Parachain Staking - Passive income for parachains

The innovative concept — brought by Astar Network of dApp Staking — is one of the hottest topics in OpenGov. What would be the positive and negative impacts on the ecosystem of distributing rewards to parachains?

DApp staking emerged as a mechanism to distribute passive income, stemming from the inflation of ASTR tokens, to dApps that showed commitment to the development of the Astar Network ecosystem. The more tokens staked in that dApp, the higher the percentage of inflation received.

In Polkadot, the mechanism would work through a vote for parachains to be whitelisted or not by DOT holders. If whitelisted, they would receive a percentage of the DOT inflation based on the number of votes received from DOT holders.

Polkadot SDK and Polkadot Ecosystem

There are projects that would start their development with the Polkadot SDK and later migrate to other networks or expand, as is the case with:

• Manta
• Astar Network
• Parallel Finance

And there are projects that started their development on other networks, but for obvious reasons, superior technology and interoperability, chose to join the Polkadot SDK and Polkadot ecosystem:

• Aleph Zero
• Aventus Network
• Energy Web
• Origin Trail

There are also projects that only use the Polkadot SDK and could be influenced to focus their development on the Polkadot ecosystem such as:

• Cardano
• Near
• @AvailProject
• @MadaraStarknet
• @oceanprotocol
• @compoundfinance
• @subsquid
• @Chainflip
• @JoystreamDAO

@VaraNetwork

Positive Points of parachain staking

Through financial incentives, it would be possible to keep projects focused on development in Polkadot and using the Polkadot SDK. Since we observe a trend of projects expanding to other networks (for various reasons) as is the recent case of Astar Network.

Astar Network recently launched the mainnet of its zkEVM in partnership with Polygon Labs and using the Polygon SDK. The goal of the partnership is to establish a win-win relationship in the Japanese market between the two blockchains.

In addition to keeping teams focused solely on development in Polkadot and its ecosystem, financial incentives are triggers for projects from other ecosystems to migrate to Polkadot, resulting in an even larger network effect, greater liquidity for the entire ecosystem, more users, and more developers.

Negative Points of parachain staking

The model developed by Astar Network already reveals some flaws that could potentially occur if replicated in Polkadot for parachains, which is the incentive for DOT holders to vote for a certain parachain because it distributes part of the rewards to those who vote.

Indirectly, it is a form of “buying votes” or “buying support,” which if it would be replicated in the real world we can call it as crime and tarnishes the game with exclusively financial interests. The team that distributes more rewards to the community will receive more funds because it will have more votes/support.

Another case that could potentially occur is that ecosystem whales support projects for personal interest or are indirectly incentivized to support certain projects.

Some questions I would like to address for the community to reflect on are:

• What would be the way to prevent corruption in parachain staking?
• How to prevent the network from being dominated by freeloaders?
• To what extent is decentralization ideal? Does it indeed exist?

I believe that parachain staking has more positive points than negative ones and that it can generate a huge network effect for Polkadot by attracting new projects from distinct ecosystems. However, it is necessary that voting power be linked to verified wallets instead of the amount of DOT tokens: 1 address = 1 vote.

For more discussions on the Polkadot ecosystem, visit:

https://paragraph.xyz/@dotleap/dot-leap-2024-4-project-conviction