Polkadot could introduce ‘common good’ parachains with DOT-based smart contracts

As Polkadot (DOT) gets ready to launch parachain auctions, a combined fundraising and market interest discovery mechanism, the team is realizing that some core features may be ill-suited for the auction mechanism.

Polkadot parachains are somewhat analogous to the sharding proposal for Ethereum 2.0. Each parachain is a largely independent blockchain built for a particular purpose. Many projects building on Polkadot, like Moonbeam, Equilibrium or Acala, are developing their own parachains where the project’s tokens would act as a native currency used to pay for transactions. The parachains are able to communicate with each other through the Relay Chain, a central coordinator where Polkadot’s staking-based consensus mechanism is executed.

The different parachain projects may sometimes overlap in their purpose and potentially compete with each other. For example, Equilibrium and Acala are set up as Polkadot-native DeFi chains  while Moonbeam is focusing on offering virtually the same blockchain environment as Ethereum, with a focus on DeFi as well. Certain features like bridges to external blockchains may be useful to all projects on Polkadot, but each individual parachain team may be hesitant to commit funds for an auction, knowing that their competitors would benefit just as much from it without having invested any of their resources. This is referred to as the “free rider problem” in economics.

The Polkadot team thus proposed on Thursday to allocate some parachain slots to public-good features, bypassing the auction process. Instead, the inclusion of the parachain will depend on DOT stakeholders passing a governance proposal. Each individual proposal will be discussed by a technical committee and the Polkadot Council, though the ultimate decision will rest with token holders.

For now, the candidates for public-good parachains are primarily “system-level chains” and “public utility chains.” The former are meant to offload features from the Relay Chain into a dedicated parachain. This includes governance, staking elections, identity and account balances. Such an optimization would help performance, as the relay chain must be validated by all nodes at the same time, while individual parachains are processed by only a portion of them at any given moment. Eventually, the plan is to make the Relay Chain a transactionless chain, only performing validating functions.

Public utility chains, on the other hand, can be considered as a Polkadot-native implementation of individual project parachains. This includes features such as bridges to other blockchains, or general smart contract environments based on WebAssembly. Such a parachain could allow developers to deploy their project on a neutral Polkadot environment, where fees are paid with DOT, or KSM in the case of the Kusama sister chain.

The public Wasm chain would save on the development complexity involved in building a whole parachain, making it closer to developing a DApp on Ethereum. The key distinction is the strict adherence to WebAssembly, a virtual machine generally considered more powerful than the Ethereum Virtual Machine. Peter Mauric, head of public affairs at Parity, told Cointelegraph that “a strong argument could be made that a generalized, pure Wasm smart contract parachain would be well received as a public utility on Polkadot.”

The WebAssembly environment would be one of Polkadot’s more unique features, with Mauric noting that “legacy networks have all but scrapped plans to incorporate powerful WebAssembly virtual machines.” Indeed, plans for building the eWASM, a WebAssembly environment for Ethereum, have been scrapped in 2020, as Ben Edgington, project lead on the Eth 2.0 Teku client, told Cointelegraph.

Nonetheless, plans for public utility chains are still not confirmed, as Polkadot governance will need to formally agree to including them.