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November 21, 2021

Change is coming to DeFi: Polkadot Parachains

Changes are coming that may divide the masses, where blockchain is concerned. Some consider Ethereum as the infrastructure that will equalize the crypto-financing. Many believe that it could one day allow anyone to be their bank. With historically low-interest rates in comparison to brick and mortar banks’ savings accounts, the market is hungry for ETH to become a liquidity provider. But try to swap a token on Ethereum’s Uniswap and expect to experience uncomfortably high ETH gas charges.

The Competition is Eager

Luckily, Ethereum competitors are stepping up. Polkadot project presented itself as a solution for some of the challenges that Ethereum battles. These are some important challenges, including the ability to scale and interoperability. One aspect of growth that Polkadot is fortunate to have to face is that of proving itself. That would be slow and fraught with various challenges. Polkadot is fortunate not to have to experience this purely because it already proved itself.

Polkadot Infrastructure

With its open-source substrate framework, Polkadot uses the NpoS (Nominated Proof-of-Stake) consensus. This consists of 4 agents at the network level. These are nominators, collators, validators, and fishermen. The design allows for a level of flexibility and scalability in the sense that if Polkadot wanted to create a smart contract system, it could. It would, however, have to include NFT marketplaces, token minting, and DeFi’s farm yielding.

Polkadot can cater to up to 1000 transactions per second, in comparison to Ethereum’s pre-upgrade capacity of 13.4 transactions per second. One difference though is that Polkadot’s smart contracts display as parachains. Parachains are Polkadot’s interconnected blockchains that hold their tokens. The advantage of this is that it streamlines scalability up to the blockchain economy. It also helps do this without profit robbing transaction charges.

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Key Advantages

So, Polkadot shines when it comes to the number of transactions it can handle over a number of chains in a parallel dynamic. At the time of writing this article, Polkadot had well over 500 projects on their way to production stages. All of this is a pleasant peculiarity of Polkadot.

Parachain Auctions

As of now, Polkadot has two parachains deployed. They are both on Polkadot’s mainnet. These parachains are Bifrost Kusama and Shiden Network. Bifrost Kusama (BNC) has a staking liquidity protocol. Shiden Network (SDN) has a smart contract layer. SDN is very important to the Polkadot ecosystem.

Launch Procedures

Parachains are not available for use unless they undergo tested. Kusama is the testing ground. For that reason, Kusama has gained the label of being the “canary network”. It is worth noting that Kusama and Polkadot are independent of each other as blockchains. New parachains are linked with Polkadot or Kusama Relay chains. This is typical of the spirit of the crypto-industry. Polkadot uses “candle auctions” for its bidding process. Once launched bids are submitted by users incrementally. The highest bidder wins and the auction is closed at a time selected by a random number.

Current Polkadot Projects

At the time of writing this article, there were 15 Polkadot projects underway in the auction stage. Here is a selection of some of these Polkadot projects:

Moonbeam (GLMR)

Moonbeam does a great job of connecting to an ecosystem of over US$100 billion (TGV). However, it is slow and pricy.

Acala (ACA)

Acala gives the hope that Finance 2.0 awaits. This is even though Acala is a new decentralized finance protocol.

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Parallel Finance (PARA)

A robust and comprehensive service that includes margin staking, money markets, and insured staking. It is promising an important element of decentralized financing of the near future.


Exciting times are ahead. This can be expected with a fast-moving industry. Polkadot seems to promise cutting-edge innovations and new solutions.