Polkadot parachains allow for customized blockchains to be built on top of the Polkadot relay chain, gaining security, interoperability, and scalability. Parachains offer developers the ability to create blockchains tailored to their specific needs while benefitting from the larger Polkadot ecosystem. This blog discusses what Polkadot parachains are, their benefits, usage examples, development services, and the costs of running a parachain.
What is a parachain?
A parachain is a parallelizable chain that connects to the Polkadot Relay Chain through the Parachain Slot Auction mechanism. It allows blockchains to gain trustless interoperability, decentralization, and scalability from the Relay Chain while still maintaining sovereignty over transactions, network security, and upgradeability. Parachains run in parallel to the Relay Chain and to each other while still being a part of the overall Polkadot network. They ensure scalability through parallel processing by using sharding – where different parachains can process different transactions in parallel. Parachains bundle transactions into blocks and submit them to the Relay Chain for validation and finalization.
What is Polkadot Parachain?
A Polkadot Parachain is a parallel blockchain that is connected to the Polkadot Relay Chain. Parachains enable decentralized applications to scale beyond the limitations of a single blockchain by accessing the resources of the Polkadot network. They allow for specialized blockchains to be built for unique use cases while still being interoperable with other parachains and blockchains in the Polkadot ecosystem. Unlike sidechains that are separate from the main chain, Parachains are first-class citizens of the Polkadot network. They have their own security through a custom Proof of Stake consensus mechanism, can run custom software for different functions, and govern their own infrastructure. However, they rely on the Polkadot Relay Chain for cross-chain messaging and transaction finality. This hybrid model provides independence to parachains along with the benefits of interoperability.
What are the advantages of Parachains?
Here are the main advantages of Parachains:
Scalability
Scalability is a major advantage of Polkadot Parachains. Parachains enable scalability through sharding where each parachain can process transactions independently and in parallel. This greatly improves the overall throughput of the Polkadot network. Each parachain functions as a shard that can scale to handle more transactions on its own, without affecting other parachains. The Polkadot Relay Chain then stitches all these shards together by providing a layer of consensus and finality. This hybrid sharded architecture allows the Polkadot network to scale far beyond the capabilities of a single blockchain. Parachains can scale horizontally by adding more parachains as shards, while still benefiting from interoperability and security of the Polkadot network.
Flexibility
Flexibility is another major advantage of Polkadot Parachains. Parachains have the flexibility to run their own specialized blockchain software for unique applications. They are not constrained by the code of the Relay Chain and can choose the programming language, consensus mechanism, and features that best suit their needs. This allows for a high degree of specialization within the Polkadot ecosystem.
Parachains only rely on the Relay Chain for cross-chain communication and security but otherwise have full autonomy over their networks. They can choose to run private or public networks and even change their consensus algorithms over time to suit the needs of their users. This flexibility, independence, and specialization of parachains opens up countless innovative use case possibilities within the Polkadot network.
Interoperability
Interoperability is enabled by the connection between Polkadot Parachains and the Relay Chain. Though parachains can be customized independently, they connect to the Relay Chain through Parachain slots. This allows them to communicate and transact with other parachains on the network. The Relay Chain acts as a router, forwarding messages and transactions between parachains to facilitate interoperability. It also provides a common standard for data formats and APIs that parachains can follow to ensure compatibility. This infrastructure enables different blockchains, ranging from DeFi chains to IoT networks, to securely and seamlessly interact with each other within the Polkadot ecosystem. Parachains benefit from being part of a larger, interoperable network while retaining their independence and specialization.
Governance
Governance is an important advantage provided by the Parachain model. Though connected to the Polkadot Relay Chain, each parachain has its own independent governance system. Parachains can set their own rules, upgrade their own software and make decisions autonomously. However, they are also subject to the overarching governance of the Polkadot network as dictated by DOT token holders. This hybrid governance model provides both autonomy and coordination.
Parachains can evolve based on the needs of their specific users and applications, while still operating within the broader Polkadot ecosystem. In case of conflicts, the Relay Chain governance acts as the final arbitrator. This balanced approach to decentralized governance allows for innovation within individual parachains, while also maximizing cohesion across the entire Polkadot network.
