It’s a Polkadot Party!
Polkadot, a smart contract cryptocurrency similar to Ethereum, is about to have a collection of projects create their own tokens on the Polkadot blockchain. That means that this will be your chance to jump in early and ride their growth to the top (or lack of).
Some Background Knowlege
In order to understand how to invest in projects running on Polkadot, we need to catch you up to speed. We’ll go over a quick origin story of the project and the basics of how it works. Some of these parts can get a little bit nerdy and complicated, but just hold in there and I’ll do my best to break it down.
If you feel that you already have a good grasp of how Polkadot, parachains, and slot auctions work, you may just want to skip to the part talking about projects with high potential.
The Promises Ethereum Couldn’t Fulfill
launched the Polkadot project in May last year. Originally, Wood was one of the Ethereum co-founders. He was the CTO from 2013 to 2015 and invented Ethereum’s smart contract programming language, Solidity. But Ethereum wasn’t perfect, and in 2016 Wood left Ethereum to start his own project. Today, we know this project as Polkadot.
Polkadot was created to fulfill the promises that Wood felt Ethereum was failing to do. One of the biggest differences between the projects is that Polkadot uses a proof-of-stake consensus mechanism. Without going too into the weeds, this is the improved version of proof-of-work, which is what Bitcoin and Ethereum use. It’s more efficient, doesn’t waste tons of power like Bitcoin, and pays people to just hold it (through staking their tokens).
Polkadot also has smart contracts which allow developers to program on top of its blockchain and give their tokens functionality. Unlike Ethereum, Polkadot uses additional blockchains, called parachains and parathreads, to plug into its main chain, called the relay chain. These parallel chains can only run one process at a time and use the relay chain for security and consensus. If you want to read more in-depth on Polkadot’s origin, I recommend reading this article by
Parachains are designed to be longer-term blockchains for projects whereas parathreads have a more “pay as you go” approach. There’s a limited number of parachain slots whereas parathreads will be much more widely available. This distinction will allow bigger projects with a community to have their own parachain, while smaller projects who are developing or building a following can use the parathreads.
The Relay Chain is the “Heart”
If you didn’t follow that quick nerd rant, don’t worry about it. The main takeaway is this: there’s a maximum of 100 slots available. So how does Polkadot decide who gets a spot?
Answer: running an auction.
Parachain Slot Auctions
Diagram Showing Relay Chain and Parachain Relationship
Currently, the Polkadot team is doing final tests to make sure everything is working as it should. Then, once the community vote of Dot holders says go, the parachain slot auctions will launch on the Polkadot testnet, Kusama. Wood says that we could see the auction launch as early as April.
Once launched, each slot will have its own two-week-long auction. Potential projects will put down bids in DOT, Polkadot’s native coin. At a random point within the two weeks, a “snapshot” will be taken and whoever has the highest bid at that moment will win that auction. The DOT that the project commits in their bid will then go into storage and be returned to the project once their “lease” is over. From there, the parachain goes back up for auction and projects will be able to bid on it again.
How this Affects You, the Investor
From an investor’s standpoint, this auction system is both good and bad. A pro to this system is that the DOT used to win the auction will be locked up for the length of the lease. Just like staking, this takes that DOT out of circulation. Less supply = higher value.
However, this will create an interesting situation for investing in projects running on Polkadot. Leases for parachains will be two years long at max. What happens when that lease expires?
The Risks When Leases Expire
Hopefully, the project will be able to secure another lease. It’s possible, however, that it could lose its spot. If a project, living on a parachain, were to get outbid and couldn’t renew its lease, the project would need to scramble and move to a less powerful parathread.
This is a bigger risk that investors should keep an eye on for all Polkadot projects they have money in. As leases expire, the price for a project’s tokens could drop. Yet again, if you’re confident a project will be able to get a second lease, this could create an amazing entry point.
More Than One Way to Invest
As you may have noticed, this auction system will naturally exclude smaller potential Dot projects who don’t have deep pockets. To fix this, Polkadot is developing a system for projects to get crowdfunding. Anybody will be able to offer their Dot to raise the bid for that project. In return, the project will be able to send out its native token or a stablecoin.
This gives investors an extra dilemma. Do you simply buy a project’s native token or do you offer some of your Dot to help fund a project? Funding a project will give rewards but you’ll be locking up your Dot for the lease’s length, assuming the project wins the auction.
