Understanding the ecological value of Polkadot's parallel chain economy, how will the auction revenue of parallel chains be?
We have listed the projects that are most likely to win in the first round of the current parachain auction and estimated the average annualized return of the final crowdloan projects.Author: IOSG Ventures
Polkadot Slot Auction Officially Begins, Looking Forward to the Ecological Value of the Parachain Economy
It has been three years since Gavin Wood first proposed the grand vision of "A network that connects blockchains." Over these three years, both the Parity team behind Polkadot and developers based on Substrate have been working on the most challenging yet valuable task in blockchain today—building the "Internet of Blockchains." Even before the parachain infrastructure is fully launched, the number of ecological projects has naturally grown to over 500.
Before the parachain launch on November 11, we are excited to announce the official establishment of the IOSG Polkadot Ecological Fund, which will support Polkadot ecological projects in parachain auctions, liquidity, and more :D. In the recently concluded first and second rounds of Kusama's slot auctions, a total of 11 slots were successfully won by six invested projects, including: Phala (Khala), Acala (Karura), Interlay (Kintsugi), Moonbeam (Moonriver), Centrifuge (Altair), and Astar (Shiden).
What Will Be the Returns from the Polkadot Parachain Auctions?
In the first round of the Polkadot parachain auction, a total of 14 projects announced their participation. Below, we list the projects most likely to succeed in the first round of parachain auctions, along with a rough estimate of their reward mechanisms and overall project valuations. We estimate that the average annualized return for the final crowdloan projects will be above 30%-50%, which is quite good compared to the DOT staking yield (about 15%).
The above estimates are based on two important assumptions (for reference only):
Minimum DOT Required for Successful Bidding: Based on the auction results of the first two rounds of Kusama—where the 11 winning slots raised about 25% of the total KSM in the network—it can be anticipated that the first two rounds of Polkadot's auctions will be even more competitive (considering factors such as the more dispersed DOT investors, most project tokens not yet listed, and strong expectations for successful listings in the first two rounds). We estimate that the average amount needed for successful bidding in the first round will be around 30 million DOT (approximately 1.5 billion USD).
Valuation of Project Tokens: Since many project tokens in the first round lack secondary market liquidity, we have made conservative estimates for the valuations of projects that successfully auctioned parachains. Taking Acala as an example, assuming Acala raises 50 million DOT to win the auction, ignoring factors such as secondary market unlocking and selling pressure, its market cap for the next year is conservatively estimated as follows:
Other points for investors to pay attention to:
The rewards set by projects participating in the DOT parachain auction vary based on actual conditions, market strategies, and other factors. Many projects even offer additional rewards beyond the basic ones. It is recommended that participants pay close attention to the community's official website updates and compare multiple participation channels (for example, some projects have different rewards for participating through Polkadot.js on their official website compared to other cooperative platforms like Parallel and Binance).
The liquid token issue of DOT: To address the liquidity issue of DOT lost in crowdloan staking, various project parties such as Acala, Bifrost, Parallel, and even centralized exchanges like Binance have launched liquid tokens for DOT. However, investors should carefully consider the actual secondary market liquidity performance of these liquid tokens.
Ecological Value Based on Polkadot Parachains / Middleware Components
As a "Meta Protocol," Polkadot will gradually connect a large number of blockchains after the parachain auctions begin. We can foresee that a significant number of ecological projects based on parachain infrastructure will emerge. Currently, a considerable number of projects participating in the parachain slot auctions belong to the Middleware Stack, including smart contract development platforms, data storage, privacy computing, oracles, data API indexing, DID, cross-bridge components, and more. After successfully obtaining slots, they will develop application products vertically and collaborate extensively with other middleware horizontally.
IOSG has conducted in-depth research on the value of middleware in the blockchain technology stack from 2019 to 2020, and has deployed numerous high-quality middleware projects on Substrate in the two years prior to the launch of Polkadot's parachain auctions. Among these projects, six have successfully won in the first 12 Kusama slot auctions.
IOSG DOT Ecological Fund Officially Launched
IOSG Ventures is an early investor and active ecological participant in Polkadot. We believe that whether in the foundational industry research at the infrastructure/middleware level of Polkadot or in later project development assistance, we have over two years of in-depth research and practical experience. In the recently concluded first two rounds of Kusama slot auctions, IOSG's portfolio not only performed excellently in the market, but with the help of our post-investment partners and many community friends, our leading project Interlay/InterBTC became the biggest dark horse in the first two rounds of auctions, successfully winning a slot.
