What is Polkadot Parachain- Its Benefits and Usage

By September 28, 2021Polkadot
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In our recent insight on Polkadot blockchain, we referred to Parachain, an integral component of the Polkadot ecosystem. If you can recall, Polkadot is an interoperable blockchain that can connect multiple blockchains, enabling them to communicate with each other. Parachains are those heterogeneous blockchains that are connected to Polkadot. They are interoperable with Polkadot Network and other Parachains.

A Parachain runs parallel to the Polkadot relay chain, and that is how it has derived the name Parachain (parallel chain). Here, the idea of running parallel to a relay chain is indicative of the parallel nature of a Parachain, which enables it to parallelize transaction processing with the Polkadot system and achieve its scalability. That is one benefit of becoming a Polkadot Parachain. The other prime advantage of a Parachain is that it can interact or communicate with other Parachains of Polkadot. Also, it shares in the security of the entire network.

There are many more details to Parachains, which will be covered in this insight article. Here, we will discuss the benefits of Parachains, its use cases and understand how to run a Parachain on Polkadot.

Table of content

What is Polkadot Parachain?

Understand Parachain as a layer-1 chain connected to the layer-0 relay chain of Polkadot. The relay chain is at the center, and the Parachains run parallel to the relay chain. The Parachain is maintained by collator nodes. A collator operates as a full node of the Parachain, and they are responsible for retaining all necessary information of the Parachain. They also produce new block candidates and pass the details to the Relay Chain validators for verification and inclusion in the shared state of Polkadot.

Parachains may have their own native tokens and economies. They can also have their own stipulation around implementation, like they can specify whether the collator nodes require to stake their DOT on the Relay chain. Also, they can define the incentivization of the collator nodes. Usually, the collator nodes are incentivized through the inflation of a native Parachain token. However, there are other ways of incentivization also.

There is so much buzz around Parachains because, by design, they share the Polkadot’s cross-chain composability and interoperability. Because of this, they can send or receive any type of data or asset with other Parachains. Thereby, Parachains are capable of supporting a host of new use cases and applications. Besides, they also share and benefit from the security, scalability, and governance of Polkadot. Let’s understand in detail the key benefits of Parachains.

What are the benefits of Parachains?

Flexibility

When it comes to the modeling of Parachains, Polkadot has given optimum flexibility. The only mandate criteria levied by Polkadot is that the Parachain must prove to the Polkadot validators that each of its blocks has followed the agreed-upon protocol. It means the Parachain must follow the consensus of the relay chain. Because of this flexibility, a Parachain can be developed as a chain with its own individualistic design. It can be run as public or private networks, can have its own native token, and governance process. It can also be developed as a platform for others to build applications on top of it.

Scalability

Interoperability, the ability to interact with other blockchains, is one of the key factors that define the scalability of any blockchain. While otherwise, blockchains have to rely on layer-2 solutions for interoperability, a Parachain can achieve interoperability at layer1 itself. This way, Parachains have a more decentralized and efficient means to achieve blockchain scalability and throughput because their transactions can be spread out and processed in parallel over an ecosystem of specialized layer-1 blockchains.

Interoperability

One of the biggest advantages of a Parachain is that it inherently acquires Polkadot’s cross-chain composability. Thus, Parachain as a layer-1 blockchain can provide full control and sovereignty to blockchain communities and also allow them to engage in free trade with other Parachains and external networks. Leveraging Polkadot Interoperability, Parachains can exchange not just tokens but also any type of data, including verifiable credentials, off-chain information from oracles, and smart contract calls. Thus, a Parachain doesn’t function in siloes and is opened to new possibilities.

Governance

As mentioned earlier, Parachains are free to adopt any governance model. They can also integrate several pre-built modules for implementing various on-chain governance systems. Access to sophisticated on-chain governance mechanisms reduces the likelihood of hard forks of the Parachain. Besides, on-chain governance also provides the Parachain communities with accountable transparency.

What is Parachain consensus?

As discussed, Parachain can have a lot of flexibility regarding its design, model, governance, and token. Still, when it comes to the consensus mechanism, the Parachain must follow the Polkadot Relay Chain. It is not allowed for Parachains to have other consensus algorithms. It means a Parachain can’t execute a block finality outside the scope of trust that Polkadot provides, but they control how and who will author the blocks. However, sovereign chains that bridge to the Relay Chain via a Parachain can have their own consensus.

