An Introduction to Polkadot and Parachains - Dan Reecer (Acala) - TOKEN2049 London

thanks to the token 2049 team for for having us and inviting us to talk this is one of my favorite topics that i've done quite a bit over the last couple years um so yeah today i'm going to be talking about polka dot in general and explaining what polka dot is what pair chains are there we go and getting into a little bit about akala and what we're building for defy on polka dot so quick background vp of growth at akala the team's primarily based in new zealand we've got people in new zealand china u.s south america pretty global team and i've been there since about february uh prior to akala i was at web3 foundation so worked on the launch of polka dot and kusama which i still spend a lot of time um obviously helping to promote and educate because there's quite a bit to it and and quite a quite a few people still need to kind of learn exactly how all of this stuff works um so today i'm going to go through first polka dot i'll give a brief conversation around kusama because it's kind of a critical component that you need to know when it comes to polka dot um i'll go over the existing challenges of blockchains prior to polkadot and then how polka dot solves those problems and then some use cases where makala comes in hopefully i'm not blocking the slides so these are the kind of six challenges that polka dot i think set out to tackle when when gavin gavin wood created polka dot back in around 2016. um first and foremost blockchains going back to bitcoin ethereum they haven't been able to communicate which if you compare that to the internet it's like the the internet in london not being able to communicate with the internet in the united states it just doesn't make sense so interoperability or cross-chain is is one of polkadot's key focuses customization of blockchains so blockchains historically have been built as kind of general purpose blockchain so if you look at ethereum we're seeing d5 nfts gaming all these different use cases being built on one general purpose chain whereas blockchains now are being able to be customized for specific use cases or applications um another key key topic here is the difficulty to bootstrap security so as you know with proof of stake networks these networks are secured by a group of validator nodes who help secure and validate transactions but as an individual blockchain team such as ethereum terra solana there those teams not only have to build their tech but they also have to worry about recruiting hundreds of millions or billions of dollars of value to secure their network with those validators polkadot was also created to help solve that problem by creating one set of validators for polka polkadot and then letting all these other blockchains plug into that very easily without having to worry about security um and then i won't touch on all these the last one i think is really important is the bottom right so the ability to upgrade without forks so as we've seen with ethereum i know tara just did a blockchain upgrade last week or the week before these are very difficult processes to update the chain it requires forking the network sometimes that's causes some trouble within the community polka dot was one of the one of the things that substrate and polka dot offer is the ability to continuously upgrade the chain without needing to fork the network which adds the ability to just continuously improve over time instead of the chain kind of being stagnant so i think this is necessary to just give background on polka dot so everyone here knows bitcoin and ethereum vitalik wrote the white paper for ethereum but many people don't realize that the white paper was actually implemented and coded by gavin wood so gavin would build ethereum he invented the solidity programming language that's still used today he invented the ethereum virtual machine we all hear constantly about evm compatible evm compatible the evm was built by this guy gavin wood who then went on to realize that there was a lot of scalability challenge with the ethereum um so he went on to actually leave ethereum and came up with this whole concept of polkadot that i'll walk you through today um rob habermeyer a good friend of mine he he also um was a co-founder with gavin brilliant guy and then peter shabon same thing super talented developer helped co-found polkadot with rob and gavin um just i'm just assuming some people here might be new to polkadot if you're if you're coming to this talk so this is necessary background just so you can understand the lay of the land web3 foundation is who i used to work for they're a non-profit foundation based in switzerland founded by gavin and then at the same time he founded parity technologies which is the primary like dev shop behind polka dot so parity is a super powerful organization of probably around 150 170 people now and this is where all the developers sit there's some business development team so if you're getting involved with polka dot you'll most likely talk to people at one of these two organizations so polka dot is super complex i've done a lot of thinking about how to boil it down to the most simple um the most simple explanation and what i've kind of uh you know focused on is these two things that i mentioned before so polkadot helps connect blockchains together and polkadot helps secure blockchain so as a team like akalo we wanted to build on polkadot because we can get our chain secured by polka dot instead of it instead of having to go through that whole process of recruiting validators and and all that so we get to focus on building our our products um common misconception about polka dot so polka dot is not a smart contract platform it's not a layer 1. we actually refer to it as a layer 0 because it connects a bunch of layer ones together and you can't build applications on polka dot so all these pair chains that i'm going to explain all these block chains that are connecting