Polkadot Unveils $770M Development Fund Ahead of Parachain Auction

Polkadot founder Gavin Wood unveiled a $777 million development fund ahead of the network's parachain lease auction.

On Oct. 17, Wood tweeted that Polkadot’s treasury had allocated more than 18.9 million DOTs (worth roughly $777 million at the time of writing) to a development fund that would be paid out through community governance.

Wood made broad recommendations on how the funds could be used, saying that, in addition to “things Polkadot governance deems valuable,” the funds would be used to fulfill the community’s vision of “building, improving, and educating” the Polkadot ecosystem.

According to the Polkadot Wiki, treasury funds become available if approved by the council, which votes on proposals presented to them. The Polkadot Council currently consists of 13 members, but plans to expand to 24 seats at some stage in the future.

Due to the low community participation in many Polkadot governance votes in the past, this development fund may be aimed at enhancing the participation of DOT holders in the governance process. According to Polkasembly, the total number of votes for the three governance proposals proposed in the past week was 0, 6 and 7, respectively.

Stakeholders wishing to make a proposal must set aside a deposit of at least 5% of the proposed payout, which will be slashed if rejected (a burn mechanism to discourage misbehavior by validators), and returned if accepted. With funds being put at risk in the event of an unsuccessful vote, Polkadot’s slashing mechanism could be a factor that discourages participation in network governance.

The new development funding comes weeks before Polkadot’s highly anticipated parachain auction is due to begin in early November, suggesting that the funds may be intended to jump-start development for Polkadot’s upcoming parachain ecosystem.

Polkadot’s parachain auctions will be used to realize Polkadot’s vision for a sharding ecosystem. During the auction, projects built on Polkadot will lock DOTs by bidding to obtain one of 100 parachain slots.

Parachains are Polkadot's sharded sidechains that can host decentralized applications and protocols, provide specialized computation, and communicate with Polkadot's proof-of-stake "relay chain" to complete transactions.

Polkadot's existing relay chain handles transfers, governance, and staking services exclusively for the Polkadot network, while the upcoming parachains are responsible for providing advanced features such as smart contract functionality and cross-chain compatibility.

Therefore, the new development fund may be designed to encourage developers to start building on Polkadot in preparation for the launch of parachains.

Many onlookers see Coinbase-backed Acala Network as the frontrunner to win the first parachain slot on Polkadot. In June of this year, Acala's Karura Network deployed on Polkadot's sister network Kusama won Kusama's first parachain auction by a significant margin.

Backed by more than 15,000 entities, Karara won the slot with bids of over 500,000 KSM (worth about $184 million at the time of writing).

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