Polkadot

Polkadot is a scalable, secure, decentralized multi-chain network built on Substrate, which enables the creation of compatible and purpose-built blockchains composed of custom or pre-built components. Polkadot aims to achieve a fully decentralized network that is controlled by users, providing interoperability protocols that use segmentation or sharding to extend the network. It can connect private chains, public networks and oracles. This will enable a new form of network in which independent blockchains can exchange data or conduct transactions in a trustless manner.

Polkadot is the native token of the Polkadot network, and its smallest unit is called Planck. Polkadot facilitates the development of payments, network governance, staking, reward incentives, transaction fees and other uses. In the process, Polkadot was chosen as the means of payment for connecting new chains to the Polkadot network or for other operations. Unlike most other cryptocurrencies, Polkadot is not subject to a maximum supply limit. This is to incentivize network development and dynamically adjust based on users’ staking participation rates, with Polkadot inflating by up to 10% per year.

History of Polkadot

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

While working on Ethereum, Wood co-founded EthCore Blockchain Technologies, which later transformed into Parity Technologies. The company develops important blockchain infrastructure technologies such as the Substrate development framework and the Polkadot network.

In 2017, Wood also co-founded the WEB3 Foundation, a non-profit organization established with other developers to support Polkadot's research and development 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 multi-signature wallet code to steal 153K ETH (approximately $33 million at the time) from three different crypto wallets. In October, the foundation held an initial coin offering and raised $145 million in less than two weeks.

However, just days after the token sale, Parity Technology experienced a new hack. The ICO smart contract was hacked and 66% of the funds raised ($150 million) were frozen. The event was irreversible and inevitably slowed the early development of the project. Over the next few months, through private placements, the WEB3 Foundation team managed to raise enough funds to continue achieving its development goals, and by 2019, things were back to normal.

How Does Polkadot Work?

Polkadot allows funds to be sent from one digital wallet to another using a public and private key encryption system. The hash of the public key is the address you provide to receive funds, while the private key acts like a password and is used to authorize and broadcast transactions to the network. Approximately every six seconds, these pending transactions are confirmed in a transaction block, which together make up the Polkadot blockchain.

Of course, Polkadot offers more than just sending and receiving funds. Polkadot is a sharded multi-chain network coordinated by a central relay chain, allowing it to process data and transactions on multiple chains in parallel, called parachains. Its sharding architecture breaks the network into separate parts or shards. This increases the throughput of transactions, allowing them to be processed in parallel on each shard rather than sequentially across the network as in older generation blockchains.

As a result, multiple parachains can be plugged into Polkadot, gaining security from the entire network, significantly improving scalability, interoperability, and cross-chain functionality, eliminating the congestion, high fees, and incompatibilities of traditional blockchains. Polkadot utilizes a governance system managed by Polkadot holders to automatically manage upgrades without the need for hard forks.

To coordinate the network, Polkadot uses a nominated proof-of-stake (NPoS) consensus mechanism that rewards users with Polkadot coins for staking, rather than the mining reward incentives provided in proof-of-work blockchains like Bitcoin.

Stakers interested in maintaining the entire network can run a Validator node. Collators on Polkadot maintain Parachain nodes. Fishermen nodes oversee the network. Polkadot holders can stake tokens to participate as nominators, choosing to support up to 16 validators. Serve as a trusted candidate. The validators then generate new blocks, validate the parachain blocks, and guarantee finality.

Features of Polkadot

Scalability

Isolated blockchains can only handle a limited number of transactions. By connecting blockchains, the Polkadot network enables the parallel execution of many transactions on multiple chains, thereby eliminating the bottleneck that occurs on chains that process transactions one by one. This significantly improves scalability.

Specialization

Most blockchains are built for a specific purpose. Naturally, developers must make trade-offs (the blockchain trilemma) and face difficult decisions about which features to include and which to omit. Because resources are limited, and the potential for buggy code and technical issues increases exponentially with every feature added, no blockchain can contain every feature. Polkadot allows blockchains built using Substrate, a blockchain building toolkit, to run on its network. By building this development framework, teams can leverage off-the-shelf code blocks to develop and customize their blockchains more efficiently and faster than ever before.

Interoperability

Blockchains connected to the Polkadot network can exchange information and functionality without relying on centralized service providers. Polkadot offers interoperability and cross-chain connectivity, unlike previous blockchains that have primarily operated as standalone systems. This allows participants to transfer data between chains and opens the door to creative new services. A simple example is a DeFi service that pulls real-world data, such as commodity or stock prices, from an oracle chain.

Autonomy

The Polkadot network allows Polkadot holders and the Polkadot Council to submit proposals to active token holders and then vote on those proposals. Regardless of whether the proposal is proposed by DOT holders or the council, it will ultimately go through a referendum. All Polkadot holders, weighted by equity, then make decisions through voting. Agreed code changes are automatically implemented across the network. All of these factors are important components of the decentralized Internet, often referred to as Web 3.0. Web 3.0 is transforming centralized applications into decentralized, trustless protocols and enabling a future where users and machines can interact peer-to-peer with data, value, and counterparties without the need for third parties.

Uses of Polkadot

Polkadot provides various utilities for different entities and individuals. It enables an alternative, decentralized payment method outside of the interference of intermediaries, allowing for greater control over your funds.

Polkadot can also be used for speculation and investment, or as an alternative to expensive and slow international transfers. It could also provide an alternative financial system to the hundreds of millions of people who have access to smartphones but do not have bank accounts, introducing new opportunities to generate or supplement income through Polkadot staking.

Polkadot provides an interoperable, scalable, secure and decentralized platform that eliminates the bottlenecks of traditional blockchains and their high transaction fees, and is dedicated to defi, oracles, digital collectibles, games, and the Internet of Things , privacy, games, cross-platform projects provide solutions, etc.

Future of Polkadot

Many view Polkadot as one of the most promising networks of the future as it attempts to expand into a variety of uses. While the project is still in its early stages, a number of developments suggest the path it is paving could become the standard for value exchange. Polkadot may become the platform of choice for developing blockchain-based applications, especially as Ethereum releases a new version to solve many of the same problems. However, what is most advantageous about Polkadot is the combination of Substrate development tools and basic technical advantages, which may attract a large number of developers.

Polkadot serves as the protocol’s governance token and is used to secure the network or bind new chains, making it clear that the project aims to incentivize usage by rewarding participants. In fact, staking Polkadot has become one of the most valuable incentives in crypto, with an average annual return of 10%. The platform’s stable and reliable network and its compliance with its roadmap contribute to the project’s prospects. From a technical and economic value perspective, Polkadot is one of the most ingenious innovations in the blockchain industry, and the coming months will be key to assessing the network's actual capabilities.