What is Parachain consensus?
Parachain consensus refers to the consensus mechanism used by individual parachains to validate transactions and generate new blocks. Unlike the Relay Chain which uses a proof-of-stake consensus protocol, parachains are free to choose the consensus mechanism that best suits their needs. This could be a traditional proof-of-work consensus, a variation of proof-of-stake, or even a more experimental consensus protocol. The consensus mechanism ensures that all nodes within a parachain agree on the validity of new blocks and the current state of the chain.
However, the primary consensus is achieved within each parachain. This flexibility in choosing the consensus mechanism based on the specific parachain’s requirements is another advantage of the Polkadot architecture that gives individual parachains autonomy while also integrating them into the larger network.
Also, learn How to Build a Parachain on Polkadot?
Examples of Parachain development services
Most development companies that offer parachain development services provide the following:
- Consultancy and conceptualization: They help clients conceptualize their parachain idea, clarify business and technical requirements, and identify the right approach.
- Parachain development: They develop the actual parachain by writing smart contracts, security audits, and deploying the parachain on the Polkadot network.
- Token development: They develop any tokens required for the parachain, including ERC-20/ERC-721 tokens and native Polkadot tokens.
- Smart contract development: They develop the smart contracts required for parachain functionality like managing tokens, payments, governance, etc.
- DApps development: They develop any DApps that will interact with the parachain, like client interfaces, wallets, etc.
- Hosting, maintenance, and upgrades: Some companies offer ongoing hosting, maintenance, and upgrades of the deployed parachain.
- Network integration: They help integrate the parachain with other networks like Ethereum, Bitcoin, Cosmos, etc. for interoperability.
- Consulting on governance, tokenomics, and economics: They advise clients on the best practices for governance, token design, and economics of the parachain.
Running parachain on Polkadot
Running a parachain on Polkadot involves several steps. First, the parachain smart contracts and functionality need to be developed as discussed above. This includes the parachain logic, any token contracts, governance mechanisms, etc.
Next, security audits must be conducted to ensure there are no vulnerabilities before deployment. The parachain then needs to bid for a lease period or slot on the Polkadot relay chain. This involves locking up a certain amount of DOT tokens as collateral.
The parachain then connects to the relay chain through a para thread or cumulative snapshot mechanism. Parathreads allow the parachain to connect intermittently, while snapshots provide a consistent view of the state to enable consensus. The relay chain serves as a security layer, validating and distributing messages and state transitions of the parachain. It ensures the safety and liveness of the parachain by detecting faults and restarting it if needed.
The parachain operates autonomously once deployed, with transactions only passing through the relay chain for security. At the end of the lease period, the parachain can either renew its slot by bidding again in the auction or give up the slot. This allows for a flexible ecosystem of parachains with varying lifecycles
Cost and Fees of Running Parachain
The main costs involved in running a parachain on Polkadot are the DOT collateral required to bid for a parachain slot and the transaction fees paid to the relay chain.
To bid for a parachain slot, developers need to lock up a certain amount of DOT tokens as collateral. The amount depends on the competitiveness of the auction but is typically in the millions of dollars. This DOT is locked up for the duration of the lease period, which is usually around 2 years.
Once the parachain is operational, transaction fees are paid to the relay chain for facilitating and securing transactions. These fees are set by the relay chain and collected in DOT. The fees are quite low compared to other platforms, typically just a few cents per transaction. Other costs involved include the initial development costs for the parachain smart contracts, tokens, governance, etc. Security audits, ongoing maintenance, and hosting costs should also be budgeted.
Conclusion
In conclusion, Polkadot parachains provide a powerful mechanism for building specialized decentralized applications and blockchains. By running as a parachain on Polkadot, projects gain access to a robust security layer, interoperability, and the scale needed for widespread adoption. While there are costs involved in bidding for and running a parachain, the overall cost of transaction fees tends to be lower compared to standalone blockchains. Development companies can offer comprehensive services to help clients conceptualize, design, and deploy their parachains on Polkadot. As mainstream adoption of blockchain technology grows, we can expect to see many innovative uses of parachains to reshape industries and build a more decentralized future.
