• Polkadot has voted in favor of a proposal that upgrades its runtime to enable parachain-to-parachain messaging over its XCM protocol, a move that’s been widely applauded.
  • DOT and other Polkadot assets will now be transferable between parachains, while smart contracts and dApps can now communicate across the parachains.

Polkadot has announced one of its biggest upgrades yet, and it could be the final piece of the puzzle for Dr. Gavin Woods’ vision of interoperability. The project announced that the community had voted in favor of a proposal that finally allows parachain-to-parachain messaging.

Polkadot took to Twitter to reveal that v0.9.19 had been voted for by the community. The upgrade finally upgraded the project’s runtime to enable the cross-messaging, it said.

The messaging will happen over the cross-consensus message format known as XCM. It facilitates communication between chains, smart contracts, pallets, bridges, and even sharded enclaves. As Gavin, the Polkadot and formerly Ethereum founder explained last year, XCM is a format and not a protocol in that it can’t be used to send a message. Rather, it aims to be a language communicating ideas between consensus systems.

The final piece of the puzzle for Polkadot

The upgrade was hailed by the Polkadot community as the final piece of the puzzle towards enabling interoperability.

Speaking to Defiant, Dan Reecer, the chief growth officer at Acala Network, the first-ever winner of the Polkadot parachain auction, stated:

This is a massive innovation not only for the Polkadot ecosystem but for the entire crypto industry. It marks the first time a multi-chain ecosystem has ever been connected with unified security and native, trustless interoperability.

He added that the upgrade is “the end of Polkadot’s multi-year launch process.” With it, parachains will now be able to “trustlessly communicate value and data between each other.”

Acala will now be able to launch its liquid DOT staking product, he revealed. Through it, the stakers will earn the staking rewards while still remaining liquid or mint Acala’s aUSD stablecoin.

Echoing the sentiments was Lucas Vogelsang, the co-founder of Centrifuge, yet another Polkadot parachain.

According to Lucas, parachain projects like Acala and Centrifuge will now be able to “onboard Centrifuge pools as collateral for aUSD. This brings scale and uncorrelated collateral to Acala making aUSD better for everyone.”

Moonbeam Network was yet another project that welcomed the upgrade. The project is yet another parachain on the Polkadot ecosystem but unlike Acala and Centrifuge, it focuses on compatibility with the Ethereum Virtual Machine (EVM).

In a blog post on Wednesday, Moonbeam revealed that it had moved fast and added the DOT token into its DeFi ecosystem as the first XCM integration.

The integration allows “existing DOT holders to deposit their tokens on Moonbeam through the DApp and actively use them in things like decentralized exchanges, liquid staking protocols, and lending and borrowing applications for the first time.”

As the blog post noted, DOT holders have had limited ways in which they could use or stake their tokens. Now, not only can they participate in staking, governance and bonding for parachain crowdloans, but they can also participate in DeFi on the Moonbeam ecosystem, which includes projects deployed on the EVM.

Moonbeam founder Derek Yoo remarked:

Movement of tokens across chains is a basic necessity in today’s multi-chain world, but cross-chain bridges have been a major source of security vulnerabilities and hacks. Polkadot’s XCM technology uses a light client-based approach, which is the gold standard for secure cross chain interactions. Protocols and applications in the Moonbeam ecosystem will benefit greatly from access to DOT as the major asset in the ecosystem while maintaining the highest levels of security.

Related: Web3 Foundation partners Zondax for Ledger apps for Polkadot parachain auction winners

What are parachains and how do they work?

Polkadot was developed by Gavin as an upgrade on Ethereum, which he had also helped develop and even authored its yellow paper. It’s a multi-chain network where several project-specific Layer 1 networks, which are known as parachains, can operate while being underpinned by the Layer 0 Polkadot Relay Chain. Parachains are the basis upon which complex applications can be built, with the Relay Chain only supporting simple and basic transactions.

Polkadot also has a sister chain known as Kusama where experimental development and early-stage deployments take place. While Kusama mimics most of what Polkadot does, its ecosystem is full of unaudited code releases for projects that are preparing to launch on Polkadot.

There are two types of parachains common good parachains and auction parachains. With a finite number of supported parachains, Polkadot reserves some for projects it believes are doing social good for the benefit of the network and the crypto industry as a whole.

Second, are those that are auctioned off. Teams that bid for these parachains can put up their DOT tokens or turn to crowdloans where people who believe in the project put up their DOT for some form of reward, usually the project’s native tokens.

Read More: What’s Next for Polkadot Auctions?

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