Parachain launches put Polkadot in hot demand

Polkadot is taking a big leap forward, and hitting a developmental milestone that could send native asset DOT to the top spots of the crypto leaderboard.

The project, which aims to weave blockchains together to create an open decentralized economy, will be rolling out the final component of the Polkadot roadmap: parachains.

Each parachain acts as a project-specific independent chain that can issue its own tokens and be tailored to a specific use case, while still seamlessly connecting back to the main Polkadot chain. Founder Gavin Wood claims this approach will fulfill the promise of interconnected blockchains that rivals have failed to deliver.

Auctions drive demand for DOT

If the former Ethereum CTO is right, parachains will have big implications for native cryptoasset DOT, and mark the beginning of a new era of blockchain interoperability.

As such, parachain slots are hotly contested. Projects seeking to build on a parachain will need to bid for slots in auctions starting on November 11th. Bids will be placed using DOT through a candle auction format, which lasts for seven days and ends at a random moment — not by a candle burning out as in days of old, but via an on-chain mechanism.

Once the auction is complete, winning projects will be required to lock up a bond in DOT for the duration of the lease of the parachain. Eventually, 20% of the supply is expected to end up bonded in this way — reducing the amount of DOT available when demand could be rising through the roof.

This is reflected in Polkadot’s explosive price action: Since the auctions were first announced, DOT has rallied more than 20% on speculation about shrinking supply and excitement about the emerging blockchain ecosystem.

A new era of blockchain interoperability?

When all of the auctions have finished, the first five winning projects will be simultaneously onboarded to Polkadot on December 15th. This will mark the official completion of the roadmap, and the culmination of three years of development activity. All the final pieces of the puzzle will have fallen into place, and Polkadot’s vision of an open blockchain economy will finally be ready to come to life.

From there, we could expect the network effect to kick in as traders and coders flock to Polkadot. This might spark a renaissance of Parachain-based activity, with projects touted to win the auctions including privacy protocols, decentralized finance (DeFi) platforms for borrowing and lending, non-fungible token (NFT) platforms, and oracles that aim to bridge the Polkadot network with real-world data.

Combined, these projects could create a wave of activity that would not only push Polkadot up the cryptoasset leaderboard by increasing prices, but also boost the blockchain to better compete with rivals such as Ethereum.