Technical analysis of the security of Parallel Crowdloan platform vs Competition

Crowdloan is an integral part of the DOTSAMA ecosystem. It is the key to the scalable multichain architecture of the relay chains (Polkadot and Kusama) as it allows projects to connect to the networks by leasing parachain slots via a permissionless auction. It is also a way for new projects to get the support and funding they need to connect to the relay chain as a parachain. Getting a parachain slot means you can create a blockchain and benefit from the advanced security, scalability, and performance of the relay chain. This treatise compares Parallel Finance’s crowdloan platform with competitors — Bifrost, Equilibrium, and Polkadot.JS

Parallel Finance Decentralized Crowdloan

Parallel Finance offers a decentralized crowdloan pallet that allows participants to contribute to Polkadot parachain auctions through the platform. The v2 crowdloan pallet is a significant improvement over the earlier multi-sig wallet version in terms of security and user benefits as it relies on pure on-chain logic with no trust assumptions. Once users contribute DOT to parachain auctions through the crowdloan pallet, they receive minted derivative tokens — cDOT that help them stay liquid. cDOT can be utilized the same way a user will use DOT across the protocol’s DeFi super DApp suite, since the platform runs a composable and interoperable ecosystem so that users can have greater capital efficiency and amplified yield. Contributors can redeem cDOT to DOT at the end of the lease period, and they will also receive project rewards from the respective chains.

Crowdloan Platform Security

The protocol holds the security of its dapps, including the decentralized crowdloan pallet, with utmost importance. Parallel integrates directly with the Polkadot ecosystem using XMP/HRMP (built into the greater protocol) for communication with other Parachains. These communication methods have the same security as the overall system. The protocol inherited shared security from the greater Polkadot/Kusama ecosystem, and the blocks are written into the relay chain which lets us share this security.

Parallel also inherit the security of Rust which provides many security promises with low-level items such as memory and thread safety. ​​Rather than encode our runtime, which is the core state transition logic of the chain in the nodes, it is compiled into a WebAssembly execution host in which the runtime executes and is expected to remain stable and mostly static over time.

WebAssembly is a binary instruction format for a stack-based virtual machine. It is designed as a portable compilation target for programming languages, enabling deployment on the web for client and server applications, and the execution host help maintains consensus in the relay chain on a very low level and well-established instruction set. The runtime is stored on the relay chain itself, making it unbreakable and providing strong security around our crowdloan pallet.

Additional Competitive Advantage

In terms of the additional competitive advantages, Parallel has over competitors, the Crowdloan auction platform offers:

• An easy to navigate interface
• A huge bonus to contributors (base reward and additional project bonuses)
• Para bonus (users who contribute on Parallel will get a bonus on top of the rewards)
• Auto refund of contributed DOT if the project supported by a user failed to secure a parachain slot.
• Users will earn cDOT for each DOT contribution and can earn additional yield with it through staking, trading on the AMM, or lending it to the money market.

Bifrost

Bifrost is the Polkadot Ecological DeFi basic protocol, and it uses Slot Auction Liquid Protocol (SALP) to execute crowdloan contributions. SALP aims to release the liquidity of DOT locked in the Parachain Auction process for the Polkadot ecosystem by issuing derivative assets anchored to locked assets in a bid to improve capital utilization. The protocol uses the multi-signature version of SALP, which requires trusting that the multi-signature group is honest. The DOTs contributed to a project are transferred to the corresponding crowdloan after being signed by 9 out of the 14 multisig parties. The DOT and derivative asset redemption processes are manual.

The Crowdloan and derivative token minting process are as follow:

• All user-contributed DOT will be transferred to the multi-signature address created by Bifrost on the Polkadot side.
• Bifrost’s Subql multi-signature validation service will verify that the transfer of DOTs to the multi-signature addresses is successful.
• Initiated by Bifrost, the multi-signer confirms and contributes the DOT from the address to Polkadot Crowdloan.
• The Bifrost side mints derivative tokens for the user: vsDOT and vsBond

Equilibrium

Equilibrium uses fluid xDOT staking to execute crowdloan contributions. Users are rewarded with xDOT for every DOT contributed to help projects secure parachain slots. The xDOT can be used across the platform to provide liquidity, supply collateral, or be traded. Since the project needs to control the return of the DOT back to users after a lease period ends, it gathers all the user contributions via a single custodian address before participating in the bidding process from that address. The custodian address is managed via multi-sig permission, which is also based on trusting that the signatories will not act maliciously. The process of claiming DOT by users from the single custodian address after the lease period is manual, and the protocol support projects with multi-sig and proxy functionalities.

The fluid xDOT staking process for Crowdloan contribution is as follows:

• Users stake DOT for any parachain of their choice via Equilibrium
• They receive xDOT for every staked DOT
• They also receive parachain rewards
• Users manually claim DOT back after the lease period ends.

Polkadot.JS

Users can also participate in crowdloan via Polkadot.JS. The Polkadot Parachains page features a Crowdloan tab where ongoing and completed Crowdloans can be viewed. Once a crowdloan campaign is open, anyone can participate by sending a special transaction that references the campaign’s index. The minimum contribution amount is 5 DOT. It must be transferable — that is, not locked for any reason, including staking, vesting, and governance — because they will be moved into a module-controlled account generated uniquely for the campaign.

Technically, all crowdloan platforms use Polkadot.JS since it is native to the Polkadot protocol and it is highly secure. Polkadot’s security architecture gravitates all the economic incentives to the Relaychain. If an attacker wants to carry out an attack, he needs to have at least 1/3 of the DOT in the Staking state, which is technically impossible. The consensus mechanism used by Polkadot to achieve the necessary agreement on a single state of the network among distributed processes or multi-agent systems is a NPoS + GRANDPA + BABE, which has final certainty rather than probabilistic certainty. Thus, there is no possibility of rollback for transactions that have formed final certainty.

Summary

About Parallel Finance

Parallel Finance is a user-focused DeFi protocol that has evolved into a hub for DeFi use cases and solutions. It features a highly secure suite of DeFi super dapps that include Staking and v2 Decentralized Crowdloan. The platform is committed to building a decentralized future that empowers the community to increase DeFi capital efficiency, security, and accessibility.

We are also one of the largest parachains in the Polkadot space with over $700M+ TVL and 200K+ active users, and we are backed by some of the most accomplished investors in venture capital and veterans of the financial services space, including Sequoia, Founders Fund, Coinbase, Polychain, etc.

Parallel Finance has a rapidly growing, close-knit team of 90+ professionals. Their backgrounds combine technology expertise with decades of experience in product management, finance, and marketing, coming from top organizations including The World Bank Group, Dash, Crypto.com, ChainLink, Meta, Polygon, Ledger, JP Morgan, Standard Chartered, Amazon, BlockFi, etc., and we’re still hiring.