interest APY on their digital assets. The network is scalable, Ethereum-compatible, and optimized for DeFi. The network will also be bridged to Ethereum, Bitcoin, and other networks such as Compound Gateway, for which Acala received an inaugural grant from Compound. Acala is building hybrid crypto and fintech products with US fintech company, Current, to bring DeFi yield to Current’s three million U.S customers. You can try Acala’s Apps on testnet today.
Acala was founded in Oct 2019, and today has received five Web3 Foundation grants, has backing from Coinbase Ventures, Pantera Capital, Polychain Capital, and other top firms, and has a distributed team in New Zealand, China, Europe, South America, and the United States.
The decentralized network is governed entirely by Acala Token (ACA), which also servers as the utility token for operating the network.
Parallel Finance plans to make the Polkadot ecosystem brighter by offering lending solutions tailored to Polkadot, with all the safety and security it has to offer.
With leverage staking and auction lending as its primary offerings, Parallel’s new lending design has the potential to disrupt the somewhat stagnant DeFi narrative, with higher yields and better opportunities.
In addition to building lending utilities, Parallel finance will also build and brand the user interaction interfaces necessary for interoperability in DeFi. Indeed, interoperable portfolio management will be a critical tool for doing business on Polkadot, and they plan to be the first to tackle this problem efficiently. This is one of the many areas where Parallel finance builds in the spirit of interoperability already implicit in Polkadot’s design and makes it stronger as a result. Below are the features that Parallel finance aims to offer in Polkadot
- Leverage Staking
Parallel finance aims to be the go-to lending solution for DOT and KSM stakers. Through Parallel finance, users will have the ability to stake their DOT and KSM in exchange for tokenized staking derivatives called xDOT and xKSM. These tokens represent the redemption of the underlying DOTs and KSMs in Parallel’s staking pool.
The user can lend xDOT and xKSM to Parallel to receive an added borrower fee on top of their staking interest, which they refer to as “leverage staking.” After that, the user can create even further leverage by using xDOT and xKSM as collateral for borrowing. These tokens are already natively yielded bearing due to the staking yields, which lowers the interest, and increases demand. The borrower can significantly increase their leverage by lending KSM, borrowing xKSM, and lending xKSM.
While the user is lending and borrowing, Parallel finance will algorithmically optimize the users’ staking yields by nominating validator nodes with the strongest reputation, and the lowest number of DOT and KSM staked. When compared to current custodial staking solutions like Kraken’s, Parallel’s algorithmic staking solution outperforms both in security and overall yields.
- Auction Loans
After retaining its parachain, Parallel finance will be able to offer auction loans, a feature that has vast implications for DeFi on Polkadot and Kusama.
Users will be able to deposit lending collateral for fixed or floating interest, and parties pursuing parachains will be able to borrow from that collateral to participate in parachain auctions. This means that in addition to incentives offered by projects, users will also earn a fixed rate on their auction loans.
This kind of lending mechanism will be attractive for users who want to increase the value of their lent DOT and KSM, but also for projects who want direct access to users with capital to loan.
Ideal projections suggest that 30% of the total DOT and KSM will be locked in parachains, reducing the circulating supply by half, and generating an opening for a symbiotic lending and borrowing market intrinsically under Kusama’s and Polkadot’s design.
Entities to whom Parallel lends DOT or KSM may or may not be successful in their parachain auctions. This means that the parachain auctions will create continuous cash flow on Parallel that is not limited to the total capacity for parachains counted individually, and entities who do win will be able to harness the value of the parachain without the difficult burden of financing it by themselves, or through crowd loans. This, in turn, will make the parachain market much more attainable. It will also maximize the potential utilization of parachains overall, which is an inherent good for the Polkadot ecosystem.
- Interest Rate Swaps
In its current state, DeFi is built to gratify short-term bull runs, but for a more competitive and long-term advantage, the excitement of DeFi will need to be exposed to the more practical merits of DeFi.
Interest rate swaps are one of the pragmatic tools needed for DeFi to break through the glass ceiling. With this functionality, institutional borrowers will be able to extend or reduce their exposure to interest rates depending on their perception of the market and their willingness to undertake further risks. Fixed-rate loans act as an anchor for the variability of floating rates. If a user is currently holding a fixed-rate loan, and they suspect that a bear market is on the horizon, and utilization will decrease soon, then they may switch to a floating interest rate in the hopes of paying lower interest. If the opposite is true, and they expect utilization to increase across the board, then they may choose to remain in a fixed-rate position, to capture a lower rate.
- Decentralized Credit Scoring
In its initial exploration of blockchain credit scoring, Parallel finance will set out to become the “DefiPulse of credit.” DeFi has a kind of intrinsic reputation system.
Sentiment can be tracked qualitatively through social media mentions and quantitatively through factors like market cap, TVL, and dominance.
However, for DeFi to be able to compete with traditional finance, it needs to be able to transparently rate the quality of borrowers and their debts. The credit reporting system will function as a check against rogue institutional borrowers, and it will also give lenders a second line of defense to negotiate repayment of their loans. If a large DeFi institution is reported as having defaulted on a loan, the negative impact of this reportage will affect the perception of the project’s token, and projects will seek to improve their creditworthiness as a result.
The ability of blockchain to act transparently is indeed a valuable asset, and in the future, this ability may help avert crises like the 2008 market crash, which resulted from non-transparent credit scorings.
Astar Network is a multi-chain dApp hub on Polkadot that supports Ethereum Virtual Machine, WebAssembly, and Layer2 solutions.
Astar is designed to have all the necessary features to become an ecosystem for smart contracts on Polkadot. Among them, the features we recognize as particularly important are X-VM (Cross Virtual Machine) and dApp Staking.
We believe that WebAssembly is the future of smart contracts, but Ethereum Virtual Machine is currently important. A lot of existing projects have been developing smart contracts by using Solidity.
However, many new projects in the Polkadot ecosystem use ink! since Polkadot supports WebAssembly by design. Under these circumstances, a platform that supports both Ethereum Virtual Machine and WebAssembly will get more and more important. This is where Astar Network comes in.
Astar networks not only support both virtual machines but also make them interactive. A Solidity smart contract on Astar Ethereum Virtual Machine can call ink! smart contract on WebAssembly seamlessly and vice versa in the future.
- DApp Staking
DApp Staking is the most important feature that only Astar Network supports in the Polkadot ecosystem. We believe that this is going to be a huge differentiator for DApps looking to build on Polkadot.
All smart contract developers on Astar Network can receive our native token as a reward.
None of the information provided in this article is investment advice nor is it a replacement for advice from a certified financial advisor.
We may not have a vested interest in these projects.
The views expressed in this article are those of the author and do not necessarily reflect the official policy of Bulliscoming.
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