Several blockchain projects in the past few years have prioritized broad infrastructure improvements over targeted use cases. One of the most promising projects is Polkadot (DOT), which aims to enhance decentralized applications’ underlying technology (dApps).
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What is Polkadot?
Polkadot is a protocol designed to eliminate the need for intermediaries when transferring data between different blockchain environments. Polkadot can be viewed as a network within a network, enabling extremely different blockchain architectures to communicate. Parachains, or specialized blockchains with unique features and tokens, are used to achieve this goal.
In this blog, find out what Polkadot is, how it functions, and why it is crucial to developing blockchain and cryptocurrencies.
Key Takeaways
- Polkadot (DOT) relies on a consensus algorithm based on proof of stake (PoS).
- Polkadot can facilitate a much more scalable blockchain ecosystem thanks to its use of parachains and a relay chain.
- The protocol’s bridges allow for communication between various blockchain networks.
- The DOT token is integral to the protocol’s administration and staking functions.
Polkadot Basics
- Peter Czaban and Ethereum co-founder Gavin Wood founded Polkadot; Wood also came up with the now-commonplace term “Web3” in 2014.
- Polkadot’s white paper was written by Wood and published in 2016. The Web3 Foundation was also established by them in 2017. The sale of DOT tokens by the foundation brought in $145 million, which was used to fund the protocol’s development. In 2019, a second private sale brought in $43 million.
What Is The Polkadot Network In Crypto?
Polkadot (DOT) can be understood as a blockchain whose major network is the relay chain, a place where different blockchains can connect and exchange data. The relay chain ensures the safety and efficiency of cross-chain interoperability (the exchange of data between other blockchains) by hosting blockchains and processing their transactions.
Polkadot enables blockchains to communicate and exchange real-world data and DOT tokens.
Therefore, Polkadot’s primary focus is on improving interoperability. Blockchains should not be treated as unrelated entities but integrated into a larger system for seamless, secure, and scalable financial and data transactions.
Polkadot even solves the problem of coordinating between private and public blockchains, which can have slightly different technical protocols.
Thanks to the network’s adaptable and flexible design, developers can use Polkadot’s scalability, interoperability, and security. This means that Polkadot’s network is also a major step forward for developers and entrepreneurs looking to create a brand-new blockchain from the ground up.
Developing a new blockchain requires creating a custom state machine and consensus algorithm, which is time-consuming and difficult to implement. Because it’s unnecessary to develop blockchains from scratch, Polkadot’s fundamental architecture attempts to solve this problem.
Polkadot’s blockchains are built on top of the flexible Substrate modular framework, which lets users easily add or remove functionality as needed. In addition, it enables developers to tailor the chain’s architecture to their needs, pick and choose which components to implement, and connect blockchains to other networks like Ethereum and Bitcoin.
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Consensus
Like most Layer-0 protocols developed since 2017, Polkadot eschews the more resource-intensive Proof-of-Work (PoW) in favor of the more scalable and decentralized Proof-of-Stake consensus.
Nominated Proof of Stake (NPoS) is Polkadot’s consensus mechanism, consisting of two main roles: validators and nominators. Simply put, nominators want to stake their DOT, and validators are the nodes on the network responsible for creating new blocks. The system is designed to promote greater decentralization and democratization on the web by allowing nominees to choose which validator they wish to support freely.
Users can also take part in the network by serving as collators. (tracking and submitting para chain transactions to the relay chain).
Plan of Action: The Five Stages of Polkadot Development
Polkadot’s launch of its mainnet occurred in stages.
Phase 1: May 2020 saw the launch of the Genesis block of its relay chain, which uses staked validators. In its first iteration, Polkadot functioned as a proof-of-authority (PoA) platform administered by six validators affiliated with the Web3 Foundation. Users who risked their tokens and declared their intention to validate transactions and nominate validators could retrieve their tokens from the Ethereum contract.
Phase 2: In the second stage, the nominated proof-of-stake protocol will be deployed alongside the first validator election in June 2020. This stage allowed DOT owners to stake for rewards and claim validator slots.
Phase 3 & 4: The Polkadot administration was made possible by Phases 3 and 4 in late July 2020. The Council and Technical committees were elected for the first time, and suggestions from the general public were considered.
Phase 5: The last phase, which allowed DOT token balance transfers in August 2020, is complete. In this stage, parachains that have been tried and true on the Kusama and parachains testnets rolled out. Polkadot governance enabled parachains and begin slot lease auctions once all steps have been taken and parachains operate normally on Kusama.
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How does Polkadot Work?
In addition to its core network and relay chain, Polkadot offers users access to parachains, essentially replicas of the main blockchain.
Let’s dive into the specifics of the system and see how all the technical parts fit together.
- Network-wide features like consensus and interoperability between chains, as well as shared security, are all determined by the protocol of the relay chain. It is the backbone of the network, linking all the other nodes and ensuring the finality of all transactions.
