Parachains are various separate Layer1 blockchains running in parallel in the Polkadot ecosystem (Polkadot and Kusama networks) .
Parachains are connected to and protected by the Relay Chain, sharing and benefiting from Polkadot’s security, scalability, interoperability, and governance. Polkadot’s cross-chain composability allows any type of data or asset to be sent between parachains, allowing more new use cases and applications to emerge. Parachains can also connect to external networks like Bitcoin and Ethereum using cross-network bridges.
Polkadot is designed as a Layer 0 multi-chain network , which means that the relay chain provides security and interoperability from the Layer 0 relay chain for up to 100 Layer 1 blockchains connected to Polkadot in parachains.
This article was written by Web3 Foundation on behalf of Polkadot.
Features of Parachains
Specialization and flexibility
Polkadot’s parachain model is designed with the belief that the future internet will have many different types of blockchains working together . Just as current versions of the internet meet different needs, blockchains need to be able to provide multiple services: one chain might be used for gaming, another for identity management, another for finance, and so on.
For this reason, Polkadot does not propose any standards for the design of parachains, but they must be able to prove to Polkadot validators that each block of a parachain follows the agreed upon protocol. This flexibility means that each parachain can have its own design, token, and governance process, optimized for its specific use case. Parachains can operate as public or private networks, for businesses or organizations, as platforms for others to build applications on top of them or as public interest parachains for the benefit of the entire Polkadot ecosystem, as well as various Various other models.
Scalability
Through the parachain model, Polkadot allows blockchains to achieve scalability on Layer1 rather than relying on Layer2 solutions. This is a more decentralized and efficient way to achieve blockchain scalability. Parachains allow transactions to be distributed and processed in parallel in a dedicated Layer1 blockchain ecosystem, significantly increasing throughput and scalability.
interoperability
Parachains allow the blockchain community to have complete control and sovereignty over their own Layer 1 blockchain, while also benefiting from the possibility of free transactions with other parachains and external networks. Polkadot’s cross-chain composability allows not only the exchange of tokens, but also any type of data, including smart contract calls, verifiable credentials, and off-chain information from oracles, such as stock market price feeds. This ends the isolation of the blockchain industry and opens up new possibilities for applications to interoperate and create new services. Parachains are a bet on an open economy and free transactions, not Balkanization and the maximization of specific chains.
PolkaWorld Note: Balkanization is a political term that refers to the disorderly or unpredictable division of a larger region or country, or the division into smaller regions or countries that may be hostile or uncooperative.
Governance
Parachains on Polkadot are free to adopt any governance model they see fit, and can use a large number of pre-built modules to implement various on-chain governance systems. The ability to access complex on-chain governance mechanisms allows teams to significantly reduce the likelihood of an on-chain hard fork that could split their community in two. On-chain governance also provides a responsible and transparent approach to the parachain community, a prerequisite for many institutions and regulators to see a clear decision-making process before engaging with blockchain technology.
What can parachains be used for?
Polkadot is designed to give parachain teams the widest range of possibilities to design their Layer 1 blockchains, so the possible scenarios are numerous, and some may not even have been thought of. Some of the projects currently interested in becoming parachains involve a variety of scenarios, including:
game
certificate
Authentication
Oracles price feed
smart contract
Internet of Things
PLO: Parachain Slot Leasing
Projects wishing to operate as a parachain on Polkadot need to rent a slot on the relay chain by winning the parachain slot auction. Auction bids use the network’s native tokens, Polkadot’s DOT and Kusama’s KSM. Teams participating in the auction can choose to lease a slot on Polkadot for a minimum of six months and a maximum of two years. By participating in a parachain slot auction, teams will lock in the number of DOTs they bid on for a selected lease period, after which they will all be unlocked after the end . During the lease period, DOT remains in the original account, but cannot be staked, transferred or otherwise used. Teams participating in the auction can raise funds for their auction in a number of ways, including self-funding and crowdloan. In a crowdloan, DOT holders can help teams bid on auctions in exchange for some form of reward.
Parachains vs Parathreads
Parathreads are parachains that connect to Polkadot but use a pay-as-you-go model instead of directly leasing a parachain slot. The Parathread model is especially useful for projects that do not require a constant connection to the network. Blockchains on Polkadot can switch between parachains and parathreads depending on their needs and the availability of parachain slots.
Fees and Costs of Running a Parachain
Parachains connected to Polkadot can get as much computing power as they need by renting a parachain slot without additional fees or “gas” fees. Since all the DOT/KSM that the team uses for parachain slot binding cannot be unlocked at the end of the lease, the cost of running the parachain is the opportunity cost of the DOT/KSM that cannot be staked during the lease. Teams that choose to fund through crowdloan can choose to reward their contributors in whatever way they see fit, which means additional costs. Other smaller costs include the cost of running a collator node on a single parachain. For applications with a large number of users and traffic, running as a parachain on Polkadot can be more economical than running a single blockchain alone, or building on top of an existing smart contract platform.
current progress
Rococo parachain testnet v1 has been launched at the end of 2020, and early teams have already started deploying and testing parachains in early 2021. Plasm and Acala successfully sent the first cross-chain message on Rococo in February 2021!
Once the code of the parachain has been fully tested, optimized and audited, the parachain auction will open on Kusama and Polkadot with on-chain governance! Parachain slots will be auctioned one by one, with new auctions expected to take place approximately every two weeks. Polkadot is currently planning to develop several parachains in 2021.