Core Time Sales on Polkadot: A New Era of Resource Allocation Assets

Polkadot is on the cusp of a significant shift in how blockchain resources are allocated and monetised. The upcoming transition to the Agile Coretime model, set to go live on Polkadot in July following its debut on Kusama, promises to bring unprecedented flexibility and efficiency to the network. Let’s dive into what this means.

Understanding Agile Coretime: Agile Coretime is a groundbreaking approach that enables the buying and selling of blockspace in a dynamic, market-driven manner. It moves away from the static parachain leasing periods of Polkadot 1.0 and introduces a more flexible and cost-effective way to acquire and manage network resources.

Key Components of Agile Coretime:

1. Cores: Cores represent the virtual abstraction of computational resources provided by the relay chain to secure parachain blocks.
2. Coretime: Coretime refers to the time allocated for utilising a core, measured in relay chain blocks.
3. Bulk Coretime: Bulk coretime is a fixed duration of continuous coretime represented by an NFT. These NFTs can be split, shared, or resold.
4. On-demand Coretime: On-demand coretime allows for the authoring of a parachain block on-demand, acquired through bidding in near real-time.
5. Coretime Chain: The Coretime Chain is a system parachain responsible for the sale and manipulation of bulk coretime, as well as the scheduling of cores on the relay chain.

How Agile Coretime Works: Under Agile Coretime, sales occur on the Coretime Chain in two main periods: the Renewal period and the Sale period. During the Renewal period, bulk coretime can be renewed. The Sale period consists of a Price Discovery period, where a Dutch auction determines the equilibrium price, followed by a Fixed Price period.

Splitting and interlacing allow for the division of regions, providing further flexibility in resource allocation. Elastic scaling, currently under development, will enable projects to seamlessly scale and access multiple cores as needed.

Opportunities and Implications: Agile Coretime brings several benefits and opportunities:

1. Democratisation of Access: On-demand coretime lowers barriers to entry, allowing developers to quickly spin up proof-of-concepts and access Polkadot’s ecosystem.
2. Cost Efficiency: By purchasing coretime on-demand or selling unused coretime on secondary markets, projects can optimise their resource usage and costs.
3. Predictable Resource Planning: Bulk coretime enables strategic resource planning, allowing projects to secure coretime at fixed prices and plan for sustainable growth.
4. Secondary Markets: The ability to split and sell coretime opens up opportunities for secondary markets, improving allocation efficiency and enabling speculation.

Trading Opportunities and Risks in Agile Coretime

The introduction of Agile Coretime presents new opportunities to potentially profit from the dynamic market for blockchain resources. However, as with any trade, there are risks to consider.

Opportunities for Traders:

1. Price Volatility: The market-driven nature of Agile Coretime may lead to price fluctuations based on supply and demand. Traders can potentially capitalise on these price movements by buying coretime during low-demand periods and selling when demand surges.
2. Speculation on Future Demand: Traders with a keen understanding of the Polkadot ecosystem and upcoming projects may be able to anticipate future demand for coretime. By securing coretime in advance and selling it when demand increases, traders could potentially profit.
3. Arbitrage Opportunities: With the emergence of secondary markets for coretime, there may be opportunities for arbitrage. Traders can look for price discrepancies across different markets and exploit these differences for profit.

I’ve spent the last few weeks trying to consider how someone could extract MEV from this new marketplace, aside from trying to arbitrage the open market and open sell orders on an exchange. I think this will be hard to do, remember if you don’t use your core time in your time period it expires worthless. So use it or lose it.

Risks to Consider:

1. Market Unpredictability: While the market-driven approach of Agile Coretime allows for greater flexibility, it also introduces a level of unpredictability. Sudden changes in demand or unexpected market events could lead to rapid price fluctuations, potentially leading to losses for traders.
2. Lack of Historical Data: As Agile Coretime is a new model, there is limited historical data to analyse and base trading decisions upon. This lack of historical context may make it more challenging to develop reliable trading strategies.
3. Technical Understanding: Trading coretime effectively may require a deep understanding of the Polkadot ecosystem, the Coretime Chain, and the technical aspects of parachain operations. Traders without this knowledge may face increased risks.
4. Liquidity Risks: The liquidity of the coretime market may vary, especially in the early stages of adoption. Low liquidity could make it difficult to enter or exit positions at desired prices, potentially impacting trading profitability.

Favourable Situations for Trading:

1. High Demand Periods: During times of high network activity or the launch of popular projects, demand for coretime may surge. Traders who have secured coretime in advance could potentially sell at a premium during these periods.
2. Network Upgrades or Ecosystem Developments: Polkadot network upgrades or significant ecosystem developments may drive increased demand for coretime. Traders who stay informed about these events could potentially position themselves to benefit from the resulting market movements.
3. Inefficient Market Pricing: In situations where the market may be mispricing coretime relative to its intrinsic value or future potential, traders with a strong understanding of the ecosystem could identify and capitalise on these inefficiencies.

From where I sit, it’s hard to predict what prices or demand will look like once this model is live on Polkadot, I guess we’ll just need to see this go live and watch it play out, speculating on what could or might happen in the future is a fools game, but what an exciting time to be working on Polkadot. It really feels like we’re at the start of something big.