Each Project is Different
We’re almost to the list; I promise. There’s just one more thing to clarify. How do you actually invest in these projects?
Because the Polkadot parachains haven’t launched yet, most Polkadot projects don’t have tokens. However, a few in this article have tokens launched already on Ethereum or other blockchains. For the ones that have already launched, the easiest way to invest in them is to just buy its token.
As for projects that haven’t launched any token yet, it’s a bit more complicated. You’ll need to do your research into that specific project and how they’ll be launching their tokens. Many of them are utilizing the crowdfunding method, so you’ll want to keep up to date on when that launches so you can jump in.
Finding out about a project before their token is launched is both a pro and a con. The con is obviously that you can’t invest in them today and grow along with them. The pro, however, is that it means you have time to get ready for the big launch. You’ll be one of the first people to buy. Hopefully, that’ll mean you get in at the lowest point that token will ever be.
The Projects
Ok, now that we’ve covered all of that background knowledge, it’s time to go over projects to consider doing research into. I’m obviously not sponsored or affiliated with any projects mentioned in this article (or any not mentioned for that matter). Investing in any of these projects is a huge risk and has good chances of you losing money. This list is simply meant to help get started in doing your research.
Project #1: Acala
The first project that I believe could see some big success is the Acala Network. Acala aims to give the Polkadot ecosystem powerful Defi and cross-chain capabilities by offering a decentralized stablecoin protocol called Honzon and a protocol for tokenized staking and liquidity called Homa.
It Has the Qualifications
Of all the projects forming in the Polkadot ecosystem, Acala seems to have the biggest following. It has received grants from the Web3 Foundation (who controls Polkadot) and is one of the few projects that Gavin Wood follows on Twitter (if that means anything).
The founders of Acala are all known, meaning they have their names and reputations on the line. In addition, they have deep ties to the development of Polkadot itself.
Another plus for Acala is that in six years, it plans to migrate off of using a parachain and instead use its own blockchain that is interoperable with Polkadot, Ethereum, and other blockchains. This helps elevate long-term concerns of continuously needing to secure leases on parachains.
Acala is running a sister network called Karura which is mimicking everything about Acala, but on Polkadot’s test-network, Kusama. Karura will act as a dry run for Acala. Having a testnet is crucial for a good cryptocurrency project because it allows the devs to test code before applying it to the real chain.
Funding and Tokens
In addition to the grants it has received, Acala is hoping to crowdfund its bidding in the Polkadot auctions. In addition, the founders have stated that if they fail to win a parachain auction (which, in my opinion, is a low chance), Acala would still get a parathread slot. A parathread would be better than nothing but isn’t as optimal for building out its own ecosystem that it has planned.
The Acala token is not launched yet. So as of now, you can’t purchase any Acala tokens. The token will be launched after they secure a parachain.
Acala plans to have a total supply of 100 million tokens. Of those, 34% will be distributed to the public through the IPO over the course of six years. You can learn a ton more about Acala’s tokenomics in this paper.
It should be noted that the Karura sister project does already have a launched token you can buy, KAR. You can learn more about Karura on its website.
Further Research
If you would like to do some further research into the Acala Network, you can check out the following resources:
Project #2: Polkastarter
Besides having a name that sounds like an outgoing dancer (get it? Polka… starter… someone who starts polkas… ok never mind), Polkastarter is a project trying to be almost like a Kickstarter for starting Defi projects. More specifically, Polkastarter allows developers starting Defi projects to list their projects, then users can then invest funds into that Defi project’s pool. It creates a streamlined and simple way to raise capital.
Whos Making
While the team isn’t comprised of a full company, as with some of the other projects here. But it still has some great minds behind it. Plus the project does have a strong set of companies investing in it. The team is known, they have some good partnerships, good funding, and a functioning cryptocurrency. It checks the boxes.
Tokens
Polkastarter already has an ERC-20 token out (POLS) which can be traded on Uniswap. The POLS token is a utility token that is used for the project’s governance, staking, and liquidity. You can review the tokenomics on the Polkastarter docs.
Also, pool operators on Polkastarter are required to hold POLS, which takes supply out of circulation. And locking supply from circulation is always good for prices.
A Roadmap with Blueskies
The project’s roadmap also looks very promising. Polkastarter 2.0 is scheduled to come out Q3-Q4 of 2021 and it will bring fully working DAO’s (decentralized autonomous organizations). This is a huge step towards creating a fully decentralized future and it looks like Polkastarter wants to be in the front of the pack.
