What is Polkadot?
Polkadot is a similar project to Cosmos Network, which means it is a platform and a network of blockchains, where various blockchain projects can communicate with each other. Polkadot officially launched in May 2020, after three years since the project started and its Initial Coin Offering. It was founded by the Web3 Foundation and Dr. Gavin Wood, who is also the co-founder of Ethereum. The idea behind Polkadot is to create a safe and trusted environment where chains are easily deployed and updated and can cooperate with each other.
The main components of Polkadot’s architecture are Relay Chain, Parachains, Parathreads and Bridges.
Relay Chain is the foundation of Polkadot and centre for interoperability and communication between blockchains. It is providing security and consensus through validators accepting blocks from all chains. The validators are nominated by Nominators and are monitored by Fishermen, which can report validators if a bad behaviour was noticed.
Parachains are the blockchains on top of the Relay Chain. Parachains are independent, they can have their own tokens and own specialized use cases. The blockchains are secured through the Relay Chain, which means they are not vulnerable to 51% attacks. The chains are maintained by collators, who are responsible for producing their blocks, which are then validated in the Relay Chain. In order to exist in the networks, parachains need to acquire a slot. The amount of slots is limited, therefore the blockchains need to compete with each other on a public auction to gain a place on the network.
Parathreads are parachains that are renting a slot on the network for a certain period of time. This provides a pay-as-you-go model for blockchain projects and allows the developers to run a project or try out the network without the need to purchase an expensive slot.
Bridges are parachains that can connect and communicate with other already existing blockchains, such as Bitcoin or Ethereum. Through bridges, token transfer between Polkadot and external networks is possible.
Polkadot has a couple of advantages over the other blockchain networks. First of all, it is highly scalable. The speed with which the transactions are processed is very fast, with a possibility of achieving the transaction rate of 1 million per second. This is due to the fact that the parachains, as the name implies, are working in parallel, producing the blocks simultaneously.
Second advantage is that Polkadot allows for the blockchains to be specialized and to serve an own and independent purpose without any compromises. At the same time, it makes the development of parachains easier as they are built on top of the network. A Software Development Kit is also provided, which further simplifies the implementation and deployment of blockchains.
Another benefit is the cooperation between blockchains. On the Polkadot network parachains can communicate with each other. They can share any kind of data, therefore they are not limited only to the transfer of tokens, but can exchange various messages, making the network truly interoperable.
Polkadot also allows for the blockchains to be updated without the need for hardforks. Hardforks are changes to the network that can invalidate previous transactions, forcing the community to upgrade to the latest version of the software. These changes can be required in case of bugs that affect the security. Oftentimes, hardforks can split the community, as it was in the case of Bitcoin and Bitcoin Cash. However, the Polkadot network blockchains do not need hardforks for updating, which ultimately is improving the whole network continuously.
In terms of governance, Polkadot wants to give complete control to the community in order for it to be decentralized and transparent. The users will be able to decide on aspects such as rules for parachains, number of slots, and others.
The token of Polkadot is DOT, which is used in the above mentioned voting system. It can also be used for staking and paying of transaction fees. Additionally, DOT token is used in the parachain slot auctions, where chains need to lock up the token in order to win a slot. In the ICO in 2017, DOT was worth 28,80 USD and has managed to raise 145 million USD for the project. In August 2020, the DOT was denominated, as a result of a community voting. The total supply of DOT is now 1 billion and the price is around 4 USD.
Current Projects and Conclusion
There are currently 269 projects in the Polkadot network, such as stablecoin Acala Network, a decentralized exchange Sora and a decentralized energy market Energy Web Token.
Polkadot is a fairly new blockchain network, having launched only this year. It promises to be the next generation of blockchain, bringing a lot of new concepts to the industry, while trying to solve the limitations of early networks. Polkadot is still developing, for example by introducing their own wrapped Bitcoin – PolkaBTC in 2021, which will further foster the interoperability among blockchains. Nonetheless, as with any other blockchain platforms, there is a possibility of scams and fake projects. Therefore, thorough research is advised before any decisions.
— Fyggex (@fyggexchange) August 12, 2020
Image: Pete Linforth
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