What can Parachains be used for?

The concept of the Polkadot network with Parachains as layer-1 blockchains is all about widening the potential use cases for Parachain through means of interoperability, design flexibility and scalability. Some of the areas/businesses or industries that have shown interest in running projects on Parachains are:

  • Digital Wallets

  • Decentralized Finance (DeFi)

  • Smart Contracts

  • Gaming

  • Credentials

  • Identity Verification

  • Internet of Things

  • Oracles (Price Feeds)

How to run a Parachain on Polkadot?

Anyone interested in developing a Parachain-based project first requires running a Parachain on Polkadot. For this, the foremost necessity is to lease a slot on the Relay Chain. Slots for leasing are offered through a Parachain slot auction, where interested parties need to bid for the slots by using Polkadot’s native token: DOT. A lease-out Parachain slot on Polkadot is made available to the concerned team for a minimum of six months to a maximum of two years.

To participate in a Parachain slot auction, interested parties need to lock up the amount of DOT they have bided for the duration of their chosen lease period. Once the lease period is over, the full DOT amount gets unlocked. However, during the lease period, although the DOT amount is reserved in the original account of the bidder, but it can’t be used for staking, transferring or any other uses.

There are several ways interested parties can fund their bids. They can self-fund or seek out crowd loans, where DOT holders make contributions in exchange for some reward.

What are the fees and cost of running a Parachain?

  • To run a Parachain on Polkadot, it is important to lease a slot, so how much does it cost? Ideally it costs nothing, because the full amount of DOT locked for a Parachain slot is unlocked at the end of the lease period. It also means the Parachain can access as much computing power as it needs without paying additional fees or “gas” costs. But because the DOT exists in a locked state during the lease period and can’t be used for any purpose, so the cost of running a Parachain can be best described as the opportunity cost.
  • Another additional cost related to slot leasing is the cost of rewarding the contributors in those cases where the fund for the slot leasing has been acquired via crowd loan.

  • Running collator nodes on the individual Parachain also incurs some minor costs.

What kind of Parachain development services can LeewayHertz offer?

At LeewayHertz, we offer end-to-end blockchain development services to help startups and enterprises leverage the capacities of emerging blockchains platforms and networks. We have explored the scope of Parachain projects and are ready to deliver development services for it. Our team of dedicated blockchain experts can help businesses identify the requirement, brainstorm ideas, and execute them for the real use case. In this regard, we can offer the following Polkadot Parachain development services.

Conceptualization and consultancy

As a Parachain can have its own design and model, we can help you with the brainstorming and ideation of what kind of parachain model will best suit your business requirement.

Parachain development

We can build the complete chain from the scratch. Starting from slot leasing to network design and launch, we can do complete end-to-end modeling for your parachain. We can design your parachain as a private or public blockchain or as a dApp development platform.

Token development

To run the transactions on your Parachain or to power the dApps and smart contracts built over it, we can develop the native token for your chain.

Smart contract development

Abiding by the consensus mechanism of the Polkadot relay chain, we can develop smart contracts for your parachain. We ensure that the smart contracts are codded to function within the scope of trust that Polkadot provides.

dApps development

On top of your parachain, we can build interoperable dApps for different use cases like Digital Wallets, Decentralized Finance, Identity Verifications, including others. On-demand, we can also build dApps on other parachain protocols like Phala Network.

If you are looking for parachain development services, be it the development of the parachain from scratch or the development of smart contracts and dApps on other parachain networks, we can help you with our blockchain development services. Please connect to our team of blockchain experts to further discuss your project.

Akash Takyar is the founder and CEO at LeewayHertz. With the experience of building over 100+ platforms for startups and enterprise allows Akash to rapidly architect and design solutions that are scalable and beautiful.
Akash's ability to build enterprise-grade technology solutions has attracted over 30 Fortune 500 companies, including Siemens, 3M, P&G and Hershey’s. Akash is an early adopter of new technology, a passionate technology enthusiast, and an investor in AI and IoT startups.

Once you let us know your requirement, our technical expert will schedule a call and discuss your idea in detail post sign of an NDA.

All information will be kept confidential.

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