- Polkadot Parachain Slot Auctions award prospective projects a parachain slot that connects them to the Polakdot Relay Chain based on the highest bid.
- Slot auctions utilize a candle auction mechanism.
Polkadot has been hosting a series of online candle auctions where new parachain slots are auctioned off to the highest bidder to foster competition among new ecosystem projects.
After the conclusion of a Parachain Slot Auction, the project with the highest bid is granted a parachain slot to connect to the Polkadot Relay Chain.
Candle Auctions Explained
Candle auctions were initially used in the 1500s to orchestrate cargo ship sales and would last for as long as it took a candle to burn out; once the flame was extinguished, the auction would terminate. Participants could submit bids until the candle burnt out.
Polkadot candle auctions are slightly more modern and last for a fixed duration, with a winner being chosen retroactively based on the highest bid amount. Polkadot candle auctions last for one week and infrequently occur as new parachain slots only open up every few months.
Project teams can use Parachain Crowdloans to crowd-source DOT (or KSM if the auction is for a Kusama slot) for bootstrapping auctions. Essentially, community members fund project bids by locking up DOT toward a project they believe is worthy of the parachain slot. They can then be awarded later post-auction for their contributions.
Implications for Polkadot
The opening period—where projects submit initial bids—for Parachain Slot Auction #47 will commence on August 12, 2023. Each new auction fosters a sense of exclusivity within the Polkadot ecosystem, as Relay Chain slots are limited. Some would consider this to be contradictory to decentralization and permissionless participation. However, candle auctions ensure that only the best projects join Polkadot.
Furthermore, Crowdloans prevent the wealthiest of projects from being able to auction snipe with the highest bids through how community members can fund project bids based on their own volition and which projects they believe will be most beneficial to the Polkadot ecosystem.
