Polkadot Is A Top-Performing Blockchain

About Polkadot

Polkadot is an open-source sharded multichain protocol that connects and secures a network of specialized blockchains, facilitating cross-chain transfer of any data or asset types, not just tokens, thereby allowing blockchains to be interoperable with each other. Polkadot was designed to provide a foundation for a decentralized internet of blockchains, also known as Web3.

Polkadot is known as a layer-0 metaprotocol because it underlies and describes a format for a network of layer 1 blockchains known as parachains (parallel chains). As a metaprotocol, Polkadot is also capable of autonomously and forklessly updating its own codebase via on-chain governance according to the will of its token holder community.

Polkadot provides a foundation to support a decentralized web, controlled by its users, and to simplify the creation of new applications, institutions and services.

The Polkadot protocol can connect public and private chains, permissionless networks, oracles and future technologies, allowing these independent blockchains to trustlessly share information and transactions through the Polkadot Relay Chain (explained further down).

Polkadot’s native DOT token serves three clear purposes: staking for operations and security, facilitating network governance, and bonding tokens to connect parachains .

Polkadot has four core components:

  • Relay Chain: Polkadot’s “heart,” helping to create consensus, interoperability and shared security across the network of different chains;
  • Parachains: independent chains that can have their own tokens and be optimized for specific use cases;
  • Parathreads: similar to parachains but with flexible connectivity based on an economical pay-as-you-go model;
  • Bridges: allow parachains and parathreads to connect and communicate with external blockchains like Ethereum.

Who Are The Founders Of Polkadot?

Polkadot is the flagship protocol of Web3 Foundation, a Swiss Foundation with a mission to facilitate an open-source, fully functional and user-friendly decentralized web.

Polkadot’s founders are Dr. Gavin Wood, Robert Habermeier and Peter Czaban.

Wood, Web3 Foundation’s president, is the most well-known of the trio thanks to his industry influence as Ethereum co-founder, Parity Technologies founder and the creator of the smart contract coding language Solidity. Wood is also credited with coining the term Web3.

Habermeier is a Thiel Fellow and accomplished blockchain and cryptography researcher and developer. Czaban is the former Technology Director at Web3 Foundation, with a wealth of experience across highly specialized fintech industries.

History Of The Polkadot Network 

The network’s name is already unique: A polka dot pattern on fabric consists of an array of large filled circles of the same size. The circles probably symbolize the different blockchains and the overall pattern, the Polkadot crypto world.

The history of Polkadot is closely associated with Ethereum. Its founder is Dr. Gavin Wood, who was chief training officer and core developer of Ethereum. He developed its smart contract programming language, Solidity. The lead developer left Ethereum in 2016 to build a more sharded blockchain, and in October of the same year, he published Polkadot’s white paper.

While still at Ethereum, Wood co-founded the EthCore Blockchain Technology Company, which later turned into Parity Technologies. The company developed important blockchain infrastructure technology, such as the Substrate development framework and the Polkadot network.

 

In 2017, Wood also co-founded the WEB3 Foundation, a non-profit entity established to support the research and development of Polkadot and oversee its fundraising efforts. 

In July of the same year, the first adverse event occurred within the organization. A hacker exploited a vulnerability in Parity’s multisig wallet code and stole 153K ETH (about 33 million USD at the time) from three different wallets. 

In October, the foundation hosted the initial coin offering and raised $145 million in just under two weeks, making it one of the largest ICOs up to that time. 

Only a few days after the token sale, though, Parity Technology experienced a new hack incident. The ICO smart contracts were hacked, and 66% of the funds raised ($150 million) were frozen. The event was irreversible and inevitably slowed down the project’s early development. 

In the following months, through a private sale, the WEB3 Foundation team managed to raise enough funds to continue to meet its development goals, and by 2019, everything was back to business as usual. 

How Does Polkadot Work?

  • The Relay Chain – The main Polkadot blockchain, this network is where transactions are finalized. To achieve a greater speed, the relay chain separates the addition of new transactions from the act of validating those transactions. This model allows Polkadot to process over 1,000 transactions per second, according to 2020 testing. 
  • Parachains – Parachains are custom blockchains that use the relay chain’s computing resources to confirm that transactions are accurate. 
  • Bridges – Bridges allow the Polkadot network to interact with other blockchains. Work is underway to build bridges with blockchains like EOS, Cosmos, Ethereum and Bitcoin, which would allow tokens to be swapped without a central exchange.

The Relay Chain

To keep its network in agreement about the state of the system, the Polkadot Relay Chain uses a variation on proof-of-stake (PoS) consensus called nominated-proof-of-stake (NPoS).

