Polkadot launched the parachains in October 2021. The essence of the parachain was to interconnect blockchain networks, which is an integral part of the next generation of the internet (decentralized internet) or Web3.
After five years, the first of the parachains have hit the market. Since 2014 when the Ethereum white paper was launched to usher in a new era in cryptocurrency development, thousands of blockchain projects have emerged. However, most of these projects came with their network architecture, which made interconnectivity between the different chains impossible. The Polkadot project came to solve this lack of interoperability between chains.
Parachains are individual networks that run on the Polkadot ecosystem, allowing the various networks to interact among themselves on the Polkadot network. Ethereum co-founder and founder of Polkadot, Dr Gavin Woods, is credited with developing the Relay Chain with which the individual parachains on Polkadot communicate with each other. Polkadot achieved a solution to interoperability by creating fragmented multi-chains that communicate via a Relay Chain. Polkadot can lend support to 100 of such fragmented chains in this manner.
The parachain auctions are the system where projects are allocated slots on Polkadot’s main chain known as the Relay Chain. This consists of a consensus voting system in which members of the Polkadot community use their DOT tokens as their voting right, staking these tokens for 96 weeks. During this time, the blockchain project with the highest number of votes is deemed the auction’s winner.
The various blockchain projects that bid for slots on the Polkadot parachain auctions span projects in decentralized finance (lending, staking, farming, investments) and smart contract provision.
The onset of blockchain gaming projects (GameFi) and the Metaverse-themed projects has provided the opportunity to expand the scope of the themes that the Polkadot network can accommodate. More advanced tools to enable the parachain model to evolve with the increasing complexity of its handling are expected to come on stream as time goes by. According to Dr Wood,
“No single blockchain design works optimally for every use case. Each chain comes with trade-offs making it good for some applications and not others. The parachain model was created with the belief that the future of Web 3 will involve many different types of blockchains working together. Just as the current version of the internet caters to different needs, blockchains need to provide various services. Parachains solve this.”
Polkadot continues to allocate slots on its parachain on an auctionable basis. As mentioned earlier, only 100 of these slots are available. Some slots will be used for governance purposes; these will not be awarded on a bid-auction basis.
The next batch of auctions starts on 23 December 2021. It will feature six auctions in all. Therefore, six winners will emerge, going live on Polkadot in March 2022. This will bring the total number of parachain auction winners to eleven.
The DOT/USDT pair climbed more than 25% when the first parachain auction was announced, eventually hitting new all-time highs on 4 November.
Since then, there has been a general market correction. With DOT now trading at less than half of its YTD high, we may see a breakdown below the 24/72 support with the evolving descending triangle pattern. If this occurs, 19.71 becomes available as a new target, while 14.92 will mark the price projection point following the breakdown of that support.
Conversely, the downside move allows for the acquisition of DOT tokens for staking at lower prices. This could engineer some accumulation and bullish recovery, which targets 38.28 and 39.83 in the first instance. This move requires the bulls to take out the 32.04 barrier.
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This post was last modified on Dec 18, 2021, 09:45 GMT 09:45