The Polkadot project was created back in 2016 by Web3. The network is being deployed by the Parity Technologies project. It was led by Dr. Gavin Wood, who currently leads Parity, who is also the co-founder of Ethereum.
Polkadot is a cryptocurrency project that aims to create the decentralized internet of the future (Web 3.0). It is mutually compatible with other blockchains, allows the creation of smart contracts and new blockchains (as well as tokens), allows blockchains to exchange information, it can be upgraded (no hard forks), while the protocol is managed by holders of DOT tokens, the native cryptocurrency of Polkadot.
Polkadot is a multi-platform designed to unite all existing blockchains into a single global ecosystem, forever eliminating the problems of scalability, governance and interoperability. Independent distributed ledgers and even networks built on a different architecture could become one of Polkadot’s parachains. Review without mentioning the Swiss company Web3 Foundation, which is in charge of the project.
What is Polkadot?
The foundation is led by Dr. Gavin Wood from among the leading Ethereum developers. Researchers from Inria Paris and ETH Zurich, developers from Parity Technologies and equity partners from crypto funds such as Polychain Capital are working together to implement Web3, which is powered by Polkadot coin.
Advantages of the Polkadot blockchain
- Interoperability: The Polkadot network allows blockchains with different consensus models to interact with each other through dedicated intermediaries, and no action is required from the developers or users of these blockchains.
- Scalability: due to the use of parachains, the total system bandwidth can grow indefinitely. Thanks to this, everyone will be able to connect to Polkadot without slowing down the network.
- Security: Polkadot’s own security system provides the necessary layer of protection both for the operation of the entire system and for the blockchains, services and applications involved in it.
- Open source: the availability of the code allows anyone who wants to be convinced of its reliability, as well as help in finding and fixing bugs, if any.
A system of incentives and penalties: all network participants, from collators to ordinary users, can receive rewards for actions that contribute to the development of the network. There are penalties for actions that do not comply with consensus algorithms. It is such a system that should ensure the reliable functioning of Polkadot.
Polkadot technical features
The Polkadot blockchain is equivalent to a whole set of autonomous cryptosystems, each called a parachain, with unified security and well-established interconnection. It must be said that the first Bitcoin cryptocurrency does not meet the basic criteria. To connect to a relay circuit, you must have:
The mechanism for the formation of fast and compact evidence of the completion of new blocks and notification of a change in the state of the blockchain (new UTXOs in the Bitcoin ecosystem, or logs in Ethereum).
Availability of checking the execution of a financial transaction for a large number of independent auditors. For example, signature verification using the Schnorr scheme, or a smart contract for structuring logical chains with multi-signatures.
The first point of the requirements will be met by the launch of a full node in the Bitcoin network by Polkadot validators. However, for the implantation of a mechanism for non-protocol control over the turnover of assets in the BTC network, a soft fork is required, and in order to use the Schnorr scheme to verify the signature, a hard fork is required. It is unlikely that community members and developers will go for this unless absolutely necessary.
The three main components of Polkadot are:
- Relay chain is a logistics system that provides communication and guarantees consensus building and protection against attacks.
- Parachains are parallel chains for executing transactions and transferring them to the underlying system.
- Bridges are bridges for communication between parachains with their own, separate reconciliation mechanism.
Polkadot uses the Nominated Proof of Stake (NPoS) protocol to protect the ecosystem. There are four groups of participants with different levels of security involved in sustainability:
Validators are responsible for forming the Relay Chain and connect to parchains to validate blocks and perform cross-chain transactions. To become a validator, you need to make a certain bet (you need a Polkadot crypt). For fulfilling their duties, validators are rewarded with DOT tokens, and if malicious actions are recorded, they can lose their money.
The nominees are the main guarantors of blockchain security. They appoint and control validators, accepting storage bids from them and receiving rewards for doing so. Each nominator is responsible for the actions of his charges, his reward depends on the integrity and activity of the validators appointed by him.
Collators are the owners of full nodes of any parachain. They form blocks in their chain and pass them on to the validators for signature, providing them with proof of transactions. In critical situations, they can independently add blocks to their parachain.