to polka dot that is where all the action happens none of these are live yet so we're getting i think very close to the launch of pair chains on polka dot which is ultimately kind of the the end of the launch of polka dot after four years of building this so polka dot is not a layer one and polka dot's not a smart contract platform but these uh these para chains are as you can see here so at the bottom here i mentioned that we referred to polka dot as a layer zero so this is a meta protocol connecting multiple layer ones together as you can see here we have akala moonbeam astar we've got in the crowd here several of these layer ones are preparing for launch on polka dot polka dot parachains are the equivalent to the solana's tara's ethereums of the world at the at the layer one and then of course going up one layer this is where all the applications can be built um a couple other uh words that the team at web3 and parity created when when building polkadot there's a lot of buzzwords and jargon that's involved in polka dots so i'm just giving kind of background on every all the components of this so the relay chain is the core of polka dot if you are aware of eth2 and how that will look this is the equivalent to the beacon chain on ethereum that connects all the shards together and then the para chains are each of these little gray boxes here are all individual pair chains or block chains that are connecting to polka dot these are the equivalent to shards on eth2 so at this point i think it's it's difficult for a lot of people to wrap their heads around like what polka dot is what a layer zero is because this is actually the first of its kind there won't be a comparable network until eth2 launches which will also be that beacon chain and shards set up so i i already kind of covered this but para chains just to reiterate they can be smart contract platforms they don't necessarily have to be they're layer one block chains and then these are all kind of inheriting the security of polka dot and then that diagram if you just flip it on its side just another important point to just hammer home again is that all the applications all the users all the liquidity on polka dot happens at the parachain layer so this is why i and many people are also very excited to get these parachains launched because this is when the game really begins um now let's dig in to one of these para chains just so i can show you um what is what is possible with polka dot and the substrate which is the development framework to build on polka dot um it's an interesting comment uh from ken seif we we did a panel in new york and he kind of compared what akala's building to turning um pro what we used to think of as products on ethereum think about uniswap maker products like this and at a call we're kind of turning those into features that are built into our chain so we've got like a dex called a collar swap we've got a liquid dot staking product similar if you know lido we've got a decentralized version of that um ausd is a stable coin decentralized stablecoin similar to dye um and we have several other components like oracles governance etc but unlike what we're used to kind of with previous blockchains where these are applications built on top of the chain we've built these products into the chain itself so that any application coming and building on akala can leverage those products natively from the application layer instead of needing to build that themself and of course we also have our an evm environment because there's been so much great work done by the ethereum community on building these d5 products getting developer developer adoption um we're serving those needs and helping ethereum d5 projects scale to polka dot via akala's kind of defy optimized parachain um just for those of you who might be interested in the the technical details of polka dot um i've mentioned a couple times but polka dots coded with a blockchain framework that gavin and the team at parity created called substrate this is a rust based framework this allows us to build these para chains as heterogeneous uh shards instead of with eth2 these are kind of homogeneous shards that they all kind of act the same this allows us to deeply customize what we're building at the paratrain layer versus being kind of forced into kind of a general model and then the code compiles to wasm from from the substrate framework security model i can be quick on this so quite a bit of dot is staked right now about 64 of the network is is staked among 297 validators and the last i checked a couple days ago 863 000 accounts so tons of users in this community um another interesting aspect of polka dot is that although polkadot natively bridges or connects these chains without needing to wrap tokens and things like that if you're a para chain talking to another para chain it's much easier but that doesn't mean that we also can't talk to existing networks outside of polka dots so in in the polka dot world there's actually two types of bridges number one starting up here with snow fork and interlade these teams are going to occupy their own parachain slot so this is a bridge to polka dot itself and then any para chain in the in the ecosystem can use the wrapped bitcoin or the wrapped eth assets from these bridges that are plugged into polka dot the second type of bridge is bridges that are coming in directly to an individual para chain so we we got a grant from compound to build a bridge to the compound gateway chain um and that bridge will go directly to akala and then from akala it can go on to to send tokens or data to other pair chains within the polka dot ecosystem same for btc and eth so um let's take a quick pause from polka dot and go on to kusama which is something that um i i had a blast working on back when we launched it no one had any idea what was about to happen but it's been it's been a crazy run in terms of the adoption we've got an nft community on on kusama now we've got i