What Is Polkadot? Polkadot Explained
October 08, 2020
If you are conversant with the cryptocurrency market, you will likely have heard of Polkadot and the DOT token. This brings us to the question, “what is Polkadot?” Polkadot made its ways into the top 10 cryptocurrency list by market capitalization. In this article, we shall delve into the world of Polkadot, its underlying structure, and the use cases.
Recently, the Polkadot project has been garnering a lot of attention, maybe due to the multiple delays of its release date. The whitepaper for Polkadot was released as early as 2016, and it has been a long journey.
In 2017, Polkadot had a successful ICO on the Ethereum Blockchain. They generated a whopping $144,630,000 from the ICO. However, three-quarter of the amount was frozen as a result of the “Parity hack.” The hack took advantage of a weakness in the code of the Parity wallet. Despite the huge loss, the Polkadot project surged forward. It speaks a lot about the tenacity of the team to make the Polkadot project a reality.
What Is Polkadot?
Polkadot is a multi-chain framework blockchain-based project that is akin to Cosmos. It is designed to enhance interoperability and scalability of blockchains that are plugged into its Relay Chain. The project leverages a kind of Proof-of-Stake (PoS) consensus for the broader ecosystem of blockchain connected to it.
The main aim of Polkadot is to serve as a decentralized centre for the different types of blockchain systems. Its architecture is designed to interconnect alder distributed ledger technologies (DLTs), current DLTs, and future DLTs. The architecture ensures scalability in the blockchain. See this video for a short and simple explanation of Polkadot.
Polkadot also allows data structures outside blockchain systems to connect to the network’s parachains. Polkadot was designed by Gavin Wood and Jutta Steiner, in their quest to create a more evolved version of Ethereum. Both were former Ethereum executives. Polkadot is also supported by Web3 Foundation, which provides the project with funding, advocacy, research, and essential collaborations.
In mid-2018, Polkadot launched two proofs-of-concept (PoC), and the first parachain was deployed in July 2018. The company launched in an “initial” state in May 2020, but token transfers were enabled in August 2020. As at 5th October 2020, Polkadot’s relay chain has not yet been activated, and the chain auctions aren’t live yet.
AS we highlighted that the Polkadot’s design is meant to support different chains, it comes with several advantages like.
ScalabilityPolkadot supports multiple blockchains using its parachains or through a mechanism called sharding. This features you can process transactions efficiently and in parallel.
- It provides forkless upgrades.
You can upgrade Polkadot without using time-consuming and divisive hard forks. New features can be added to the Polkadot network without completely overhauling the entire network.
The different parachains of Polkadot can share information and functionality, due to the project’s interoperable design and compatibility that exist between the different chains.
Each of the parachains can be streamlined to a specific use case or application.
What Is Polkadot Coin Structure?
To further have a good understanding of what Polkadot is, it is good to acquaint yourself with the following concepts:
- The relay chain
The relay chain is the base Polkadot chain that connects all other individual chains. Therefore, the system can organically rectify interoperability issues between connecting chains.
- The parachains
They are the parallel chains that run through the Polkadot network, and they help to scale up the system by executing operations in parallel.
- The bridge chain
This chain connects the different blockchain networks that don’t use the Polkadot protocol.
The Use Cases Of Polkadot
There are several ways to apply Polkadot in today’s blockchain space. Due to the flexibility of the Polkadot project, developers can build application-specific blockchains like the ones that are privacy-oriented, or exclusively focusing on dapp development.
The features of one parachain on the Polkadot network can be leveraged by another, hence sharing innovations between different chains. Users of a decentralized exchange on one parachain can deposit Bitcoin onto the exchange by using zero-knowledge proofs (ZKPs). These users can achieve this leveraging a ZCash parachain.
Here are more of the prospective uses cases of Polkadot:
- If a blockchain project wants to raise Ethereum, but needs verification from a private bank chain before accepting ETH; Polkadot provides a platform for such verification.
- A payment processor may demand some form of verification form a private bank chain before accepting Bitcoin payments.
- A decentralized exchange parachain allows crypto deposits through zero-knowledge proofs using a ZCash parachain on Polkadot
- Polkadot offers better coordination between different blockchains and off-chain oracle.
What Is Polkadot Token and the Role In Polkadot Governance?
Polkadot was able to raise $140 million by selling it native token (DOT) in their 2017 ICO. However, in 2019 and 2020 the company also ran two private sales in which they raised an estimated $100 million. The company began to allow investors to trade the native token in August 2020. Since then, the token has been listed in more than 40 different exchanges. The high trading volumes caused the coin’s market capitalization to skyrocket.
Polkadot uses an on-chain governance model that is completely controlled by chain stakeholders. These stakeholders or validators stake the Polkadot native token (DOT), and they can control everything ranging from direct protocol upgrades to bug fixes. Like other Proof-of-Stake (PoS) consensus models, the Polkadot native token (DOT) is used to bonding purposes. It also incentivizes validators to act honestly through having a financial stake in the authenticity of the verification process.
Meanwhile, parachains are connected to Polkadot through bonding, and they can be removed by withdrawing their stake from the network. On-chain governance is not only employed by Polkadot. You can find it in other networks like Tezos and Decred.
We believe that this article has answered the question “what is Polkadot?” and has provided you with more insights into the protocol. There is no doubt that Polkadot is a promising project and will certainly revolutionize the blockchain market. The high-ranking market position of DOT may also be beneficial to Polkadot’s reputation.
This project has great potential, but how the potential will manifest remains to be seen. The major competitor of Polkadot is Cosmos, but there are other projects working on inter-blockchain communication.
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