Normally, when joining the Polkadot Auctions, you must stake DOT in the crowdloan and it will be locked for two years. Therefore, Parallel is the key to unlocking those illiquid DOTs. Today, let's dive deeper into Parallel Finance to discover its functionality and distinctive features with us!
What is Parallel?
Parallel Finance is a Polkadot-powered network built to accelerate liquidity & adoption on the Polkadot network and it combines three decentralized protocols.
- The first protocol is Decentralized Money Market Protocol that offers lending and borrowing.
- The second protocol is a Staking Derivative Protocol that tokenizes native DOT tokens.
- The last protocol is an under collateralized lending market built to help the teams form capital for parachain auctions.
In the short term, Parallel aims to be the first lending and staking protocol in the Polkadot ecosystem, and the first money market to target the staking economy.
In the long term, on Polkadot, Parallel will offer a parachain optimized for financial applications, allowing anyone to build dApps in the ecosystem, and even launch their own parachain through the Parallel network. Beyond Polkadot, they will offer an intuitive set of financial tools across blockchains, and a gateway into DeFi.
How does Parallel Finance work?
Parallel Finance allows users to accrue interest from staked DOT while still having a liquid asset not subject to lockups or lengthy unlock periods. The staked DOT financial primitive will be referred to as xDOT.
Lenders will be able to earn interest income on their xDOT, and borrowers will be able to get loans against their DOT denominated in stable coins without selling their DOT.
Noteworthy Features of Parallel Finance
Parallel Network is similar to Heiko Finance in terms of functionality and architecture, and both are built by the same team. The only difference between them is that:
- Parallel is on the Polkadot Relay Chain.
- Heiko is on Kusama.
Unlocking the illiquid staked DOT
Currently, if users stake their DOT into the relay chain to earn an estimated 14% interest per year, these staked DOT will remain illiquid and it takes 28 days to unstake them. However, by lending it on Parallel, holders can earn interest from both staking and lending activities.
Interest Rate Swaps
Interest Rate Swaps allows institutional borrowers to extend or reduce their exposure to interest rates depending on their willingness to undertake risks. Fixed-rate loans act as an anchor for the variability of floating rates. If a user is currently holding a fixed-rate loan, and they suspect that a bear market is on the horizon, they may switch to a floating interest rate in hopes of paying lower interest.
On the other hand, if borrowers expect utilization to increase across the board, then they may choose to remain in a fixed-rate position, to capture a lower rate.
Parallel provides an Auction Loan platform for the global community to support projects bidding for a parachain slot through a crowdloan.
Multi-layer rewards and higher return:
- Parallel partners will provide bonus rewards to the community.
- In addition to the crowdloan’s base rewards, both Parallel and the participating project A can earn a bonus of Base rewards + 40k $PARA bonus + up to xx% extra of the participating project’s native tokens.
- In contrast, contributing on PolkadotJS portal or through other means will not get the same reward bonus
- When users stake DOT to join the parachain auctions or crowdloans, these DOT will take two years to be fully unlocked, and this time users have to face the opportunity cost when utilizing DOT in other dApps.
- Therefore, thanks to the Staking Derivatives Protocol, when joining the Crowdloans on Parallel, they will receive the cDOT-A (A is the project they join) on behalf of their staked DOT.
- When DOT coins are locked in the parachains, users can utilize the derivative cDOT-A token in the Parallel money market platform and AMM (after it launches). This reduces users' risks from the lockup period and allows them to stay liquid.
Delightful and simplicity:
- Currently, there are a few methods to contribute (project websites, PolkadotJS, wallet apps), but there isn’t one platform that allows users to simply contribute on the different active crowdloans.
- Parallel enables users an efficient and simple way to contribute in 3 -clicks.
- Contributors can also see a dashboard of the campaigns, the progress, and rewards/ bonuses all in one view.
