Polkadot launches first slot auction
Polkadot s ongoing roll out is the final launch phase for its multi-chain sharded architecture, after rigorous testing, optimization and auditing, which was initially carried out on testnets like Rocococo and the canary network Kusama.
In September, the first indication that Polkadots were afoot was when Gavin Wood hinted that they were ready for launch. This was followed in October by a motion for the Polkadot Council to open up the network's first slot auctions, which were later approved by on-chain governance, creating buy pressure on DOT in the run-up to the launches.
The auctions are split into batches, with the first batch of five running weekly from November 11. The winning projects will be onboard on December 17 for the lease period to October 20, 2023.
With the option to renew, customchains are anchored to Polkadot's Relay Chain for up to 96 weeks at a time. Each slot is assigned by an on-chain candle auction mechanism with successful projects locking up a bond in DOT for the duration of the lease.
With the help of a community crowdloan campaign, teams can fund their auction bids, allowing them to accept contributions from DOT holders and demonstrate demand for the project's idea. Crowdloan participants get their DOT back at the end of the lease, and they can choose to reward them with their own native token.
Since holders of their DOT are not compelled to transfer control of their DOT in exchange for the project token, auctions and crowdloans differ from an initial coin ICO exchange IEO or DEX IDO offerings. DOT is returned if projects lose an auction bid, slot-holders reimburse supporters when their lease expires.
There is a key difference: project teams can't use DOT at their discretion or sell it on the market. They benefit from access to scarce network slots, fee generation opportunities, and token launches.
Acala secured the maiden Polkadot slot, and raised a bond of 32.5 million DOT from a community of over 81,000 users, which is about $1.27 billion at the time.
The success of the inaugural auction shows the strength and power of the Polkadot community, which has rallied around to pledge DOT to their chosen ventures. Moonbeam, which lost to Acala, is currently the best of the rest, having secured 35.8 million DOT for the second slot.
The number of locked up token shows how many participants are invested in the success of the projects compared to the more speculative structure of other offerings. Due to the strict 96 week leasing period, the projects must deliver quickly on their applications, which should lead to greater accountability.
More than 205,000 participants have contributed through exchanges like the Kraken and Binance, which has resulted in a healthier balance of incentives between participants and projects.
Assuming the trend continues, somewhere between $4 and $4.5 billion worth of DOT is likely to be locked up for nearly two years, reducing potential sell pressure and circulating supply on the market.
It incentivizes hundreds of thousands of supporters to become active users in the ecosystem as it is in their best interest, not only because of the faith in Polkadot and DOT over that period.
The Polkadot community and its burgeoning ecosystem will certainly be one to watch for the next 96 weeks, with the rise in contributors expected to continue.