Is Polkadot’s Parachain Launch the Catalyst To Flippening Ethereum?

2020 was the breakout year for Polkadot as the scalable multi-chain network went live and its native DOT token moved into the cryptocurrency top ten. Its growth has since accelerated, establishing a top-three position behind only Bitcoin (BTC) and Ethereum (ETH), excluding stablecoins.

The latest phase in Polkadot’s development comes from the release of the Parachain launch roadmap. Parachains are the specialized Polkadot shards that enable transactions to process in parallel. They are the last piece of core functionality to be delivered, allowing Polkadot to realize its scalable and interoperable multi-chain potential, connecting to the shared security and consensus of its central Relay Chain, and marking the full launch of the protocol.

With Polkadot on track to launch several Parachains in 2021, could this be the catalyst to adoption and valuation levels that disrupt and surpass Ethereum?

Parachain Rollout

Following a period of testing, optimization, and auditing, Parachains will be ready for launch on Polkadot, with the community determining the features and upgrades to add over time. 

Before being enabled by Polkadot’s network governance, the initial stage sees Parachain functionality rolling out on Rococo, Polkadot’s testnet designed for Parachains. Parachain projects like Plasm Network and Acala can test their own chains and interact with other chains via the cross-chain messaging function, XCMP-lite. Once final testing and debugging of Parachain and consensus core functionality concludes, the Polkadot codebase will be feature complete.

The next stage in the rollout will be a vote to enable Parachains on Kusama, Polkadot’s canary or sister network, allowing teams and developers to build and deploy a Parachain or try out Polkadot’s governance, staking, nomination, and validation functionality in a real environment.

Kusama’s live network and native KSM token with real economic incentives will provide a further proving ground for Parachains, allowing for additional testing and optimization. Once enabled, another vote can begin the process of slot leases to add Parachains to the network. The first slot lease allocation will be via an auction process, with regular auctions taking place approximately every two weeks. The winning Parachain from each auction will be deployed to the network for the duration of their lease period – up to two years in six-month increments. Auctions will then continue on a rolling basis with the addition of more slots, and as leases expire. Alternatively, Parachains that are considered a common good for the entire network can deploy via a governance vote.

Once the Kusama Parachains have been audited and stabilized, the community can vote to enable Parachain functionality and begin Polkadot slot lease auctions via on-chain governance, following the same process as the Kusama network.

With Parachains then live on Polkadot, anticipated by Q2, the network launch will be fully complete. From there, future upgrades including Parathreads – an alternative to Parachains that can temporarily participate in the network, gaining Polkadot security without leasing a dedicated slot – can be enabled via ongoing community governance.

DOT Making Waves

The detailed roadmap release for the Parachains rollout produced a positive market response, coinciding with the DOT token gaining over 20%, reaching more than $30 on its way to a new all-time high. It marks a significant milestone in a move that has seen the cryptocurrency increase over 1,000% since the first Polkadot mainnet went live without Parachain functionality in May 2020.

Kusama’s KSM token responded even more aggressively, rising over 50% on the news. It also reached a new all-time high in a run that has seen it outperform DOT twofold over the same period.

Is Polkadot Really on a Path to Disrupt Ethereum?

Polkadot’s latest move sees DOT approaching a market capitalization of $30 billion, gaining ground on ETH as it grows from around 10% of its value to nearer 15% since the start of the year. This price action seems to validate the thesis put forward by Dan Morehead of Pantera Capital, who suggested in October that “Polkadot is only trading at 10% of the value of Ethereum, and our theory is that it has a much higher than 10% chance of being a competitor to Ethereum.”

If Polkadot continues to outpace at this current rate, it’s not unimaginable for it to surpass Ethereum in terms of market cap this year. Time will tell, but it’s an ecosystem to watch with apparent strength in market and investor appetite at present. 

What makes it different from other “Ethereum killers” is an interest matched by a growing number of projects and developers building out its ecosystem, leveraging an ability to solve ongoing scalability issues for defi and other dApps, while retaining security and decentralization. In the end, however, it may Flippen Ethereum due to its interoperability and composability with other chains, complementing the current smart contract platform leader, rather than directly disrupting it. 

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