On top of that, it’s cross-chain, has a governance system, and deals with all of the KYC laws that throw a wrench in crypto projects raising capital. It fixes a problem that we have today and will become even more prevalent tomorrow.
Further Research
If you would like to do some further research into the Polkastarter Network, you can check out the following resources:
Project #3: Moonbeam Network
Image from Bitcoinist
The Moonbeam Network is a project designed to create an easy-to-use bridge between the Ethereum chain and the Polkadot chain using a Polkadot parachain. It also just has a really cool Synthwave style look that I love... so there’s that too.
The Team Behind It
Moonbeam is developed by the PureStake company and has a trustworthy team building it. The company’s CEO is Derek Yoo, who previously created the successful company Fuze.
It also has a great network of partnerships with other projects, including Chainlink and other oracles. This is extremely important, as I’ll talk about later. Similar to Acala, Moonbeam also has its own sister chain used for testing. The side chain is called Moonriver.
Funding and Tokens
Moonbeam has its own foundation, appropriately named the Moonbeam Foundation, that handles all funding, grants, and tokenomics.
The Moonbeam project will have two tokens, Glimmer (GLMR) and River (RIVER). Glimmer will be the utility token for Moonbeam. Its utility token will be used to pay gas fees, participate in on-chain governance, and can also be staked. The River token is just an equivalent token to Glimmer but for the testnet and isn’t relevant for investing.
Moonbeam is waiting to release the tokens to the world once they have a parachain lease secured. Since Moonbeam is a multi-chain project, there will be ERC-20 versions of the tokens as well. But Moonbeam is holding off on launching the tokens until both sides of the bridge are ready to get to work.
You can learn about Moonbeam’s token allocations on the Moonbeam Foundation’s website.
Anticipating the Future
The idea of creating bridges between blockchains is crucial. I’m incredibly bullish on the concept as a whole. Just like there’s no single programming language that is used by every programmer, there won’t be one blockchain used by every token. Instead, certain blockchains are going to have specialties. The “best” blockchain for a project will depend on what the project is for.
If your project is best suited to be built on Polkadot, but you need access to Chainlink, which is built on Ethereum, you’d be stuck. Projects, like Moonbeam, that build these bridges are going to become crucial in the future.
Further Research
If you would like to do some further research into the Moonbeam Network, you can check out the following resources:
Project #4: Polkaswap
Polkaswap is a DEX aiming to give Uniswap a run for its money. While there a lot of different decentralized exchanges battling for Uniswap’s large market share, Polkaswap has a few features that could set it apart for some huge growth.
Cross Chain Action
Polkaswap’s biggest feature is cross-chain trading. Polkaswap uses Polkadot’s bridge system to be able to trade outside of the Polkadot ecosystem. That means you can make trading pairs that involve Polkadot tokens, Ethereum tokens, Bitcoin, and other projects living on alternative chains.
Qualifications
Polkaswap is developed by the company Soramitsu, a Japanese blockchain company that specializes in Defi. The company is developing its own entire Defi network in Polkadot called the Sora Network. Polkaswap is one of the projects within Soramitsu’s upcoming system.
Tokens
Polkaswap will use its own token called PSWAP. The token will act as a utility token throughout the project and play a crucial role in liquidity. The token will also be slightly deflationary, so it will naturally want to rise in price.
PSWAP will have no ICO. Instead, it will be distributed through the Polkadot parachain auctions. This will be the only way to get your hands on it directly from the project before it goes to the markets.
Uniswap’s Long-term Problem
Uniswap has plenty of problems it is facing right now, such as gas fees. But long term, I believe it has a bigger issue: it can only handle Ethereum projects. As we see the rise of alternative chains, each with its own specialty, Uniswap will start to support a smaller percent of tokens as Ethereum loses complete dominance.
Polkaswap is, from the ground up, built to handle all projects on all chains. This is a long-term move that could make Polkaswap a go-to for trading tokens someday.
Further Research
If you would like to do some further research into the Polkaswap Network, you can check out the following resources:
Honorable Mentions
While there are tons more projects, I don’t have time to keep writing forever. Here are a few other projects that are still worth checking out:
Litentry
Litentry is a project that wants to do something very complex: identity management. Currently, Defi protocols don’t have a great way to verify people. Litentry aims to provide a decentralized way to solve this. It is also very focused on being cross-chain, offering its features to services on a variety of blockchains.
