Parachains — we believe this is the killer app of Polkadot. In this article, we walk through why it’s a good idea, how you can become one, and go deep into how you can prepare to become a parachain. It may sound daunting, but every step of the way, we at LongHash are here to help! Many great posts on parachains (links included) have explained the concept and technical details. Here, we focus on the strategy and steps required to really make it work. Here’s a quick summary:
-
A parachain is basically a “parallel blockchain” or your own blockchain, with security provided by Polkadot. Compared to dApps/ smart contracts, you get a lot more flexibility and security. It’s much cheaper too, compared to managing your own blockchain’s security.
-
To become a parachain, you need to participate in a parachain auction to obtain “leases” in 6-month periods of up to 2 years. Naturally, the highest bidder wins. To win, you are going to need Polkadot’s DOT tokens — lots of them.
-
To get the DOTs we need, we need to first prepare a good parachain strategy which includes your ecosystem strategy, governance, and fundraising strategy. Then, we need to let the world know and share your story, especially DOT holders/ investors. Finally, we need to actually raise the funds: before the auction, during the auction, or simply through governance mechanisms.
-
LongHash can support you comprehensively along each step of your Initial Parachain Offering. As a Polkadot investor ourselves, we can leverage our assets, influence, and experience to make sure you are fully prepared to win your bid and operate a successful parachain.
Now let’s dive into it.
What is a parachain?
Parachains are a core proposition of the Polkadot network. Put simply parachains are self-sovereign native blockchains that rely on Polkadot’s relay chain for security and communication with other relay chains. Multiple resources explain this in depth.
-
Customizable governance
-
Customizable block production
-
Customizable tokenomics
-
Shared security from Polkadot relay chain
-
Ability to exchange messages/ assets between parachains
-
Typically built with Substrate
Why should you consider becoming a parachain?
Before we trigger another ICO rush where every other project bids for a parachain slot, let’s first examine why you would consider becoming one. Given the costs of preparing for a parachain, it must be justified with projected future volume and revenue. That being said, the benefits are much greater compared to smart contracts only:
- Flexibility to customize the blockchain to your needs, such as:
• Flexibility for on-chain governance , as opposed to typical default of centralized off-chain governance, or free-for-all decentralized governance.
• Room to innovate by involving stakeholders in more ways, not only with tokens, but also in consensus and governance.
• Freedom to specify technical details of the entire stack, e.g. sharding
-
Upgradeability of protocol including smart contracts, governance, and consensus
-
Interoperability between parachains to exchange assets and information
-
Shared security provided by the Polkadot relay chain
-
Cost savings for high volume/ value applications:
Preliminary modeling by the Web3 Foundation estimates the annual cost of securing major chains (e.g. Cosmos, Tezos and EOS) is in the tens of millions of USD per year, with Ethereum and Bitcoin in the billions, while the estimated opportunity cost to lease a parachain is $100–200k for 12 months.
Read more here: https://www.longhashventures.com/news/preparing-for-your-first-parachain-auction/
