Dot Pulse #2 — Charting The Next Parachains & Airdrops

Find out about Polkadot's communications between chains, the latest auctions, stories of the week and governance watcher! 📣

Welcome to Dot Pulse, your window into the Polkadot DeFi ecosystem.

If you’re a humble farmer looking to learn more about Polkadot’s DeFi opportunities, or even if you’re a seasoned DOT/KSM staker, this newsletter is the place to find all the latest events in Dot land.

Subscribe now to receive regular updates about Polkadot development, crowdloans and parachain auctions, new exciting DeFi projects, and anything else worth knowing about Polkadot.

This week we’ll cover a crucial aspect of Polkadot’s vision: communication between chains.

Without interoperability and communication, Polkadot would simply be a cluster of independent blockchains using an external consensus mechanism. Interoperability is the glue that holds all of them together and turns a swarm of parachains into a cohesive network. 

There are two main types of communication frameworks within Polkadot: cross-parachain communication and ad-hoc external bridges. 

The Wonders of XCMP

Polkadot relies on a system called Cross-Chain Message Passing, or XCMP for short, to connect parachains with each other. Basically, each parachain must create channels with the peers it wants to communicate with and collateralize that channel with DOT. The channel can then be used to send an arbitrary message expressed in code. This includes transfers of fungible and nonfungible tokens, but also directly calling functions on the other parachain. 

XCMP can already be used to “teleport” your KSM or DOT between parachains from the PolkadotJS interface. Other tokens will work with this system too, but the individual parachain teams need to coordinate to make this happen. This is because XCMP relies on SPREE, a shared execution environment on the Relay Chain. Any function that acts across parachains needs to be deployed to SPREE so that each parachain can adopt a “canonical” version of the cross-chain code.

Teleporting assets and code between parachains is what makes them a unified network. Imagine having one parachain for NFTs and one for DeFi, and you want to make them work together. A potential interaction could be sending NFTs to collateralize a stablecoin position on the DeFi chain, and then send those stablecoins back to buy another NFT. Without seamless communication this would be impractical, but with XCMP it’s as if they live on the same chain!

There is just one small caveat to what we said: XCMP is not really live yet. What we have today is XCMP-lite, which stores data on the Relay Chain and is a bit more limited in terms of capacity. The final XCMP design is a protocol that doesn’t suffer from the Relay Chain bottleneck, and as such it’s very complex and will be implemented later.

Bridging with the outside world

Communicating with ecosystems outside of Polkadot is no less important than within, but here it gets a lot more complicated. XCMP relies on the Relay Chain and the fact that parachains subscribe to the same communication standard, but that’s obviously not doable with other blockchains.

How do you connect Polkadot to Ethereum, Bitcoin and all these other ecosystems? The only way is to create custom bridge solutions for each. The easiest bridge is the custodial, PoA validator community: basically a bunch of business entities executing the cross-chain transactions. This solution works, but it presents a serious point of centralization.

The Web3 Foundation has funded many teams to work on decentralized bridges. For Ethereum (and EVM chains), Snowfork is building a dedicated light client-based architecture that will run on its own bridge parachain. This is the most decentralized architecture possible as the Ethereum blockchain will be verifying proofs from Polkadot at the smart contract level (and vice versa). The bridge will be able to send code, just like XCMP, without needing any middlemen!

For Bitcoin, the lack of smart contracts means that you really can’t avoid some form of custody. The only way to make a Bitcoin bridge trustless is by posting a lot of collateral, which is the approach chosen by Interlay. The decentralized intermediaries who execute the swaps must post a bond in DOT, which gets slashed if they fail to execute the withdrawal transaction.

More complex bridges take time to develop, so both Snowfork and Interlay have yet to launch their parachains. In the meantime, Moonbeam, Phala and other Substrate projects are gearing up to launch with an Ethereum bridge based on a slightly simpler design.

Polkadot Weekly Farms

Like last week, no crowdloans are active yet and no new farms appeared. That’s all going to change really soon, pinky swear! More action is set to come to Kusama soon, though Polkadot is going to take a bit more time still. Stay tuned!

Active Farms

Earn KAR by staking into the KSM/kUSD and KAR/KSM pools on Karura DEX

  • Yields have decreased a bit since last week. You now get 75% APR (or 106% with loyalty bonus) for KSM/kUSD farming, or 20% (40% with loyalty) for KAR/KSM. 

This week we saw a formal analysis of almost one month of all 6 parachains running on Kusama, giving us some clues as to when we might see more auctions!

Published by Polkadot co-founder Robert Habermeier in his analysis piece, the parachain results are quite promising. No major issues in terms of CPU load, excessive network usage or consensus bugs. Still, there were a few curious artifacts.

Polkadot is currently designed to produce one parachain block every two Relay Chain blocks, so that’s a block time of respectively 12 and 6 seconds. In practice parachains are a bit slower than that, especially Shiden with a block time of over 18 seconds.

According to Habermeier, the most likely explanation is that Collators and Validators are struggling to communicate quickly enough. For reference, Collators are the parachain block producers who organize the transactions, while Validators verify the proofs produced by Collators. The long-term solution is to improve the protocol to give Collators more time to sync with Validators, although a quick patch might be to bring them closer geographically.

Another issue is that the network suffers brief periods of finality lag, where the chain leaves a larger slack of unfinalized blocks than usual.

The cause of these “stutters” remains to be investigated. They’re not necessarily harmful, as the blockchain itself keeps chugging along like nothing happened. But this does mean that Polkadot parachains will have to wait until this issue is fixed to ensure complete stability.

Shortly after this post, a potential date for the new parachain auctions was published, starting on Sept. 1 until Sept. 29, with one new parachain per week. Seems that Kusama’s second batch will come before Polkadot’s first... As Kusama itself said (yes, it talks), the early bird gets the worm!

TL;DR: The privacy-centric parachain candidate Manta is collaborating with Acala to enable cross-parachain token swaps.

TL;DR: The new mechanism will be used to test future Trusted Execution Environment mining on mainnet.

TL;DR: Everyone had a chance of acquiring some ACA and KAR in a kind of airdrop. Sadly registrations closed on the same day, demand is quite insane!

TL;DR: Builders can now submit their grant requests to a single location, choosing the level of support they need.

TL;DR: Moonbeam plans to distribute 8% of total supply in a community airdrop.

  • (Polkadot) Referendum 31, executed an increase of the minimum bond for nominators to 80 DOT. Follows an earlier motion from last week.

  • (Polkadot) Motion 104, funding requested for the second tranche of the Encode Polkadot hackathon.

All info in this newsletter is purely educational and should only be used to inform your own research. We're not offering investment advice, endorsement of any project or approach, or promise of any outcome. This is prepared using public information and couldn't possibly account for anyone's specific goals or financial situation. Be careful and keep up the honest work!