This system allows anyone who stakes DOT by locking the cryptocurrency in a special contract to perform one or more of the following roles necessary to its operation:  

  • Validators – Validate data in parachain blocks. They also participate in consensus and vote on proposed changes to the network.
  • Nominators – Secure the Relay Chain by selecting trustworthy validators. Nominators delegate their staked DOT tokens to validators and thus allocate their votes to them.
  • Collators – Nodes run that store a full history for each parachain and aggregate parachain transaction data into blocks for addition to the Relay Chain. 
  • Fishermen – Monitor the Polkadot network and report bad behavior to validators.

Users who stake DOT and perform these roles are also eligible to receive DOT rewards.

Polkadot Governance 

Three types of Polkadot users can influence the software’s development. 

These include:

  • DOT holders – Anyone who purchases DOT tokens can use their DOTs to propose changes to the network and approve or reject major changes proposed by others. 
  • The Council – Elected by DOT holders, council members are responsible for proposing changes and determining which changes proposed by DOT holders are made to the software. Proposals by Council members require less votes to be approved than those by ordinary DOT holders. 
  • The Technical Committee – Composed of teams actively building Polkadot, this group can make special proposals in the event of an emergency. Members of the technical committee are voted in by Council members.

How Do I Stake DOT?

Polkadot uses a proof-of-stake consensus mechanism (as opposed to the proof-of-work system Bitcoin uses) to secure the network, verify transactions, and create and distribute new DOT. There are several ways DOT holders can interact with staking system — depending on how much time, technical knowledge, and money they want to devote. 

Validators do the most work — it’s a major commitment, and requires technical knowhow. To become a validator, you need to run a node (one of the computers that makes up the network) with little to no downtime and stake a substantial amount of your own DOT. In exchange, you get the right to verify legitimate transactions, add new “blocks” of transactions to the relay chain, and potentially earn newly created DOT, a cut of transaction fees, and tips. (On the flip side, you can also forfeit some or all of your staked DOT for acting maliciously, making a mistake, or even having technical difficulties). 

• Nominators allow regular investors to participate in staking indirectly. You can delegate some of your DOT to a validator you trust to behave according to the rules. In exchange, you get a cut of DOT earned by your chosen validators. Be careful with who you choose: you also can forfeit some of your stake if your validator breaks the rules.

There are also two specialized roles that typically require less of a commitment than becoming a full validator but more technical skill than is required to be a nominator: Collators keep track of valid parachain transactions and submit them to the relay chain validators. Fishermen help find and report bad behavior across the network. 

By staking and participating directly in the network (note: Polkadot staking is currently not available via the Coinbase platform) via any of the above roles, you may be able to receive DOT rewards. DOT holders also have a say in the governance of the network and are able to vote on proposed software upgrades.

Powering the Polkadot network

The DOT token serves three distinct purposes:
governance over the network, staking and bonding.

 

What Makes Polkadot Unique?

Polkadot is a sharded multichain network, meaning it can process many transactions on several chains in parallel (“parachains”). This parallel processing power improves scalability.

Custom blockchains are quick and easy to develop using the Substrate framework and Substrate blockchains are designed to be easy to connect to Polkadot’s network. The network is also highly flexible and adaptive, allowing the sharing of information and functionality between participants. Polkadot can be automatically upgraded without the need for a fork in order to implement new features or remove bugs.

The network has a highly sophisticated user-driven governance system where all token holders have a vote in how the network is run. Teams can customize their own blockchain’s governance on Polkadot based on their needs and evolving conditions. Nominators, validators, and collators all fulfil various duties to help secure and maintain the network and eradicate bad behavior.

At the end of 2021, Polkadot successfully concluded its first Parachain auctions. The Parachain auctions followed an un-permissioned candle auction system. The winning bid is the highest bid at the random moment the auction ends.

Polkadot assigned the first five slots to the following auction winners: Acala, Moonbeam, Astar, Parallel and Clover. These projects will have their parachain slots locked in for 96 weeks, guaranteed by the DOT bidders committed as collateral. As customary on Polkadot, all projects had previously been battle-tested on its de-facto testnet Kusama.

What Are The Functions Of DOT Within Polkadot?

DOT will serve three key functions in Polkadot, namely (i) providing governance for the network, (ii) operating the network, and (iii) creating parachains by bonding DOT.

