Dot Pulse #20 — The Pre-Launch Period & Heiko Dive
Learn about the Parallel Heiko parachain, Polkadot’s 2022 programs, parachain auctions and governance watcher! 📣
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Time sure flies when you’re having fun! Our journey into the Polkadot and Kusama ecosystems has reached Kusama’s 10th auction slot, won by Heiko, the canary network of Parallel Finance.
Heiko: The Parachain Bank
This one’s interesting for us because it’s another application-specific parachain for DeFi. That is, it doesn’t want to be some generic smart contract platform, instead it’s a family of dApps rolled into a parachain. Parallel and Heiko leverage this very hard, to the point that they don’t seem to be taking third party projects at all!
So what does this DeFi parachain do? Fundamentally, both Parallel and Heiko aim to give DOT and KSM holders many extra options for earning yield and growing the ecosystem. This includes liquid staking, innovative borrowing mechanics and StableSwap-like pools.
Parallel/Heiko is also actively looking to provide financing for other parachains by expanding the options for participating in parachain auctions, for example by borrowing DOT/KSM for a flat interest rate, instead of diluting their token supply.
There aren’t many differences between Heiko and Parallel, so it makes sense to study the latter first. Let’s start!
What is Parallel Finance?
Parallel Finance’s core function is a decentralized money market (think Compound, Aave) where users can deposit their DOT and KSM tokens and earn extra money on their assets. This is not as trivial as it seems because of the characteristics of DOT staking.
Even with >50% of the supply locked in staking, returns are still on the order of 20%, which is much higher than the usual you’d pay to borrow some coin.
There is also an issue of blockchain security at play here! We can expect that any DOT borrowing market would have an interest rate at least as high as the staking rate, which means that holders would be incentivized to remove their assets and make the network more insecure.
The solution is, you guessed it, liquid staking. When users stake DOT in Parallel’s pool, they receive a derivative called xDOT, which accrues the interest given by staking and at the same time ensures liquidity, as it’s freely tradable. The xDOT can then be supplied to the money market to earn additional interest from borrowers.
One cool thing about Parallel is that it integrates an optimized AMM for redeeming xDOT with the regular DOT, based on the same “flattened curve” formula used by Curve. An xy=k AMM (Uniswap V2) is of course present as well.
Heiko, Parallel’s canary on Kusama
Like Parallel, Heiko aims to maximize usage of basically dormant capital. In addition to all the basic features of any DeFi platform, Heiko is currently focusing on supporting other project parachains in their bids.
As you may know, the core of Polkadot’s value lies in parachains, which can be acquired by locking up enough DOT and KSM in the system. Most projects today use crowdloans to source that liquidity from users, but that carries opportunity costs in that you can’t use your assets while the slot is leased. This means no staking and no management of your DOT/KSM, so that liquidity is effectively unusable for the time being.
With Heiko’s auction auction lending feature, users are able to lend their KSM and DOT to support both Kusama and Polkadot parachain auctions. This is a tease of the future parachain lending feature, and it carries plenty of benefits for participants! For one, you get to control your liquidity by holding cTokens representing your DOT/KSM. Plus, there are extra rewards in PARA or HKO waiting for you!
The Heiko lending platform has been quite successful so far! A large chunk of all Polkadot crowdloans had their liquidity come in from this platform. And it’s easy to see why, as you literally get the same benefits of contributing regularly plus PARA rewards plus a chance to use your money!
HKO token Distribution
Heiko won Kusama’s 10th slot auction with a total of 202,793 KSM from over 10,000 contributors and is going to distribute 5% of HKO tokens total supply to its supporters.
As many parachains in this batch, the HKO token isn’t quite live yet, so we can’t estimate returns, unfortunately. But the parachain itself is definitely obtaining traction!
All quiet on the parachain front! This week the auction itself wasn’t live, so we don’t have a new winner. Composable is still looking strong, so for now we shouldn’t expect major changes here. But the road to finishing all 6 slots is long, so the standings will almost certainly look different a few weeks down the line!
