Polkadot Parachain Auction starts on Nov 11, DOT Price Rises

Polkadot network will witness parachain auctions from Nove 11, 2021, to Mar 10, 2022. It'll remove DOT tokens from circulation, making DOT prices rise.

Many contenders will participate in the first parachain auctions of Polkadot this week. This process is likely to put buying pressure on the price of Polkadot Token (DOT). It will also give Polkadot a chance to show aspiring blockchain projects why their project provides the most competitive solutions to the different existing demands in the cryptocurrency sector. 

Polkadot’s sister network, Kusuma, has also successfully held similar parachain auctions. Projects such as Moonriver (MOVR) and Karura had secured their own parachain slot each for the next year. The parachain auctions of the Kusuma network were held during a time when the cryptocurrency market was experiencing a downturn. These auctions enabled the network to pledge KSM tokens to auctions. This pulled Kusuma tokens out of the network’s circulation, thereby helping KSM to recover from a low of US$148.85 in July 2019 to its current price near US$457. 

The parachain auctions of the Polkadot network this week will also pledge DOT tokens to auctions, thereby removing an increasing number of tokens from the circulating supply. Analysts believe that this will create a relative shortage in the supply of tokens in circulation, which will in turn could push the price of DOT significantly in the future. 

Currently, there are 4 parachain auctions going on and they are:

  1. Acala
  1. Moonbeam
  1. Astar
  1. Parallel Finance

Acala (ACA)

It is a layer-one smart contract platform. This protocol is compatible with Ethereum (ETH) and is billed as a DeFi (decentralized finance) and liquidity hub. Acala has a built-in liquidity mechanism. In fact, ready-made financial applications are also there in Acala and they are:

  • A trustless exchange
  • aUSD (a decentralized stablecoin)
  • LDOT (DOT Liquid Staking)

Acala is Karura (KAR) DeFi protocol’s sister network. It operates on the Kusama network. Analysts believe that a large, established DeFi protocol such as Acala can not only attract liquidity but also offer some yield to the token holders. 

Moonbeam (GLMR)

It is a fully Ethereum compatible smart contract platform that simplifies the process for multi-chain projects launching on the Polkadot network. The sister network of Moonbeam on Kusama is Moonriver. It is the Moonriver parachain that has got the highest reward rating among all the parachains launched on the Kusama network.

In the current market, it has become extremely important to simplify the cross-chain migration process to Polkadot. This is mainly because Ethereum network’s high gas fees has come up as one of the main reasons for both developers and investors to shift to lower-cost alternative blockchains such as Polygon, Avalanche, and Fantom. If Moonbeam parachain can simplify this process, it can significantly boost Polkadot’s overall strength as well as the activity. 

Astar (ASTR)

This protocol creates a scalable and interoperable infrastructure for Web3.0. This is done by creating a multi-virtual machine that supports a platform connecting compatible layer-one protocols with the Polkadot network. Astar can act as a scalable smart contract platform, helping the Polkadot relay chain that is not capable of supporting smart contracts. 

Parallel Finance (PARA)

It is a DeFi lending protocol as well as an AMM (automated money market) that supports assets based on Polkadot and Kusuma. The token holders can also earn interest by putting their assets to work. 

The main aim of the protocol is to offer the Polkadot ecosystem with:

  • Higher liquidity
  • Higher yield
  • Higher capital efficiency

This will help users perform lending, staking, and asset borrowing from any supported network.

Polkadot (DOT) and Kusuma (KSM) Tokens Turn Bullish Ahead of Auctions

The Polkadot (DOT) parachain auctions are likely to put positive pressure on DOT prices. This is mainly because the users will buy tokens for contributing to crowdloans, which will effectively remove DOT tokens from circulation for 2 years. The same phenomenon took place when crowdloans were introduced on Kusama in June 2021, which in turn led to a rise in the price of KSM.

From November 11, 2021, to March 10, 2022, 11 sets of parachain auctions will run. Taking a cue from the Kusuma experience, it can be predicted that the price of DOT will continue to rise as long as the parachain access demand continues.