The first function of DOT is to entitle holders to complete governance control over the platform. Included in this governance function is determining the fees of the network, the auction dynamics and schedule for the addition of parachains, and exceptional events such as upgrades and fixes to the Polkadot platform. These functions are not formally granted to DOT holders, but rather the underlying code of Polkadot will enable DOT holders to participate in governance.

The second function of DOT will be to facilitate the consensus mechanism that underpins Polkadot. In order for the platform to function and allow for valid transactions to be carried out across parachains, Polkadot will rely on DOT holders to play active roles. Participants will put their DOT at risk (referred to as “staking” or “bonding”) to perform these functions, which acts as a disincentive for malicious participation in the network. DOT required to participate in the network will vary according to the activity undertaken, the duration DOT is staked for, and the total number of DOT staked.

The third function of DOT will be the ability to add new parachains by tying up DOT (referred to as “bonding”). The DOT will be locked during their bonding period and will be released back to the account that bonded them after the duration of the bond has elapsed and the parachain is removed

What Makes Polkadot Different Than Ethereum?

Given they share a high-profile founder, there has been much speculation about what makes Polkadot different from Ethereum. 

Indeed, Polkadot and the forthcoming major update to Ethereum, known as Ethereum 2.0, share many similarities in design and operation. 

Both networks operate a main blockchain where transactions are finalized and allow for the creation of many smaller blockchains that leverage its resources. Both technologies also use staking instead of mining as a means of keeping the network in sync. 

Research is ongoing on how transactions between the networks could be made interoperable. Parity, for example, has developed technology designed for users who may wish to deploy applications leveraging Ethereum’s code and community, but that would run on Polkadot.

Lastly, developers can use Polkadot’s development framework to simulate a copy of the Ethereum blockchain that can be used in their own custom blockchain designs. 
 

Any type of data across any type of blockchain

Polkadot is a network protocol that allows arbitrary data—not just tokens—to be transferred across blockchains.

This means Polkadot is a true multi-chain application environment where things like cross-chain registries and cross-chain computation are possible.

Polkadot can transfer this data across public, open, permissionless blockchains as well as private, permissioned blockchains.

This makes it possible to build applications that get permissioned data from a private blockchain and use it on a public blockchain. For instance, a school’s private, permissioned academic records chain could send a proof to a degree-verification smart contract on a public chain.

Polkadot is a very ambitious project aimed at transforming the very structure of the global network. Many experts consider it to be a revolutionary solution that could completely change the blockchain industry. Moreover, the project has several advantages that increase its attractiveness for investors:

 

  • An experienced development team led by one of the most famous and influential personalities in the blockchain industry
  • A focus on solving the real-world problem of the interaction between different blockchains
  • The project’s ability to be infinitely scaled
  • No need for forks to make system changes and updates
  • A high degree of decentralisation and security
  • Open-source software code

At the same time, the project does have one or two disadvantages. One drawback is the project’s complexity, which can be an obstacle for developers who want to connect their blockchains to the project.

Polkadot is worth buying in 2022 as per the price forecasts of analysts at Coin Price Forecast, DigitalCoin, FX Leaders, Cryptopolitan, WalletInvestor and Long Forecast.

Inasmuch as there is an infinite competition from other smart contract blockchains such as Ethereum, Cardano, NEO, EOS and Tron, Polkadot is third only to Cardano and Kusama when it comes to developer activity.

Cardano is yet to register a use case and Kusama is a blockchain technology which runs on Polkadot’s network. As a result, activity on Kusama has a direct reflection of the price of DOT. Polkadot also has 436.97 developers building new applications on its platform.

At the end of the program, blockchains created must use or be made for the Polkadot/Kusama/Substrate ecosystem. This means that more developers will build protocols which would help Polkadot compete with the primary mover of smart contracts Ethereum and others.

Decentralized finance protocols and applications under lendingexchangeyield aggregators and autonomous organizations could be flooding DOTs Network soon.

Once all these are in place, DOT’s price would not be determined by interoperabilityscalability or mere partnerships. It would benefit from the real world use cases of the Polkadot network. This would bring more activity to the cryptocurrency and increase the overall valuation of the asset.

With more than 87% of DOT in circulation, if the creators of the cryptocurrency do not release more coins, the laws of supply and demand will set in. Once this happens, DOT will change hands based on prices that investors are willing to pay for it. This could cause the price of Polkadot to increase substantially in the near future. 

Evidently, Previsioni Bitcoin predicts DOT to have a price of $95.99 by the end of 2022. If we are to go by Previsioni Bitcoin’s prediction, then Polkadot DOT is an asset you should consider adding to your investment portfolio due to its potential in the future.

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