Centrifuge’s Parachain Launch Strategy
And our roadmap to the Parachain Loan Offering
In our last community call we shared our roadmap update. If you didn’t get a chance to join, watch the recap here, and make sure to stay tuned by joining our Telegram, following us on Twitter, and subscribing to the newsletter. In this post, we are going to dive a bit deeper into one of our important projects for the coming months: Centrifuge’s Parachain launch!
Centrifuge Chain is the home for real-world assets on-chain. Mainnet went live in April 2020, and our Tinlake Dapp launched immediately after. Tinlake is the Dapp for decentralized asset financing. With these two key layers — Centrifuge creates open access to the world’s financial system by breaking down the barriers of traditional finance.
By becoming a parachain, Centrifuge hopes to strengthen its security, gain access to the Polkadot network, and the greater blockchain ecosystem by bridging to other chains.
What is a parachain?
If you are new to the Polkadot community, you may not fully understand parachains yet. A parachain is a blockchain that is connected to a larger relay chain. The goal is for the relay chain to provide a high level of security, with its large validator set and high value at stake, to all of its connected parachains. The reason a project would become a parachain is to outsource its chain security to achieve a higher level of security at a better cost than if they went about it themselves.
In the case of Centrifuge — we plan to connect our blockchain to Polkadot’s Relay Chain. Afterwards, the validators on Polkadot will provide the security for Centrifuge Chain — allowing Centrifuge to focus on its core features. Another important benefit for Centrifuge will be using the relay chain to connect to other chains in the Polkadot ecosystem.
There is a lot more information available here for those who want to dive deeper!
Polkadot will auction the first parachain slots later this year — and Centrifuge plans to be one of the first projects to obtain a parachain slot. 🥳 Until then, projects are getting ready by using Rococo, Polkadot’s parachain testnet.
In the meantime, we are testing things out on Chachacha — our pre-Rococo test environment! Chachacha is a Rococo based relay chain testnet configured and supported by Centrifuge. It is a support network we built for all projects to do testing on future updates in parallel to Rococo, and to use as a tool to prepare for onboarding onto Rococo.
Parachain Loan Offering
In order to secure enough DOT to win one of the first Parachain Auctions on Polkadot — Centrifuge plans to host a Parachain Loan Offering (PLO). All participants that lock DOT for Centrifuge’s parachain slot in the crowd loan will receive the Centrifuge token as a reward.
The Centrifuge token reward to DOT stakers will be the payment Centrifuge Chain spends for its security. This reward aims to provide an attractive incentive for DOT holders by compensating them for the time-value of their locked DOT. This reward will be minted over time and distributed to all those who stake DOT that is used to secure Centrifuge’s parachain slot.
The current block reward on Centrifuge Chain is 3% (~12M Centrifuge tokens) per year — and we will use a percentage of this to reward DOT holders that lock-up their DOTs in our crowdloan. DOT holders will have the option to participate directly through the crowdloan hosted by Centrifuge — or by participating through another platform(s) (TBA!). The Centrifuge token reward will be distributed directly to crowdloan participants on an ongoing basis for the duration of our parachain slot.
We will announce more details regarding our PLO after Polkadot announces the parachain timeline as the date gets closer. Stay tuned!
A New Role for Our Validators
There are currently 32 validators in the active set on Centrifuge Chain mainnet — and 15 waiting to join the set. All of these nodes will transition from validators to collators when Centrifuge Chain becomes a parachain. Centrifuge Chain will continue to use the staking pallet for collators — so we don’t expect too many technical changes for nodes. However, because collator nodes will no longer be responsible for chain security, the block reward to collators and their nominators will drop significantly.
This means that although collators will still need Centrifuge tokens at stake, as well as nominations, in order to join the active set — there will be a smaller reward for both collators and their nominators because there is much less at risk for running these nodes, and therefore not as high of a reward required to compensate them. As a result, the large majority of the block reward will go to those who lock DOT in order to secure the parachain slot.
What’s Next? 🌀
Currently our chain, Centrifuge Chain, is in the queue to be added to Rococo, Polkadot’s parachain testnet. One of the first things we want to do on Rococo is to start integrating with other lending protocols and see how our assets could be used as collateral for Acala! As we wait for parachains to be rolled out on Polkadot, it‘s important to note that all DOT holders that wish to take part in our crowdloan must unbond their DOT 28 days in advance. We will announce a timeline for this after Polkadot announces the parachain timeline!
We are also looking at possibly bidding for a slot on Kusama, to be able to test things out with real value at stake.
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