🎛️ 4. Your options

Now that we’re clear on Polkadot’s main constituents and why becoming a para{chain, thread} makes sense, let’s look at your/our options.

When joining Polkadot, your options are a function of at least these two essential parameters:

Whether you’re a parathread or parachain;

How your collators are operated and incentivised.

Parameter 1: Parachain vs. Parathread

To become a parachain, you need to secure a slot upfront.

To do so, you place a deposit in DOTs. It’s locked in as long as you’re using your slot. Auctions happen periodically — every 6 months — and you can keep your slot for up to two years (Source). You get your DOTs back at the end of the lease. Yet note that locking these DOTs has an opportunity cost.

Let’s take a closer look at this deposit. How much is it worth?

Since the system is auction-based, the deposit can’t be determined with certainty. What we do know are some of the parameters that will influence the price tag of the deposit:

The amount of emitted DOTs;

The number of actors interested to join as parachains;

The proportion of staked DOTs.

One important point to keep in mind is that this parachain slot leasing deposit could be rather high if the competition is fierce, or rather low otherwise.

Alternatively, you can freely take part as a parathread. As a parathread, you join the network on a pay-as-you-go basis: “When a parathread wants to progress (add a block to its chain), it participates in an auction that takes place every relay chain block. The parathreads with the highest bids will be able to submit a block to the next relay chain block. All parathreads compete in this auction for their parathread to be finalized by the relay chain.” To join as a parathread, you would also need to pay a fixed registration fee. (Source)

So how do you choose?

Functionally, parathreads and parachains are similar. Both can “send messages to other para{chains, threads} through ICMP and [are] secured under the full economic security of Polkadot’s validator set.” (Source) But being a parachain enables you to have much more frequent state updates. Your state execution logic will be called per block, so your chain can progress with every block of the relay chain. What you need depends on your use case: “Take a domain name service, for example. Read requests come in large numbers, but it would be normal to update the registry on an hourly basis. DNS has no need for Polkadot’s six-second block time.” (Source)

Economically, they are very different. In a way, both parathreads and parachains are auction-based; only the time scale is different. A parachain stake auction happens every six months when securing a slot. For a parathread, a fee auction happens every block. What this means is that, as a parathread, you free yourself from the large DOT deposit required for parachains. But you also subject yourself to future fee fluctuations: “[Parathreads] compete on a per-block basis, similar to how transactions are included in Bitcoin or Ethereum. […] A similar fee market will likely develop, which means that busier times will drive the price of parathread inclusion up, while times of low activity will require lower fees.” (Source) Note that the collators will need to pay block bids in DOTs (although they can receive them in DOTs or in another token that converts to DOTs).

Another distinction is the level of guarantee. The large deposit you pay as a parachain is your key to becoming a prime actor in the network. As a parachain, you are “guaranteed inclusion as long as a parachain slot is held”. Conversely, as a parathread you can join freely through a small registration fee, but you have no guarantee that your transactions will be registered on the relay chain. (Source)

The economic difference between parathreads and parachains has a notable consequence. Running as a parathread might be quite some extra work: you need to determine the right time and the right bid to write blocks on the relay chain. What’s the right frequency — or in which case do you want to request a state update on the relay chain? What is just the right bid at a certain point in time so that your block is included without paying too high of a price? These heuristics are not trivial. Think of the way fees are calculated automatically in crypto wallets. When the Polkadot network launches, such services might be readily available — or might not be. So this work might fall onto your shoulders.

Most important, this is not a one-off decision. You can switch between being a parachain and a parathread “with relatively minimal effort” (Source). Being a parathread might make the most sense at an early stage and later on you would want to become a parachain to benefit from a higher throughput.

Parameter 2: Collator management

Both parachains and parathreads need collator nodes.

You can decide between:

Operating them yourself . Polkadot’s relay chain secures the network via validators. But if your collators are down, you won’t be able to publish any state updates. So you need to keep in mind the classic single point of failure issues.

. Polkadot’s relay chain secures the network via validators. But if your collators are down, you won’t be able to publish any state updates. So you need to keep in mind the classic single point of failure issues. Relying on third-party collators. Since collators do work you would probably need to reward them. Additionally, they impose their model on you: maybe they’d expect a certain fee and reject blocks that don’t provide it. Where are these third-party collators coming from? Not from Polkadot but most likely from external players. This is speculative: if the business opportunity is compelling enough, organisations will start offering collating-as-a-service to whoever wants to join the Polkadot network.

Non-exhaustive summary: your options

Let’s take a closer look at all our options.

Disclaimer:

This list is not exhaustive. Each parachain can have its own economy in Polkadot, which is great: you’re free to try different ideas for yourself. An excellent place to think of new ideas and discuss them is Parity’s parachain economics chat.

The information below is very fresh and subject to change.

KILT Protocol — Non-exhaustive list of options as a para{chain, thread}

Other models

We have touched on a couple of options, but there are infinite possibilities.

For example, no para{chain, thread} is required to have a token. You’re always free to have your own economy. (Source).