Decentralized Credit Scoring
Parallel Finance will set out to become the “DefiPulse of credit". The credit reporting system will function like a check against rogue institutional borrowers. It will also give lenders a second line of defense to negotiate defaulted on a loan, the negative impact of this reportage will affect the perception of the project's token, and projects will seek to improve their creditworthiness as a result.
PARA Token Information
PARA token metrics
- Token Name: Parallel Token
- Ticker: PARA
- Blockchain: Polkadot
- Token Standard: Updating...
- Contract: Updating...
- Token Type: Utility and Governance
- Total Supply: 10,000,000,000 PARA
- Circulating Supply: Updating...
PARA Token Allocation
- Liquidity Mining: 25%
- Token Sale: 20%
- Team & Advisors: 20%
- Ecosystem & Dev Funds: 15%
- Crowdloans: 15%
- Insurance Fund: 5%
PARA Token Release Schedule
- Liquidity Mining: 23% will be mined in the first 6 months then the remaining 77% will be mined over 47 months
- Seed Investors: 15- month lock-up then release over 24 months
- Private Investors: 12-month lock-up then release over 24 months
- Crowdloans: Linear release over 24 months
- Team & Advisors: 15-month lock-up then release over 24 months
- Ecosystem Fund: 25% release at TGE then the remaining release over 47 months
- Insurance Fund: Transferred to the insurance pool after TGE
PARA Token Use Case
- Protocol Governance: PARA holders will have the ability to vote on all aspects related to the management and administration of Parallel Protocol.
- Transaction Fees: PARA will also function as a means of network fees.
- Network Utility and Incentive: PARA is also utilized to incentivize collators and validators
- Security Module Staking: PARA can be staked to a security module to hedge risks in case of staking slashes, and in return, contributors to this insurance pool will be compensated with PARA tokens.
- Kusama Validator Insurance and Incentivization: Kusama non-active validators will need PARA or HKO (Heiko) to increase the chances of being selected as an active validator
How to get PARA Token
PARA token is not launched yet. However, you can get PARA for the future by joining crowdloan on Parallel Finance website.
How to store PARA
You can PARA token on Coin98 Wallet when the token is supported.
Team, Investors, and Partners
These are notable builders in Parallel Finance. Yubo Ruan, Parallel's founder, invested in Solana, Polkadot, and many more projects in the blockchain field. Then, in April 2021, he started to build Parallel Finance until today.
Some of their partners include other Polkadot's parachains and prominent partners like Chainlink, Web3 Foundation,...
Roadmap and Updates
- November 2021: Beta Launch will be introduced, and this phase only offers users lending and borrowing functions at a limited threshold.
- December 2021: Parallel Finance will release the official version with full functionality after winning the parachain slot on Polkadot.
Is PARA a good investment?
Currently, Parallel Finance is one of the potential parachain winners in the first batch of the Polkadot Auctions, which means it could officially launch in December 2021. The total fund raised now is more than $350M ((little less than Astar Network's $10 million). With its unique features, Parallel will contribute to the prosperity and sustainability of DeFi on Polkadot in the future.
Received Web3 Grant
Web3 Foundation funds were established by Ethereum Co-founder and former CTO Gavin Wood, also the founder of Polkadot. This fund aims to research and develop teams building the technology stack of the decentralized web.
Parallel was approved for the grant in April of this year by the Web3 Foundation.
When Parallel obtains a grant from the Web3 Foundation, I believe it signifies that the foundation has thoroughly investigated them from both a technical and business standpoint. As a result, in the future, the Foundation will assist all granted projects in general, and Parallel Finance in particular, in order to help kickstarting Polkadot's entire ecosystem.
Acala: Acala Network is a layer-1 smart contract platform that's scalable, EVM-compatible, and optimized for DeFi with built-in liquidity. It is also a DeFi Hub of Polkadot. This project is the first winner of the Polkadot Parachain Slot Auctions.
Coin98 Insights hopes you have gained all of the important information about PARA including its features and highlights throughout this topic.
If you have any questions about Parallel Finance or want to know more about PARA, please feel free to leave a comment below and join Coin98 Community for further discussions about Crypto.