Dot Pulse #8 — Parachain Bonus Round, More Cross Chain and Statemine

Learn about parachain auctions, what is Statemine/Statemint, plus Kusama cross-chain and governance watcher! 📣

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

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This week we will learn more about Statemint/Statemine, the basic common good parachain  for Polkadot and Kusama. 

For a bit of an intro, common good parachains are a class of “free” parachains onboarded by governance without having to go through the auction process. They are divided in system level chains, which are designed to perform core Relay Chain features like governance or staking, and public utility chains, which perform some function that is useful to the entire ecosystem.

Right now the only active common good parachain is Statemine on Kusama. It falls into the public utility part of the spectrum as a “generic asset platform”. Basically it’s the parachain for fungible and non-fungible tokens, with KSM as its native asset.

What can you do with Statemine?

Statemine is extremely optimized for transacting with tokens, which means that this feature is ingrained in the runtime instead of using smart contract standards. 

Statemine and Statemint are ten times more efficient for KSM/DOT transfers than the Relay Chain itself. This translates into lower fees and a lower existential deposit, a unique Polkadot/Kusama quirk. Essentially, Polkadot will eliminate inactive accounts to keep its state from bloating. The existential deposit is a dust amount of KSM that needs to be held in order to not kill the account and its state. Currently it amounts to about 3.3 microKSM, or 3.3 millionths of a KSM (in Ethereum terms this would be 3333 Gwei). Some assets may become “self-sufficient” and allow the existential deposit to be held in the token itself.

Unlike with Ethereum or smart contract parachains, Statemine doesn’t allow any kind of DeFi use for the tokens. The only thing you can use Statemine for is transacting with NFTs and fungible tokens, for example sending to a friend or to a centralized exchange. If you want to use your assets in DeFi, you need to “teleport” them to another parachain that enables smart contracts.

Right now Statemine doesn’t have much use. Ironically, the most active Kusama NFT project, RMRK, doesn’t use it for the NFTs themselves for now. Since the team developed the project before parachains were a thing, they rigged the Relay Chain to support NFTs through a trick involving system.remark, a kind of on-chain note or graffiti system (quite similar to how you’d use the OP_RETURN data field on Bitcoin to create tokens). The RMRK platform token is however available on Statemine, and centralized exchanges will create Statemine deposit addresses for it.

As more cross-parachain connections develop, Statemine is likely to become a kind of settlement layer for payments and CeFi platforms supporting the Polkadot/Kusama ecosystem. Tether has pledged to bring USDT to Statemint, for example. More common good parachains will likely come soon, including a WebAssembly-native smart contract parachain where the native tokens are DOT or KSM (contrast this with project parachains, where the native token is their own).

Polkadot Weekly Farms

As expected, Parallel Heiko ended up taking the 10th and final slot of this parachain auction batch. Or was it?

A council-led motion was fast-tracked this week to trigger a new slot auction. This 11th slot allows setting up a new parachain within the existing lease period, which means that the current crowdloans all remain active. It’s amazing news for Kintsugi, which reached its crowdloan cap of 200k KSM last week and is likely to become the 11th project parachain. 

Of course, the event sparked debates on the role of Kusama governance. The last-minute addition throws a wrench into the game theory behind the previous rounds, as parachains like Parallel and Kintsugi probably campaigned for way more KSM than they ultimately needed to. 

Some raised concerns that this should’ve been put to a tokenholder vote, instead of being a council motion. But this approach wasn’t perfect either — for one because parachain slot activations do not modify the protocol and hence never required referendums. But there were also issues in terms of timing and who could vote on the proposal, as the people most interested in it had their KSM locked in the crowdloans themselves.

Active Crowdloans

TL;DR: Reached the 200k KSM cap, can’t accept any more.

TL;DR: PolkaSmith is the closest to Kintsugi at 27k KSM, but in all likelihood they’re ngmi (for this batch).

  • Most of the others have their crowdloan caps below 200k KSM.

Active Farms

Some new farms on Karura popped up:

Earn KAR by staking into the KAR/KSM pool on Karura DEX

  • Yields are now 24% APR (or 49% with loyalty bonus) for KAR/KSM. 

  • A new KSM/LKSM farm appeared with 29% APR (98% with loyalty)

  • KAR/kUSD now offers kUSD surplus as well. APR is 53.76%, 76.8% with loyalty.

Moonriver’s farms are now holding a few dozen million in TVL, but most projects are Uni V2 forks. As before, the following section is not vetted. Rug risk is high, fundamentals are basically absent. Proceed at your own peril.

  • Earn SOLAR in a classic Pool1/Pool2 arrangement, Pool2 yield hovering in the mid triple digits.

  • Earn MOON in another Pool1/Pool2 set of farms. Yields at 500% for the Pool 2s.

  • A few more assorted UNI V2 token farms in this list.

The biggest news this week allows us to demonstrate the value of parachains and how DeFi will look like in parachain land.

A thread by Acala’s CTO, Bryan Chen, explains how the team launched the first Horizontal Routed Message Passing channel between Karura and Bifrost. The channel is currently single-direction — Bifrost can send messages but not receive them from Karura. The second part of the channel will be launched as soon as Bifrost governance approves Karura’s request to open it.

HRMP is the “XCMP-lite” cross-shard communication framework, which uses the Relay Chain to pass messages between parachains. The primary use for this is token transfers, with BNC and vsKSM set to make it to Karura. This will allow listing them in the Karura DEX, their first decentralized market. 

Eventually, Karura aims to take assets from Statemine, Khala and all the other parachains. This requires setting up HRMP channels with all of them, which is quite a tedious task. Each bidirectional channel also requires a 268 KSM ($93k) bond, which easily becomes a lot of money if you need to do it ten different times!

Of course, this kind of expense or work is nothing compared to bridging two separate chains altogether. This is arguably the largest benefit of making it as a parachain — the ability to use HRMP to get your token into all the others. For example, USDT on Statemine or Kintsugi’s BTC will be usable on Karura or Moonriver without much extra work. 

A fully fleshed-out Polkadot/Kusama would probably feature a number of hubs for DeFi, NFTs, payments etc. Parachains doing other things (what, there’s more to crypto than DeFi?!) would open channels with them to benefit from DEX liquidity, lending integrations and other kinds of usage for their tokens. But who knows which of today’s contenders will become these hubs!

TL;DR: Gavin Wood published the 3rd part of Polkadot’s XCM design, covering the XCVM execution model and error management.

TL;DR: Astar Network’s founder recaps major updates like Astar 2.0 and dApp staking.

TL;DR: The Moonbeam Foundation announces its collaboration with Transak, which will allow eligible users to buy MOVR and GLMR tokens with fiat.

TL;DR: Acala team announces opening of the Crowdloan Waitlist, launch of KSM Liquid Staking, new liquidity mining program and more in this update.

TL;DR: Composable Finance recaps its September updates, including the Picasso Crowdloan journey, the Mosaic cross-layer liquidity solution and more.

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!

A guest post by
A techie passionate about (some) humanities. Former editor at Cointelegraph, DeFi enthusiast, self-taught programmer
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