think two or three d5 platforms or para chains launched including our network carrera that launched on kusama but what it is if you're new to kusama if you look at the graphic this is meant to show that it's the exact same as polka dot the architecture is the same the parachain setup is the same the way that we inherit security from the relay chain is the same the key is that this is meant to be a fast environment for people to try out products after they've been tested on testnet they go to this main net to get an experience with real value so that if something did break or if there was a value loss it wouldn't be as drastic or significant as it would be on polka dot i'll explain this on the next slide so this is the traditional model that i think a lot of people are used to you test things on test net and then you launch it on mainnet but when you launch on mainnet you're kind of like crossing your fingers hoping that things work out that you had expected when you were testing it in testnet with no value and then you go to mainnet and say you're running uh maybe someday there's a 50 billion dollar network if you have a bug that you didn't expect on testnet it could be quite catastrophic so what gavin and the team came up with was this like a middle ground in between test net and mainnet where you can launch a product on kusama make sure everything's okay and then take it to polka dot when you think it's nearly perfect so it's this new development model of three steps instead of two steps and a lot of parachain teams like us are utilizing this model and it's already been significantly helpful in our launch process getting to learn and kind of do it once with kusama so that when we do it on polka dot now we'll be you know not experts but we'll be seasoned in some of these things that we're launching so this is kusama and like i said we're running networks on both polka dot and kusama and we'll continue to run these in parallel they both will kind of help make each other better and we'll you know everything that we launch on on akala will launch on uh karua on kusama first so this is the slide that i showed you in the beginning just to remind you and i'm gonna now overlay the the way that polka dot helps solve these problems i'm not it would take too long to go through each of these but i'm going to highlight some of the important ones and then at the end hopefully we have yeah we should have a little bit of time for questions so let's go into customization so this is an important one and um this is when i talked earlier about this i mentioned substrate which is the framework that people are using to build these blockchains so one way i like to think about this is like a music equalizer you can tweak some things up tweak some things down to change the way the sound sounds if you're a dj or a music producer this is kind of how substrate works so substrate is like drag and drop blockchain development where you can build these pallets or components that are all parts of the the runtime or the consensus of the blockchain itself and there's there's it's kind of like a menu like a food menu where you can choose exactly what you want and then inject that into the blockchain you have your own chain kind of customized for what you need um i showed this at the bottom just to show too that this list of pallets will continue to build and build over time and these pallets themselves can be improved so what this means is like a team like akala or a team like chain link can actually come in build a pallet and then if you remember back to what i was talking about being able to upgrade the chain without a fork we can continue to make the chain better by adding more and more features to the blockchain and just upgrading our chain overnight without any kind of hiccups this is another piece that i think i covered earlier but just to reiterate that we're able to build an evm which is again a pallet that we built with substrate and not only can we provide an ethereum compatible environment for teams looking to come scale out of ethereum but we also customized our evm to be able to leverage substrate so you can see here that the evm has access to all the products in our blockchain itself so it's kind of a mix of the evm environment and being able to leverage the power of everything that we've built was substrate and also it's it's compatible with everything that e developers are used to so compatible for users and developers with meta masks things like truffle and so on and i mentioned this a couple times but i checked a couple days ago and there's been 25 runtime upgrades of polka dots since launch so just to compare that to ethereum for example this is 25 forks that would have had to happen in the last year so this is since we launched polkadot i believe last summer it's been upgraded 25 times like i said just continuing to improve and improve as we go so i'm almost finished i'm going to go into just just to make this a little bit more real for you i've talked about polka dot i've talked about kusama some technical things i know it's been kind of a head dunk into a lot of these topics but i'm going to make it a little bit more real now as far as what we're building at the parachain layer and what what i think the next year or two is going to look like so one thing that i'm really excited about is our partnership with a us-based fintech company called current so current is our first uh of many fintech partners that we're going to be working with to help bring defy as a service to them as a fintech company so what this will look like uh they haven't they haven't fully defined exactly what the product will be called or what the exact numbers will be so i won't give a kind of an exact you know guess as far as what that will be but as an example what this will look like is one day so current has three million customers in the u.s who are newer to the financial system using current for a savings account so they're probably earning around 0.

