What Are Parachain Auctions And How Do They Work?


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

that we first understand how these two block chainwork They have a

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

relay chain

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

optimally used.

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

reward systems.