Polkadot is a direct Ethereum competitor and a work a progress. But not for long, because the parachain auctions are starting. The market reacted positively when the good news spread last week and DOT is doing fine, while Bitcoin is still struggling to reach for a new high and breakout above 70.000 US-Dollars.
What is a Parachain, why is it so important and what will happen after the auction is closed? In today’s article, we are going to dive a little bit deeper into Polkadot.
Parachains and Relay Chains
Polkadot is making use of a unique concept. While the so-called Relay Chain is verifying transactions and keeping the network safe, Parachains can serve a variety of purposes. You could create a specific parachain for a certain DeFi protocol or run an NFT marketplace on top of that chain.
The advantage of this model is speed. Since each parachain is dedicated to a specific task and the relay chain is securing the whole network, there is no congestion as we all have witnessed with Ethereum in the recent past. But here is the thing. There is only limited space for Parachains. To get a slot one has to pay and to make the access fairer the first slots will be auctioned.
DOT will fuel the system
To take part in the auction, bidders have to pay with DOT, the native token on the Polkadot blockchain. The auction will be held in batches and each batch will consist of between five and six slots.
The first auction will start November 11th, the second auction December 23th and the last auction will end on March 10th, 2022. This makes the first batch more valuable because it will allow developers to start their work earlier as with an auction that is won with the second or third batch.
The Polkadot community has been waiting for years for this very moment. With the parachains, there will be finally a lot of products coming in the next couple of months. Speaking of which, it is worth taking a close look at Kusama, which was meant to be a testing ground for Polkadot but became its spinoff. Kusama held auctions earlier this year and parachains were started around June. It remains to be seen if Polkadot can have similar or even greater success. The price for DOT has surged recently and might continue to do so as long as the auctions are going because they are increasing the demand.