- The functionality of the relay chain was purposefully designed to be low. For example, the chain’s primary role is coordinating the system as a whole, which may include parachains, and smart contracts are not supported.
- Parallelized chains are abbreviated as parachains. They have their own tokens, governance, and use cases, making them decentralized blockchains in their own right.
- Parachains, on the other hand, use and benefit from the security and interoperability of the relay chain to guarantee the finality of transactions. Parachain’s system functions flawlessly thanks to the relay chain, allowing developers and users to concentrate on other concerns, such as privacy or scalability, and their respective applications.
- One of the main advantages of Polkadot is that parachains can take advantage of its proven security and lightning-fast, scalable transaction speeds.
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There are only one hundred slots in Polkadot that parachains can rent to join the network. Parachain has limited space, so slot allocation may become difficult to obtain. Slots can be acquired in one of three ways:
- Like parachains, the parathreads serve a purpose. However, they operate on a pay-as-you-go basis, so they only need to be linked to the relay network when actually in use.
- Temporary para thread participation does not require renting a para chain slot. Parathreads’ block time will be longer than parachains, but their security and interoperability features will be identical. Any blockchain can also switch between being a parachain and a parathread, depending on the availability of relay slots and the requirements of the network.
- The interoperability of the Polkadot blockchain is further enhanced by bridges, which permit parachains and parathreads to interact with other networks such as Bitcoin and Ethereum. Over time, bridges may allow for the decentralized trading of various tokens and coins.
Where Is Polkadot Available?
- Neither centralized nor decentralized exchanges provide access to the actual DOT token. Tokens traded on these platforms are DOT-backed tokens built on a different blockchain.
- The pegged DOT can be purchased on cryptocurrency exchanges like Binance, Coinbase, Kraken, and Gemini. Decentralized exchanges such as SushiSwap and UniSwap do not typically support the tokenized DOT.
- If you have DOT, you can keep it in one of several wallets. Ledger, Fearless, Polkawallet, and Polkadot-JS Plus are just a few examples.
Should You Invest in a Polkadot Coin?
- Like any other cryptocurrency, DOT’s value is subject to wild swings.
- DOT is a risky investment because of its volatility. If you want to know if DOT is a good fit for your investment objectives and strategy, you should talk to a financial advisor familiar with cryptocurrency.
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Polkadot vs Bitcoin
The functionality and ends sought by the Polkadot network and Bitcoin differ slightly. Polkadot aspires to develop a multi-chain platform that enables interoperability between blockchains to leverage tokens, data, and communication exchange. At the same time, Bitcoin is on its way to becoming the first global decentralized payment network.
To facilitate the transfer of arbitrary data between blockchains, Polkadot is investigating potential blockchain network protocols. On the other hand, a Bitcoin company is keen on the idea of a new payment system and cryptocurrency based on blockchain technology.
Polkadot vs. Ethereum
Ethereum is an operating system for smart contracts and an aspirational blockchain for decentralized financial transactions. Conversely, Polkadot provides a framework for rapidly developing custom blockchains and system interoperability.
Both platforms aim to repair scalability via parallelized execution and are geared toward developers creating distributed applications. Ethereum, on the other hand, utilizes shards to accomplish this, while Polkadot relies on parachains and parathreads.
Ethereum, like Bitcoin, uses a consensus mechanism based on proof of work. While Polkadot’s NPoS may be similar, the upcoming 2.0 upgrade will switch to the proof-of-stake system.
Polkadot vs. Cardano
Cardano and Polkadot were developed in response to Ethereum’s shortcomings. Since notable Ethereum contributors conceived them, they also share a history with Ethereum.
Cardano (ADA) is a smart contract platform built on the Ethereum blockchain, making it a third-generation blockchain. It is the first proof-of-stake blockchain platform based on scholarly consensus and created using empirical methods. It combines cutting-edge technologies to ensure the safety and longevity of distributed programs, networks, and communities.
Alternatively, Polkadot is a multi-chain application ecosystem, blockchain, and cryptocurrency. With the ultimate goal of fueling next-generation DApp development in mind, the network was designed to simplify cross-chain interoperability.
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Future of Polkadot
The Polkadot ecosystem is unquestionably young by crypto standards, having existed for over two years with parachains living for less than a year. Its architecture is distinct because it prioritizes interoperability beyond the confines of pure PoS scaling.
Kusama’s use as a testbed improves Polkadot’s network security in a field where vulnerabilities are exploited aggressively. Indeed, the network has yet to see as much adoption as rival chains like Solana and Binance Smart Chain. Still, its architecture lays a firm groundwork for further iteration and innovation from developers as we move toward widespread use.
Even though the market’s future is uncertain, it is instructive to observe major projects like Polkadot, which keep their sights set squarely on the task. After all, we know from experience that gradual progress is usually the key to success.
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