Robert Habermeier, co-founder of Polkadot, recently presented a roadmap for Polkadot and its parachains. The future looks bright as a lot of innovation is happening in the background. One of them is the implementation of parathreads.
In this article, we will discuss parathreads, how they work and differ from parachains. For a clear understanding, let’s start with the architecture of Polkadot before moving to parathreads and how they fit in.
Polkadot Architecture
Polkadot Network uses a “relay chain–parachain” model. The relay chain is the heart of the network and is responsible for securing and enabling interoperability among the blockchains connected to it. The relay chain is where the validators stake their DOT tokens to secure the network. The connected blockchains (or parachains) are application-specific blockchains that can seamlessly interoperate with other parachains on the network.
Currently, the relay chain has 100 parachain slots. Projects have to win a parachain slot auction to acquire a dedicated parachain slot. This auction is held in DOT tokens and requires significant capital to win. Projects announce a crowdloan for a parachain slot and community members back their favourite projects with DOT tokens and get rewarded with the project’s native token.
But why would a project want to be a parachain? Let’s discuss.
Why connect as Parachain?
Parachains get the following benefits after connecting to the Relay Chain:
- Shared Security: Parachains leverage the multi-billion dollar economic security of the Polkadot relay chain.
- Forkless upgrade: Chains become future proof with their ability to upgrade without a fork. Upgrading a chain is as simple as updating a mobile app, with no need for conventional hard forks that sometimes split the nodes.
- Trustless communication: XCM enables trustless communication between parachains with the trustless transfer of tokens and messages across other parachains via channels, which are as secure as the relay chain.
- On-chain governance: Chains can be governed via on-chain voting. Polkadot’s governance is considered one of the most decentralized in the entire web3.
- Solve blockchain trilemma: Since parachains outsource their security from the relay chain, they can be highly scalable and decentralized.
An Issue with Polkadot’s Auction Mechanism
Being a parachain gives projects the flexibility to massively scale, innovate, and become future-proof with forkless upgrades. But there is an issue with the auction mechanism.
To date, 27 projects have been onboarded as parachains on Polkadot, costing around 132 Mn DOT tokens, which comprises 11% of the total supply.
Considering the last batch of auctions, i.e., 21–25, a total of 562,000 DOT tokens were crowdloaned. This gives the average cost to win an auction as 140,500 DOT ( costing around $850,000). And we have this cost when the market is extremely bearish. In earlier auctions when the markets were bullish, the cost of winning the auction was a hundred times the current cost.
Newer projects without VC support do not have enough capital or a big enough community that can back them with their DOT tokens to win the auction. This makes it very difficult for such projects to acquire a parachain slot and connect to the Polkadot network.
This is where Parathreads comes in.
What are Parathreads?
Parathreads have a similar design and leverage the same benefits as the parachains, like shared security, governance, and XCMP transfers. The difference lies only in the economic aspect. Instead of winning an auction to acquire a parachain slot, parathreads follow a “pay-as-you-go” model, which charges fees per executed block.
How do Parathreads work?
The relay chain has some parachain slots dedicated to the parathreads. A pool of parathreads will share a single parachain slot. The projects must pay a registration fee to become a parathread and enter the pool.
As parathreads are simply blockchains, it is essential to keep producing new blocks. For this, the collators from every parathread will produce and send the block to the Polkadot block author. But since there are multiple parathreads wanting their blocks to be included in the relay chain, they will have to submit their block with a fee.
To include a parathread block, the respective collator must pay a fee in DOT. The parachain block author will then pick the parathread block with the highest bid and include it in the relay chain block candidate. 80% of the bid goes to the Polkadot treasury, and the rest 20% to the Polkadot block author.
Thus, a parathread only pays a fee when it wants its block inclusion. The following figure will explain it better.
Assume a parachain slot is reserved for parathreads. And attached to it is a parathread pool with 5 parathreads, which are denoted by Pt1, Pt2, and so forth. All parathreads will send their blocks (represented by distinct colours) and a corresponding bid in order to be included in the Block 1 of the parachain slot.
- Step-1 Parathread (Pt) Collators send their blocks (represented in different colours) with a fee in DOT.
- Step-2 Parachain Block Authors pick the parathread block with the highest bid (Yellow in this case), includes it in the Polkadot block candidate, and relays it to the Relay chain.
- Step-3 The Polkadot block candidate is verified by the relay chain validators and ultimately included in the relay chain. This way, the state of parathreads and parachain gets updated.
The same steps happen for each block, therefore parathreads are “pay-as-you-go” blockchains, as they pay only when their block gets executed and included in the Polkadot block candidate.
What projects might favor the parathread model?
Parathreads are based on a pay-as-you-go model, which means you pay a fee only when you need your block to be included in the relay chain. Thus, the parathread model is appropriate for projects with fewer transactions and doesn’t need constant connectivity to the relay chain.
- These could be the chains that have more readable and less actionable content. The perfect example could be a social media platform. The users of a social media appchain would spend more time consuming the content than taking actions. For such chains, it would be more efficient to get their blocks executed at a certain time interval.
- Another example could be a gaming chain. The users would only need to sign transactions while changing skins or equipping weapons. Thus, the parathread model would suit such chains as they don’t need to frequently add blocks to their chain.
Parachains vs Parathreads
Parathread economic model
The parathread economy is quite similar to the Bitcoin and Ethereum fee models. The user who pays the highest fees will have his transaction included in the block. Here, the miner, users, and transaction are analogous to parachain block author, parathread collator, and parathread block, respectively. The parathread collator who bids the highest fees (in DOT) has its parathread block picked by the parachain block author and is included in the parachain block candidate.
Myth Buster
Myth: “A project will simply die once it loses the parachain slot”
A project could potentially lose its parachain slot in the next slot auction (96 weeks in Polkadot). However, this does not herald the end of the chain and the subsequent activities.
The truth is that once the lease period expires and the project loses the auction, it will be downgraded to a parathread. As a result, the project can continue to benefit from Polkadot’s shared security and interoperability. Till then, they only need to pay on a per-block basis.
Continuing as a parathread would give them sufficient time to prepare, raise funds, and bid in the next parachain auction. Therefore, the chain may enter a period where it will produce fewer blocks but will not die.
Conclusion
Polkadot has a solid architecture that enables interoperability among blockchains. But if the cost to get onboarded is high, the ecosystem will be limited to VC-backed projects or those with a bigger community. Newer projects which do not have any of the above would be entirely left out.
To fix this issue, parathreads will be implemented soon, allowing such projects to connect to the Polkadot Network and communicate with other chains. The cost to get onboarded is reduced as the project pays only per executed block. Parathreads are expected to be implemented by Q1 2023, which will allow small projects to get onboarded.
Imagine a massive network of application-specific blockchains under a multibillion dollar economic security, communicating and transferring assets in a trustless manner. The network effect this will cause can only be underestimated right now.
This will be interesting to see how things unfold.
Important Links
Polkadot website: https://polkadot.network/
Polkadot wiki: https://wiki.polkadot.network/
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