What you need to know about Polkadot’s Parachain

The Polkadot project is a network protocol. It comprises four primary components. The “core” of the network is the main component. This offers overall security, consensus, and cross-platform interaction. 

The other projects in the Polkadot ecosystem can focus on making their products as much as possible.

Parachains are blockchains that are separate from the Polkadot network. Third-party developers create them. Parallel threads are similar to Parachains, but they can be rented when you want them for any length of time. 

Parachains have one main difference from parallel threads, though. Parachains can be rented for any length of time, while developers can only rent threads immediately.

Bridges connect Polkadot to other blockchains, like Ethereum or Binance Chain. DOT tokens are the internal currency of the project. The stability of the ecosystem is guaranteed by a verifier, which checks blocks in different parachains and is controlled by a reliable algorithm that ensures security.

Participate in the chain guard auction

The Polkadot network will have a limited number of Parachain slots, only about 100 in the next few years. This means that more projects are hoping to borrow them. The team plans to conduct a chain guard auction (crowdfunding). In other words, companies that want to launch their chain guard have to rent a slot by auction.

Most developers who start parachains are new companies and don’t have enough money to rent the required slots. That is why you need to buy the initial chain guard products.

What you need to know about Polkadot's Parachain

Anyone can participate in the IPO auction by doing a few simple steps:

  • Buying Polkadot on Binance Exchange
  • Choosing a promising project
  • Starting a Parachain and participating in the auction

Investors send DOT tokens to a unique address as payment for renting a parachain slot. If this project wins the auction, all tokens of people who voted for it will be frozen for the entire lease period of the Parachain slot.

Why do we need a chain guard rod?

With the parachain auction, the DOT token holders vote for their favorite projects, and in turn, the development team can get funds to rent a slot on the leading network of the relay chain.

At the end of this type of auction, two results can happen:

If your team does not collect enough money, all participants will give back all tokens, and the chain guard will not launch. If you collect enough money to win the auction, people who gave money will get their tokens back at the end of the lease period on Polkadot.

chain guard rod and substrate explained

The auction system provides maximum security for investors because they will withdraw their tokens anyway. If the project they voted for is successful, in addition to their DOT, the investor will also receive valuable parachain tokens (as a reward for providing temporary loans to developers).

Therefore, it is a good choice for users who want to start investing in cryptocurrency but are afraid of losing money. After all, every participant in the chain guard auction has no risk of losing capital assets.

This is good for the creators of parachain and projects because, through an auction, they can attract participants and distribute their tokens even before launching their project on Polkadot.

Polkadot’s Substrate: A new way to develop blockchains

It would be best if you created a chain guard in the Polkadot environment. This is called Substrate. It can make different blockchains for different purposes. The first step, then, is to develop the chain guard itself.

The Polkadot project has a development environment called Substrate. These are the two ways to participate in the auction:

Personal accounts are used when only trusted people bid in the chain guard auction. Crowdloan (collective auction) – in this case, anyone can vote for the chain guard.

In the second option, you might give special control rights or distribute native tokens to participants of an auction. In both cases, you must choose one of these strategies before starting an auction on your own.

If the project does not win the chain guard auction, they have to return the DOT tokens to investors. If this happens, it will happen automatically. The team can also take part in another chain guard auction if they want to.

The team will keep their project regular. They will use parallel threads. This is the same as Parachain, but they need to pay a fee to use them. So they will not block the DOT tokens during the lease period, but they will pay for them to access Polkadot’s features.

In general, this third option is best because developers can show all of the benefits of their project. If community feedback is good enough, they can participate in chain guard auctions again.

Disclaimer this is not a financial advice.