5 percent um one day imagine that these customers then open up their app and it's going to say would you like to sign up for this new type of account let's say for example a current yield account and maybe it's three percent four percent again don't know for sure what that will look like in terms of numbers so that the user signs up for that they all of a sudden have a an account that's yielding them maybe three or four percent what's actually happening in the background is that all those dollars will go out of current um into one of our on off partners and convert it into ausd our stablecoin and then that stable coin will go into a kala into this yield kind of engine that we've built that leverages things like dot staking returns a compound like i mentioned our stable coin and generating yield for them that may be 12 15 um that yield will then be liquidated and sent back through our stable coin converted into u.s dollars and then distributed to those current customers without them even needing to know that there's defy or crypto involved because for most people it's still very confusing and what all of us are kind of working on right now so this for me is really exciting as far as what these pair chains are able to do and also bringing d5 to a much larger audience without needing to do private keys public keys meta mask all this stuff this is i think where we're going next as far as d5 and for us being a defy as a service bringing yield to fintech companies like current um this is just another slide kind of exactly what i just explained but uh see if i forgot anything yeah so i explained everything with current but very excited for this we're kind of dubbing it as hi-fi or hybrid finance so blending traditional finance or these neo banks with a d5 backend built on polka dot so last almost last slide so what's next for polka dot and akala so if you follow akala at all we've been doing a little bit of you know you know promotion and community building around our upcoming pair chain slot auction so i don't think i have time to go fully into this entirely different topic but this is how you launch on polka dot is you can't just launch any blockchain into one of these slots on the network kind of freely and openly what's required is an actual auction against other paratrain teams to bid dots in an auction and whoever has the highest bid in that auction actually earns the slot and earns the right to launch i think what what gavin and the team at web3 were thinking was let's try to solve a little bit of that problem that we saw with icos where anyone could just throw up a website launch a token this requires much more work and kind of helps the best teams rise to the top because there's so much involvement in the community there's so much scrutiny on what you're building so this is what's coming up next we don't know exactly when and i can't really give any dates because i'm also waiting myself to hear but i do think it's coming soon and this is when things start to get real so we'll be competing for a pair of chain slot auction our goal is to win the first slot like we did on kusama and after this teams will start launching so we we should have hopefully five pair chains in the first kind of batch and then from then on they'll be just rolling out more and more auctions until we scale up to about 100 total pair of chains on pokedot and 100 on kusama so that's it um i think i have yeah we have like five maybe five or seven minutes to go through questions so thanks for the attention and uh thanks again for for having me token2049 awesome dan great big round of applause for dan and of course we're going to have some questions if anybody would like to know anything about alcala please raise your hand dan that was an awesome presentation very informative so uh great hearing about it uh gentlemen here my main man hi uh great presentation um just a question when looking at polka dot and power chains what do you think the advantages of having to set up your own power chain versus other types of layer twos like a roll up uh zk roll up for example yeah i'll do my best i'm not technical but uh from what i've heard in this topic is that some of it's around the decentralization of it from what i from what i know that layer two is there's a little bit of a centralization aspect to it that's required for how they work um with with parachains on polka dot these these layer ones that are sharing polka dot security it's fully decentralized and in just the way that the the architecture is set up between para chains and the relay chain of polka dot so that would be one kind of uh one one guess from my point of view uh okay do i have another question from a main man yes i do sir thank you so much hi um how in terms of the the dot auctions so obviously yeah you know you're going through that right now etc and and then those are locked up for a couple of years how do you see that kind of evolving as we go forward right so like into the second generation of auctions you know would you say that the ecosystem is kind of going to improve itself the projects that have worked have got a lot more equity and therefore are able to spend you know what does it look like for the kind of second rounds well you need to spend a lot more but it's okay because you'll have more equity like how do you see that evolving yeah that's a great question so this is one thing that i thought was super interesting with how the kusama auctions went so as you may have seen with our our auction on uh for kura and kusama we had a huge amount and all the teams raised a good amount it was i think total it's like almost 800 million dollars now but the the thing that was surprising was the second so that was the first five and then the second five we thought the amount of dot or of ksm contributed to each pair chain would go down but it didn't some of these teams in the second batch actually raised more than they did in the first i think part of that was that word spread as after the first batch a lot of people had they i don't know they enjoyed the process they had a successful experience and then they told their friends and then we had a lot more people do the second round of these auctions so still pretty high amount of ksm was required to win the auction it i would think it has to go down over time um gradually but it's we're kind of just watching this play out as we go it's really hard to predict with polka dot it could actually be the same so we're doing the best we can to talk to the polka dot community talk to people outside of the polka dots community to come in and join akala's crowd loan to help us win this auction but i think over time just more and more people will start realizing like wow this is huge like for example these polka dot auctions i personally think that over five billion dollars is going to be raised for the first five or probably the first 10 auctions could be more so i think that type of a number is going to get the attention of the coin desks of the world the coin telegraphs who frankly are not giving this the amount of attention they should be right now this is the biggest event coming up in the blockchain industry in my opinion so i think over time more and more people will start to realize what's happening with these auctions and that could that could end up resulting in more users participating and more dollars being contributed you