The Polkadot ecosystem is heating up just in time for summer, with the scalable and interoperable network entering a new phase in its development, and its parachain rollout continuing a path toward multi-chain connectivity.
The latest catalyst comes in the form of an upgrade that slashes the minimum staking requirements for DOT. But with a number of promising integrations, a rise in DeFi applications, and long-awaited parachains launching on its canary network Kusama, there’s plenty to get excited about in the months ahead.
Lock and DOT It
Within the Polkadot ecosystem, DOT holders are incentivized to become Nominators. Nominators help to secure the central Relay Chain by staking DOT and nominating the best performing Validators, receiving a share of the staking rewards in return.
Following the most recent Polkadot upgrade release, the minimum staked amount was dropped to just 1 DOT. This compares to a previous staking minimum of 300 DOT, which meant locking up $15,000 at peak prices. Now, any individual participant can take part in staking without having to rely on exchanges to make it possible. This is likely to result in more DOT being locked up to help secure the network and take advantage of up to 15% annual returns.
Promising Integrations and a Rise in DeFi Applications
The number of applications being developed in the Polkadot ecosystem is rising thick and fast, closing in on 500 projects looking to build out the future of Web 3.0.
Among them, Acala has emerged as a future DeFi hub for the network with a planned parachain launch on Kusama, and cross-chain compatibility with Ethereum-based smart contracts. It will provide financial primitives including a decentralized aUSD stablecoin, helping to drive cross-chain liquidity and future DeFi applications for Polkadot and its connected blockchains.
Curve Finance is going the other way. Already a well-established DeFi app on Ethereum, and one of the largest automated market makers, Curve will also integrate with Polkadot via a cross-chain implementation on Equilibrium.
Acala’s potential hasn’t gone unnoticed, with the US fintech operator Current seeking to integrate Acala with its banking platform of three million users. It will utilize it as a bridge to access DeFi loans, liquidity, staking and farming. Current will also become an active Validator on Polkadot as part of the process.
Moonbeam is another example, offering a developer-focused smart contract parachain that is fully compatible with the existing Ethereum-based ecosystem where the bulk of DeFi activity is currently happening. That compatibility also gives applications an alternative to the bottlenecks and high fees often experienced on the Ethereum network, while tapping into the liquidity and user base. It also allows projects to avoid the cost and complexity of porting Ethereum smart contracts and implementing a parachain themselves, enabling fast deployment of decentralized applications on Polkadot and integration with other blockchains frictionlessly.
Another important development is the rise of decentralized exchanges on Polkadot. Projects like Polkaswap are offering a cross-chain alternative to the likes of Uniswap, providing much needed liquidity to the multi-chain network. Others, like Polkastarter, are building DEXs focused toward cross-chain token pools and auctions, allowing projects to raise capital quickly, permissionlessly and cost-effectively on an interoperable platform based on Polkadot.
The long-awaited launch of parachains on Kusama marks the beginning of the fifth and final Polkadot launch phase, according to a recent update from co-founder Gavin Wood.
Parachains are layer-1 blockchains that run in parallel with the Kusama canary network and ultimately on Polkadot. Parachains connect to the security of the central Relay Chain while enabling greater scalability and interoperability.
Once an external audit has been completed, the first live test of parachains can take place on Kusama including the first-ever parachain auction to host at least one functional parachain slot. If everything goes to plan, a further five parachain auction slots will be launched, one week apart, with similar auctions beginning on Polkadot itself soon after.
Several teams will compete to win in the auctions by bidding their own funds or raising them from token holder crowd loans. Community members keen to support a promising project can bond their KSM or DOT in crowd loans to help the project win the auction and are rewarded with the native parachain token.
In a further boost, cryptocurrency exchange Kraken, which already allows customers to earn staking rewards on Polkadot and Kusama, has announced it will also be integrating parachain auctions into its platform. Set to go live as soon as the auction functionality is complete, it will provide users with a more convenient means to participate in parachain auctions, setting the exchange apart from its competitors.
While Polkadot is now coming towards the end of its launch roadmap, there’s still more to look forward to. Cross-chain messaging and parathreads are the next upgrades under development, ready to be enabled by Polkadot’s on-chain community governance once testing is complete, as Polkadot rounds off the final launch stage of its blockchain of blockchains.