There is a strong technical component to the cryptocurrency industry. The reason crypto and blockchain networks exist is that they are software that changes constantly. It is therefore often difficult to keep track of the changes (many of them highly complex) coming at breakneck speed. Parachains are one example.
New term parachain is gaining traction in major traded markets, which means that it has left the domain of programmers and code geniuses to enter the realm of everyday people. What are parachains?
Gavin wood, Founder of Polkadot, The man who made solidity (a language with which smart contract codes are written), who made smart contracts possible. Mentions use of MoonRiver’s 1 Million transactions in just 3 weeks.
What are Parachains?
Basically a parachain is a secondary blockchain network integrated into a main blockchain or relaychain network. Not all blockchain networks admit the existence of parachains, and in fact, at the moment only one does, the Kusama network, waiting for the Polkadot network to start its own.
The idea behind parachains is to turn the main network (Kusama, Polkadot, or whatever) into an Internet of blockchains, where programmers can create their own systems based on a larger network. This will make all kinds of applications flourish within new blockchain networks, such as decentralized exchanges and other DeFi (decentralized finance) products that are undoubtedly the new strong players in the crypto world.
And why are parachains important to non-programmers? Because of the way it is created. Take the example of Kusama. This network (which has its own crypto, also called Kusama) makes holes for parachains available to developers.
These slots are obtained by auction. The developers propose their project to the users of the network (the owners of Kusama) and they choose whether or not to support the auction of that parachain with their Kusamas. If the parachain wins the auction, in addition to returning the Kusamas invested in the first place, they also give a reward to all those who supported it and made the auction win.
This is very recent, but some exchanges, such as Kraken, already allow their users deposit Kusamas for parachains auctions like Karura, Bitfrost or Kala.
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Can Polkadot connect any blockchain?
Polkadot can connect any previously existing blockchain if it matches two criteria:
- It should also be able to form fast and compact proofs of the finality and validity of its blocks and state changes (this would include new UTXOs in a Bitcoin-like chain or new logs in an Ethereum-like chain).
- In order to authorise a transaction, multiple independent authorities (maybe up to 1,000) must be involved. The Schnorr scheme is one method of recognizing threshold signatures, or an automatic smart contract could detect a multi-signature condition based on structures in the smart contract.
Bitcoin and Bitcoin-like chains fall short on these characteristics. To address the first criteria, Polkadot validators can simply run a full Bitcoin node. To address the second criteria, either a soft-fork allowing extra-protocol controls over funds or a hard-fork enabling a threshold-signature-friendly signing scheme such as Schnorr is needed. Neither are impossible goals, however a significant degree coordination would be required to achieve them.
Ethereum conforms to these characteristics, particularly after the Metropolis protocol update, and therefore integration should be possible.
Private “proof-of-authority” (PoA) chains generally fulfill the first characteristic, since authorities attest to the validity of blocks, and the proof-of-validity attestation is little more than checking signatures. The second is possible Ethereum-like chains that have either smart contracts or threshold signature schemes. Interoperability with non-Ethereum blockchains such as Hyperledger and Quorum is feasible.
Where Polkadot works best is connecting new blockchains expressly designed to fit the parachain model. Under this model, Polkadot manages the chain’s consensus and validation activities. A parachain is an integrated member of the Polkadot network and benefits from immediate finality and disinterested validation (as opposed to the “interested” validation that facilitated the DAO hard fork). Parachains need not secure themselves, and are therefore free to focus purely on innovating in terms of its state machines.
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What is the difference between a Parachain and a blockchain connected via a Bridge?
Parachains are the name given to the parallelized chains that participate in the Polkadot network. Polkadot’s natively supported blockchains achieve consensus using the greater network’s consensus mechanism, both adding to and benefiting from pooled security.
Bridges are connecting layers that will enable existing blockchains with their own state histories and methods of consensus to link with Polkadot without having to be a native parachain. These include Bitcoin and Ethereum.