How do blockchains become parachains on Polkadot? Ultimate Guide

How do blockchains become parachains on Polkadot

Polkadot offers high levels of security and inter-operability for blockchains that become parachains. But, how do blockchains become parachains on Polkadot? Can a blockchain be a para chain indefinitely? how can you support a blockchain project to become a parachain on Polkadot. In this article, we shall explore all these questions in detail. 

How do blockchains become parachains

A blockchain can become a parachain on Polkadot by winning a parachain slot auction, by bidding dot tokens. Whichever project wins the auction has to bond the tokens throughout the slot duration. The maximum slot duration a parachain can lease is about two years on Polkadot and one year on Kusama. The tokens that are bonded are returned right after the parachain’s lease expires. 

How do these auctions work

First, a proposal is submitted on-chain with the schedule of the auctions and that needs to be approved through on-chain governance. Each individual auction lasts for a week, which is split into starting and ending periods. 

The starting period which is one day and 18 hours are basically like a warm-up phase and the actual bidding starts at the beginning of the ending period. So, this ending period lasts for five days and the competing blockchain projects can make their bids throughout this particular period. 

After the bidding ends, the last six hours are dedicated to deciding the winner. Here is where things get interesting! The winner of this auction is determined retroactively by the Verifiable Random Function on-chain. It randomly selects a winning block from the ending period. It could be any block! 

So, if project A was in lead for the first two days and project B was in lead for the remaining three days in the ending period, if the Verifiable Random Function picks the winning block from the first two days, project A wins! Even though project B bid more tokens than project A! 

This auction mechanism is a modified version of candle auctions, where the bidding starts when a candle is lit. The auction ends when the candle flame is extinguished. Now, if the candle flame is not visible to these bidders, then it is likely that they will be honest with their bid right from the beginning, instead of holding it off till the end. 

This is exactly what Polkadot’s on-chain mechanism achieves. Typically the bids made during the slot auctions are for the entire slot duration which is 96 weeks on Polkadot and 48 weeks on Kusama this slot duration can be further split into eight individual lease periods which comes out to be 12 weeks on Polkadot and 6 weeks on Kusama. 

Multiple projects can win the same slot auction if they bid over non-overlapping lease periods and end up making the highest bid together. 

Now, the projects that plan to become parachains can fund their auction bid on their own or can start a crowd loan campaign that allows them to accept contributions from the community of DOT holders. At the time of writing this article, here are the crowd loan campaigns that are active on Polkadot and are accepting. 

How do these auctions work

Crowdloan contributors get their dots back at the end of the lease and it is up to the parachain teams to decide on what rewards should be given for the contributors. Basically, the contributors pay the opportunity cost of not being able to use those locked dots for activities like say staking. if you’re interested to participate in crowd loans through Polkadot JS, check out this link here

The contribution through Polkadot JS guarantees that you’ll receive your DOTs back after the lease expires or if the crowd loan campaign is unsuccessful once the campaign ends your dots will be returned back to you. 

The contribution through Polkadot JS guarantees that you’ll receive your DOTs back after the parachain lease ends. So, basically, the parachain teams do not have access to your funds those are locked on your behalf on the Polkadot network and they are ready to be released after the lease expires. 

If the project requests contributions through their website or a third-party website, thoroughly read the terms and conditions and understand how your contributions are being contributed to the problem reach out to the respective projects with any further questions that you may have. 

Bottom Line

In summary, Polkadot offers a fair and open auction mechanism for blockchains to become parachains and provides crowd loan functionality for the community to support the blockchain projects to bid for their auctions. Thanks for reading, please check out more articles.

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