Litentry has tokens running on both Ethereum and the Binance Smart Chain. The project will expand to Polkadot once it can secure a parachain. Hanwen Cheng, the project’s founder, has good connections to Gavin Wood and Polkadot and Litentry has received a grant from the Web3 Foundation.
Bondly
The Bondly project is building an entire ecosystem of Defi and NFT systems. It seems that they’ve pivoted to be very NFT focused, bringing NFT’s like “PolkaPets” to the Polkadot world. The project does have a native token, BOND, but note that there are multiple “bond” tokens out there. Make sure you’re looking at the right one!
Phala Network
Phala is all about privacy. Its founders come from high-level positions at major tech companies like Google and it even has an ERC-20 token trading that you can buy today: PHA. Unfortunately, it looks like the development is not going to be ready in time to get a parachain in the first round of auctions.
I should also note that I’m always wary of investing in privacy projects because of all the legal issues they can have with governments.
Conclusion
These projects are just a handful of the tons that will be launching through the Polkadot blockchain very soon. Hopping in early creates the potential for massive gains, but it is also very risky. All of these relatively low-cap projects have a good chance of failing. Don’t bank on them being successful. Instead, be pleasantly surprised if they grow.
The Polkadot ecosystem is very focused on branching outside of the Polkadot chain and becoming bridges for any project on any chain to use. I’m super bullish on this concept and am expecting many Polkadot projects to flourish in the short-term future.
To capitalize on the growing popularity of blockchain trends like decentralized finance (defi), Zeitgeist will be rolling out a new native prediction platform for Polkadot to expand the scope of opportunities available for retail crypto investors.
New Network to Build on Substrate and Launch Exclusively on Kusama
Long before Satoshi Nakamoto unveiled the Bitcoin whitepaper that led to a flood of blockchain innovation, prediction markets were available in the form of organized betting, often on political outcomes. For centuries these markets existed, helping corral crowd-based wisdom in the form of betting odds, which remain popular to this day.
The blockchain iteration of these prediction markets promotes the same idea: determining the probability of informational outcomes based on speculation. Unlike cryptocurrency trading, these markets are binary, meaning either a positive or negative outcome results from a contract between two parties.
Predictions made using these systems are considered relatively accurate, either matching or outpacing alternative results from focus groups, experts, and opinion polls. As prediction markets intersect with the latest defi craze, one company is probing new uses for blockchain’s architecture in another significant expansion of decentralized finance’s horizons.
Zeitgeist, a startup that recently exited stealth mode, is pioneering a new base layer blockchain prediction market based on Substrate, the development framework pioneered by Polkadot.
A Base Layer Approach
After revealing the project and raising a $1.5 million seed round from a consortium of investors, Zeitgeist has unveiled its road map. The project, which will be exclusively governed by users holding its native ZTG token, expects to launch its testnet titled “Battery Park” and a Kusama parachain by the end of 2021.
Unlike other prediction markets that operate as decentralized applications running on top of blockchains, Zeitgeist is building its chain, or base layer, which will be launched exclusively on Kusama. Although related to Polkadot, Kusama is designed to host experimental protocols while providing a testing ground that reflects real-world conditions. This will enable the prediction market to operate at scale while minimizing transaction costs, opening access to parachain assets, and enabling for forkless upgrades.
Cryptocurrency exchanges ordinarily handle a limited number of cryptocurrency pairs and derivatives. By contrast, Zeitgeist plans to host thousands of different markets. Zeitgeist will initially support markets in cryptocurrency, sports and esports, politics, startups, and insurance. Together, these will open up immense potential opportunities to retail traders seeking to speculate on all manner of outcomes while also reviewing sentiment across informational areas.
Over time the platform intends to aggregate the information and data collected on the network to improve decision-making, envisioning itself as a future hub for Web3 predictions. Interestingly, it is also rolling out a feature called Futarchy, which will use insights from its own prediction markets to help gradually evolve the platform’s governance. Moreover, its construction on Substrate will help Zeitgeist be compatible with Polkadot if it intends to build on a network parachain in the future.
With the rise of blockchain prediction markets, what’s next for defi – sports betting? Let us know what you think in the comments section below.