The fishermens are a popular control group. Fishermen cannot verify transactions and sign blocks; their task is to catch the hand of an unscrupulous “official” (validator, nominee, or colator). To take part in fishing, you also need to make a bet, but much less than the nominator or validator, but the reward in case of suppressing the attack on the network will be solid. However, its size, all the same, one way or another depends on the amount of the deposit.
This option allows for a fairly large number of validators and encourages nominators to appoint participants with an unblemished reputation for this role.
To create and republish data in the ladder chain, the BABE cryptoblock generation and GRANDPA finalization scheme is used. Thus, an almost one hundred percent probability of block creation in a certain period of time is achieved, and the provable and deterministic finalization of GRANDPA ensures the stability and immutability of the ecosystem.
The system has a high throughput and random branching is almost impossible here. In addition, NPoS does not allow holders of large sums to take full control of the verifying nodes, guaranteeing the decentralization of the network. By the way, the Ethereum system after the Metropolis update is quite compatible with Polkadot, as well as other blockchains that support smart contracts or the Schnorr signature verification scheme.
Does it make sense for other ecosystems to become parachains, you ask. Yes, of course, this is primarily beneficial for young projects, but already established cryptocurrencies will benefit a lot. After all, developers will no longer need to constantly worry about protecting the parachain and can focus on introducing innovations.
DOT token and its purpose
Now let’s see what role the internal Polkadot token plays in this distributed ledger model. The coin has three main functions:
- Governance – The ecosystem’s internal cryptocurrency gives the owner a vote when making changes to the software code. Without the approval of the Polkadot coin holders, not a single major event will happen on the blockchain.
- Functionality – Bets are placed with DOT tokens and rewards are paid to management nodes.
- Connection – adding new parachains and removing inactive ones is paid for by Polkadot cryptocurrency.
There are 910,640,000 DOT in circulation, with a total supply of 991,600,000 DOT coins. If necessary, it is possible to issue additional tokens.
Mining
Since the system runs on the Nominated Proof of Stake (NPoS) consensus algorithm, DOT mining on computing hardware is not possible.
Tokens are earned by users participating in supporting the ecosystem functionality (validators, nominators and fishermen).
Buying and trading DOT
It will not be difficult to buy Polkadot coin for fiat money or another crypto, because it is supported by the largest crypto exchanges.
The most reliable sites with the highest turnover of funds, for several years the largest cryptocurrency exchange in the world has been Binance. The Binance platform is the most popular crypto exchange in the CIS as well, since it has the maximum trading volumes and supports transfers in rubles from Visa / MasterCard bank cards and payment systems QIWI, Advcash, Payeer.
It is worth noting that the Binance and Kraken exchanges added DOT tokens without even waiting for the completion of the daemonization process, which caused serious discontent with Gavin Wood. He stated that the actions of these exchanges have wreaked havoc on the community ahead of the update, which could lead to a collapse in the value of Polkadot. But, on the other hand, this indicates a high interest in the project on the part of crypto traders.
Apparently, the prospects for the Polkadot token are quite significant, since two serious platforms have listed with such haste. According to the Kraken administration, they did everything in the interests of their clients; binance did not react to Wood’s statements in any way.
Available storage wallets
The local Polkadot GUI wallet is not yet supported. But there are several options for mobile and browser applications.
You can download Polkadot wallet Signer for Android and IOS or Polkawallet to manage Relaychain and Parachain assets anywhere and anytime. The official wallet of the crypto exchange Binance Trust Wallet, the MetaMask browser application and Ledger or SafePal hardware safes are suitable for placing DOT tokens. For a complete list of wallets, see here.
Advantages and disadvantages
| Pros of the Polkadot ecosystem | Cons of the Polkadot ecosystem |
|---|---|
| An innovative model with great promise | The project is still in progress. Some technical aspects are still under development |
| Simplified application integration diagram | Lack of a serious user base required for full functioning |
| High liquidity and functionality of DOT tokens | High competition |
| Professional development team | |
| High level of security and good network scalability | |
| Open source |
So, let’s draw conclusions and try to make a Polkadot forecast. The developers of the project set themselves global goals and even if they fail, the idea will sooner or later be picked up by another team. However, at this stage, Polkadot has enough competitors. For example, Cosmos and Wanchain, and the same Ethereum 2.0.
