Parachain auctions occur on the two sister blockchains, Polkadot (DOT)
and Kusama (KSM). Auctions allow developers to create new cryptocurrencies
assets and decentralized applications (dApps) in addition to these blockchains.
However, before we understand what parachute auctions are, it is vital
unique construction consisting of two chains: the relay chain and the
The relay chain:
The main blockchain was examined and finalized
transactions are added as blocks.
Parachains: These are independent blockchains linked to the relay.
Chain so that they can use the computing power of the Relay Chain to
examine the transaction data.
Parachains in Polkadot and Kusama allow developers to create
independent blockchains that are linked to the relay chains of the two
sister blockchains. This allows each parachain to have its own
specifications, including block times, transaction fees, governance
mechanism and mining rewards.
This is unlike Ethereum, where dApps must be built within specifications set by the network. Therefore, the parachain can be thought of as an interoperability chain. It allows integrating third-party dApps and cryptoactives into the Polkadot (DOT) and Kusama (KSM) networks.
The relay chain handles network security, the consensus mechanism, and
settlement of transactions. And by virtue of being linked with the relay chain,
all independent projects on the parachain benefit from the features of the
What are Parachain Auctions?
Currently, both blockchains are capable of supporting 100 parachain slots.
every. These time slots can be occupied for three months in a row with a
maximum duration of 96 weeks.
At one point, several projects compete for a place on the parachute. And instead of adding parachains to the blockchain based on the amount
of the funds they bring in, the Polkadot team introduced Parachain Auctions
(short for Parachain Slot Auctions) to make sure the available slots
How Parachain Auctions Work:
When a Parachain auction takes place, DOT or KSM holders can pledge their
respective tokens to the project they think deserves the parachain slot.
The project may send them airdrops or some other reward in exchange for
your support. The winner of the parachain slot can also sell it in the
secondary market to a developer, who wants to implement his project
on that parachute
But how do you determine the winner of a slot?
The auction method: Parachain auctions use ‘candle auctions’ to ensure that the winner is chosen randomly without human intervention. The process gets its name from an ancient bidding practice in which a candle was lit in
the beginning of a boat auction, and the highest bidder would win the boat in
the time of its extinction.
The same logic applies to Parachain auctions. Bidders have a fixed price
term within which they must present their bids in the projects whose
implementation that they believe should move forward. However, unlike the traditional
candlestick auction, the parachain auction never really ends. Instead, a
snapshot is taken at a random period and the parachute with more
support in that period is the winner. This is done to maximize equity
of the bidding process.
Collective collaboration: Blockchain projects can get crowdsourcing support
beyond individual offers. In this process, KSM and DOT owners
they can link their assets to these projects on any of the networks to indicate
support for that particular project. If the project wins,
these bonus assets are locked and can only be redeemed at the end of
the lease period (96 days).
How is this different from an Initial Coin Offering (ICO)?
In the case of an ICO, users provide funds to the project development team.
to use them in any way the team chooses. However, in the case of a
Parachain auction, pegged tokens are never in control of the project
developers and sent to owners via airdrops or other