Read how Polkadot Parachains are revolutionary to DeFi.
The Polkadot blockchain is one revolutionary technology in the blockchain ecosystem as it differs from other existing blockchains and hopes to solve the inherent challenges users face when it comes to decentralized finance.
The limitations of existing blockchains, including scalability, issues encountered upon upgrading the blockchain, high transaction fees, and interoperability, are some of the issues that are resolved by the Polkadot blockchain.
Scalability issues, one of the prevailing challenges with most leading blockchains today, have resulted in the validation of a limited amount of transactions per second. As the networks get bigger and expand, this becomes a big issue, and it leads to the congestion of transactions which also attracts high transaction fees and long response time.
In a world where market demands are ever-changing and improving, it is essential to keep up with the needs of investors by upgrading blockchains to satisfy those needs. This, however, is not possible with most blockchains as an upgrade on them would lead to the forking of the entire blockchain, and this could even take months to execute successfully.
The inability for current blockchains to communicate effectively amongst themselves, share information and execute transactions is one big challenge encountered in the decentralized finance ecosystem.
All of these challenges are resolved by the Polkadot blockchain. The Polkadot blockchain connects several chains in a single network. It allows them to process transactions in parallel faster and facilitates data exchange between chains. This concept gave birth to the Polkadot Parachain.
Introduction to Polkadot Parachain
The Polkadot blockchain unites a network of diverse blockchain shards called parachains connected to the relay chain and secured by it. To paint a good picture of this, think of a ceiling fan. The fan’s motor is likened to be the relay chain, and the blades are likened to be the parachains.
These parachains are advanced layer-1 blockchains that surpass the current limitations of most blockchains found in the ecosystem. Polkadot parachain gives developers the freedom to optimize their ecosystem for any use case of their choice.
To solve the inherent issues present in most blockchains, Polkadot developers came up with the idea of creating the Polkadot parachains that foster interconnection, are specialized, scalable, facilitate seamless on-chain upgrades, leverage on-chain treasuries, possess built-in and customizable governance, possess built-in security, are developed with the substrate, allow the sending of any data and give users the best user experience through the facilitation of low and transparent fees.
5 Essential Things You Should Know About The Polkadot Parachain
To better comprehend the benefits and ideas behind the Polkadot Parachain, here are five essential things you should know
The Polkadot parachain, in its true nature, allows for flexibility. Unlike other blockchains where decentralized applications are created within the bounds set by the blockchain, Polkadot Parachain gives flexibility to projects built on the Polkadot blockchain as they can have their design, native token, incorporate their use case ranging from DeFi to NFT, IoT, gaming or even supply chain, projects can have their own block time, mining reward, governance process and others can be built from their specific development platforms.
This concept allows for more optimized services and multifaceted economies in the blockchain ecosystem.
The ability for blockchains and decentralized applications to share data amongst themselves is a great challenge that limits the widespread of decentralized finance. The Polkadot parachains are a rich, interconnected ecosystem where data flows freely between the chains, leading to innovative and interoperable services. This allows any data to be sent across dApps and parachains.
Leading blockchains aren’t scalable as transactions are processed one by one, which leads to network congestion and attracts high fees when the dApps usage spikes. The Polkadot parachain resolves this as it processes all transactions at a go in a parallel manner, spreading them across the entire multichain network for maximum scalability and better user experience for investors.
4. Governance and Security
Parachains are given the ability to create their governance features and processes to implement the best system for their community. It can also leverage Polkadot’s built-in transparency if it finds it fit and exciting for its community.
For every parachain, security is guaranteed as they get robust security automatically when they connect to Polkadot.
5. Polkadot Parachain Auction
Polkadot is estimated to support a limited number of 100 parachains, and allocation will be given in several ways. The parachains will be connected to the Polkadot by leasing a slot on the relay chain, which will elapse after 96 weeks with the option to renew. For decentralized applications to secure a slot in the parachain, they will have to participate in an on-chain auction, requiring winners to lock up a bond in $DOT for the duration of the lease.
The Parachain auction works in 5 different stages: the bonding stage, auction cost stage, crowd loan stage, auction duration stage, and the slot duration and lease periods.
The parachain is one way the Polkadot blockchain distinguishes its ecosystem from other blockchains and proffer solutions to the inherent challenges experienced by users in adopting decentralized finance.
With the Polkadot Parachain, users can experience fast validation of transactions, low and transparent transaction fees, and better communication with other blockchains.
Developers can also enjoy the security, governance, and flexibility provided when leveraged parachains.
5 Essential Things You Need to Know About Polkadot Parachains was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.