What Is Parachain?

How Do Parachains Work? 

First, let’s find out what a parachain is in simple terms. It is a specialized blockchain that runs on another (core) network that supports its operation. The most popular ecosystem for running parachains is Polkadot.

Parachains are created by developers of digital projects. To fully work, they must get a slot in the ecosystem’s relay chain, which is responsible for data validation, security, and transaction execution. 

Transactions are processed with the participation of collectors and validators. The former collect and package transactions on the parachain and then send them to the relay chain validators, who verify the blocks and add them to the chain. This approach helps parachain networks maintain their independence while remaining part of the ecosystem. 

Benefits of Parachains 

Having defined what parachain is, let’s talk about the pros of this technology. 

Adaptability 

Each parachain can be customized for specific functions — be it DeFi, NFT, logistics, gaming, etc. 

Scalability 

Parachains allow load balancing between different circuits, so the network can process more transactions simultaneously. 

Data exchange 

Cross-chain Message Passing (XCMP) protocols allow parachains to “talk to each other” by exchanging information and assets without intermediaries through cross-chain messages. 

Flexibility and upgrades 

Parachains can update their code independently without disrupting the entire ecosystem. This allows them to improve their functionality without forking (splitting the blockchain). 

Resource savings 

When parachains are integrated into an ecosystem, they can utilize its infrastructure and security mechanisms. This reduces development time, saves money, and makes it easier to launch new projects. 

Parachains in the Polkadot Ecosystem 

Polkadot is designed as a network capable of interacting with different parachains, each of which can perform unique functions. This is fundamentally different from other blockchains, which are limited to one chain and one set of rules for all applications. 

Moreover, Polkadot parachain technology provides developers with the Substrate tool, which allows them to create new networks and integrate them into the ecosystem quickly. 

Parachain Auctions 

The number of slots for new projects in the blockchain ecosystem is limited, for example, there are only 100 slots in the Polkadot parachain system. Slots are leased for a certain period and their number is limited, so projects compete for them by participating in parachain auctions. This creates healthy competition, encouraging developers to create useful applications for users. 

How Parachain Auctions Are Conducted 

The competition is conducted using the Candle Auction method, which allows the winner to be chosen at random at any time. This helps avoid manipulation and encourages participants to bid quickly. Let’s consider the main stages using the Polkadot parachain system as an example: 

• Preparation. A new set of slots is announced, and projects start preparing for the parachain auction. 
• Crowdlending. Developers gather support from the community by encouraging users to block their DOT in favor of their bid. These funds serve as collateral and increase the chances of winning. In return, users are rewarded with project tokens.  
• Auction Closing. The application that has raised the most funds at the time of auction closing wins a parachain slot for 6 to 24 months (depending on the conditions). During this period, the project is fully integrated into the Polkadot network. 

Conclusion 

Parachain is a specialized blockchain that integrates through a relay chain into the ecosystem and interacts with it to provide scalability, security, and flexibility for different types of applications. 

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