Current Polkadot leaderboard by parachains.info.
On Kusama, Robonomics took the 20th and last slot of this current batch. We are still not even halfway through on finishing all announced slot auctions, so stay tuned!
Active Crowdloans (Polkadot)
TL;DR: Starting out fast with a 12% supply offering. The platform aims to be an “everything VM” to hold every possible smart contract architecture on one chain. The nice thing is that you can also contribute with stablecoins to this one!
TL;DR: Offering 15% of supply to connect Centrifuge Chain to Polkadot. Offers a whole bunch of early bird, referral, and double dip bonuses!
TL;DR: The platform offers 10% of supply to bring trustless Bitcoin to Polkadot. Plenty of referral bonuses, double dips and early bird bonuses too!
TL;DR: This DeFi-focused parachain offers 20% of the supply in a variety of base and early bird and referral bonuses. Plus, it gives you an xDOT derivative to make use of your assets!
Earn KAR by staking on Karura DEX
Yields are around 16% APR (or 23% with loyalty bonus) for KAR/KSM.
KSM/LKSM farm has 15% APR (45% with loyalty)
KAR/kUSD offers an APR of 51%, 57% with loyalty.
A couple of new farms popped up:
KAR/LKSM with 45%/230% APR
kUSD/LKSM with 30%/150% APR
Earn KAR + BNC (Bifrost tokens) when staking kUSD/BNC
APR is 120% with loyalty, 35% without.
Sushi farms on Moonriver returned, with a few high yields on blue chips.
Solarbeam farms see a strong return of the Pool2s but solid choices above 100% throughout.
RomeDAO is giving a 10% return every 5 days for OHM-style staking.
We had a brief recap of Polkadot’s year last week, so with 2022 just started, let’s also hear it straight from the horse's mouth!
Gavin Wood published his own view of what 2021 brought, which focuses on technical progress, community and growth for Polkadot. One thing that immediately jumps to mind is the metric of code written. You may think that with parachains already kind of live on testnet in 2020, (now) last year was much lighter in development…
Most of the current Polkadot code base turns out to have been written in 2021, which is a showcase of just how hard it was to get this thing right! Obviously, standard caveats apply about lines of code not equaling quality or importance, and yadda, yadda. Still an impressive outlook!
Besides the basic parachain code, Polkadot saw a major delivery of XCM v2, which is the cross-chain messaging format key to gluing all the parachains together. We also saw improvements to how metadata works, which is once again crucial for all the diverse parachains to communicate with each other.
In terms of cool things that happened, Substrate is about to get its own Stack Exchange (developers will love this!) and we got some “Anti-Scam” group action going on. Basically, a group of people from Parity and Web3 Foundation worked over the year to shut down almost one thousand websites based on tips from the community. These mostly included various types of phishing schemes, of which there were more than 2300 so far. For this year, this whole process should become even more community-driven.
And as for Polkadot’s 2022, the hardcore buidling is basically done! With all the basic features live, it’s time to optimize and refactor the code while the community builds out the parachains, bridges and infrastructure. It seems that the goal is to decisively reach the promised land of 1000 TPS for each parachain, which is certainly quite ambitious!
And oh boy, 2022 is already shaping up strong for Polkadot. Moonbeam is preparing for a January 11 Launch. Next week we’ll see GLMR transfers and the launch of the EVM, and surely other parachains from the first batch will be launching very soon as well!
Gavin Wood shares an extract from the Electric Capital Developer Report (2021), which places Polkadot as the second-largest dev community after Ethereum.
Moonriver announces that from now on MOVR users will be able to easily create, buy, sell, p2p swap, farm, and launch NFTs on Kusama.
Dot.Finance will be migrating from Binance Smart Chain to the Moonriver Network.
(Polkadot) Motion 137 a proposal about covering the maintenance costs of running a new RPC node Dwellir.
(Kusama) Referendum 163, to open HRMP channel between Statemine & Karura.
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!