What are the Polkadot ecosystem projects worth paying attention to now?

This article is from Planet Daily.

Besides Cardano, Polkadot is currently one of the hottest cryptocurrency projects in the field.

And there is a very good reason for that.

Featuring unique technology and innovative concepts, this crypto project aims to solve one of the most promising issues in the industry: interoperability.

Based on this, there are already over 300 projects being built on Polkadot. In this article, we will explore some of the most exciting projects.

Polkadot 101: Basic Knowledge About Polkadot

Before diving into specific projects, let's review the basics of Polkadot.

Polkadot was founded by the Web3 Foundation in 2016 and is a decentralized, open-source Web3 blockchain interoperability platform.

The main goal of the protocol is to connect various originally unconnected blockchains, including private chains, public chains, consortium chains, and oracle chains.

The main chain of Polkadot is called the Relay Chain, which serves as a communication hub between different parachains while providing security for the entire network.

Parachains are independent blockchains that run on top of the Relay Chain, each with a unique purpose within the Polkadot ecosystem. Although they run in parallel with the main blockchain, parachains can communicate with each other through the Cross-Chain Message Passing (XCMP) protocol.

Parathreads are similar to parachains. However, the latter has a dedicated slot that provides continuous uptime for its chain, while parathreads share a slot among a group and operate at a relatively lower frequency.

On the other hand, cross-chain bridges are responsible for providing interoperability for Polkadot, connecting networks and allowing transactions between different blockchains.

Another important component of the project is its native DOT token, which has three core functions:

• Participate in network governance;
• Operate the Nominated Proof-of-Stake (NPoS) consensus mechanism;
• Bond (lock DOT to add new parachains).

Based on Polkadot's architecture, the blockchain network has high security and scalability (the main chain TPS can reach up to 1000 transactions per second, while TPS with parachains can reach up to 1 million). Especially when you are used to Bitcoin or Ethereum, you will find that DOT's transaction speed is very, very fast.

It is also worth mentioning that Polkadot can upgrade its network without soft or hard forks, preventing future forks.

The Top Five Projects in the Polkadot Ecosystem

Kusama

Kusama is one of the most popular projects in the Polkadot ecosystem. It originates from the same foundation as Polkadot.

Kusama is known as "Polkadot's wild cousin," serving as the canary network for the entire ecosystem.

Just as miners used canaries in the past to detect the presence of carbon monoxide, Kusama acts as a testing platform for Polkadot, aiming to trial new features, discover bugs and potential vulnerabilities, and fix them.

In simple terms, every new version or component that has not been tested and audited will first be implemented on Kusama, which shares the same codebase as Polkadot.

What’s interesting about Kusama is that it is not just a testnet. It features its own KSM token and provides users with the option to explore new features that may appear on Polkadot.

New parachains and projects will first be seen on Kusama before being added to Polkadot.

Acala Network

Acala Network is a decentralized finance (DeFi) hub and stablecoin platform on Polkadot.

The core component of the project is Acala Dollar (aUSD), a stablecoin pegged to multiple assets, with each coin valued at 1 USD.

What’s interesting about aUSD is that, unlike single-network decentralized stablecoins like DAI, Acala Dollar can be used across multiple blockchains due to Polkadot's interoperability features.

In addition to the stablecoin, the entire Acala ecosystem has cross-platform functionality, consisting of various DeFi applications such as lending, liquid staking, atomic swaps, and price oracle solutions.

Acala also has its native token ACA, which will serve as a governance and utility token for the network, while providing emergency solutions for sudden crashes in the prices of collateralized assets on the protocol.

Interestingly, although its mainnet has not yet launched, the project raised 7 million USD from investors in August 2020.

Reef Finance

Reef Finance is an interesting crypto project based on Polkadot that aims to solve liquidity and yield-related issues in DeFi by connecting various decentralized protocols and solutions onto one platform.

What makes Reef special is that DeFi protocols can aggregate liquidity from various sources in the crypto market, including decentralized and centralized exchanges, through a global liquidity aggregator.

As a result, users will be able to trade and swap digital assets more efficiently and reduce slippage.

Reef also caters to different popular DeFi activities—such as borrowing, lending, staking, and liquidity mining—by providing users with the best rates through its AI-driven smart yield farming aggregator.

Another key feature of the platform is smart asset management, offering users various portfolio management functionalities, such as active asset rebalancing, guided asset management, and diversified investments.

The project has its native token REEF, which was publicly sold in September 2020, raising nearly 4 million USD.

In addition to governance, REEF can also be used to pay protocol fees, stake in pools, and for yield distribution.

Centrifuge

Centrifuge is a DeFi project designed to be compatible with Ethereum and Polkadot using the Substrate framework.

The Centrifuge ecosystem consists of two main products: Centrifuge Chain and Tinlake. The former is the main blockchain powered by its native Radial (RAD) governance token, while Tinlake is a dApp that uses smart contracts for asset securitization.

The project aims to connect the fintech and decentralized finance space, allowing businesses to tokenize illiquid (NFT) assets from the real world (such as invoices, royalties, and mortgages) to borrow funds and gain liquidity without bank involvement.

To achieve this, investors provide liquidity using two different token structures: TIN and DROP.

Both tokens represent the liquidity users provide to Centrifuge's funding pool and offer interest to holders over time. However, TIN involves more risk with potentially higher returns, while DROP can prevent defaults and provide lower returns for investors.

In addition to empowering the DeFi space with NFTs, Centrifuge also allows businesses to increase liquidity for their typically illiquid assets and gain more funding without going through the expensive securitization process of traditional finance.

Moonbeam

The Polkadot Relay Chain lacks native support for smart contracts.

However, the crypto project Moonbeam aims to change this by deploying an Ethereum-compatible smart contract relay chain on Polkadot.

Once Moonbeam launches on Polkadot, it will add smart contract functionality to all other connected networks and other blockchains (such as Ethereum or Bitcoin) through its parachains and cross-chain bridges.

Since the project chain supports Web3 and the Ethereum Virtual Machine (EVM), as well as popular development tools like MetaMask and Truffle, developers can easily deploy existing smart contracts on Moonbeam with minimal configuration changes.

As a result, Ethereum-based crypto and DeFi projects can expand their reach by creating a cross-chain solution or migrating their existing workloads to Polkadot with minimal effort to avoid Ethereum's currently high gas fees.

Moonbeam has its native utility token, Glimmer (GLMR).

The main uses of GLMR include participating in on-chain governance, paying for smart contract execution and transaction fees on Moonbeam, and staking to support network operations.

Interestingly, the blockchain-based decentralized data exchange Ocean Protocol announced earlier this year that it will integrate its solution with Polkadot through the Moonbeam platform integration.

Polkadot's Next Steps

Polkadot launched its Relay Chain in May 2020, attracting many exciting projects since then.

While the network initially used a Proof of Authority (PoA) consensus mechanism, it later evolved into an NPoS blockchain. Subsequently, on-chain governance and balance transfers were implemented.

Currently, Polkadot is in the most exciting phase, where we will see the implementation and launch of multiple parachains on top of the Relay Chain.

However, there are several steps to launching a parachain on Polkadot.

First, the community must run pilots on the parachain test network and Kusama to eliminate bugs and potential vulnerabilities and ensure stable releases.

As a final step, if everything goes smoothly during testing, the community will begin parachain slot lease auctions, allowing users to choose projects to launch on Polkadot.

According to the project description, parachain slots will be auctioned one by one, with each auction lasting about two weeks.