What is Polkadot — Everything You Need To Know
Interoperability shortcomings have been a persistent problem with blockchains, which is where Polkadot comes to the rescue. It seeks to create a ‘Blockchain of Blockchains’ that is interoperable by design. Plus, it ensures scalability, specialized customization, self-governance, and forkless upgrades.
The native token of Polkadot, DOT, is worth $37.41 with a total market cap of $13.45 billion, at the time of writing. Earlier, we shared with you comprehensive guides about new developments in the crypto industry. In this blog, we’ll talk about Polkadot, which seeks to disrupt the crypto industry and revolutionize the way we use the internet.
What Is Polkadot?
Polkadot is a Decentralized Finance (DeFi) ecosystem where customizable blockchains (parachains) run independently of each other within a single unified network. Gavin Wood built this next-generation protocol with a vision to challenge the monopoly of big internet companies. Certain features make Polkadot unique and the most innovative offering in the blockchain industry.
Being a sharded multichain network, it has the potential to simultaneously process multiple transactions on parallel parachains. Primarily, this effectively eliminates performance bottlenecks. Moreover, the Substrate Framework ensures that each blockchain is designed and created for a unique use-case while being able to seamlessly share data across networks.
However, in Polkadot, cross-chain interaction doesn’t imply interference, as each network has complete autonomy in its governance. Additionally, Polkadot eliminates the often-criticized ‘Hard Fork’ by its innovative ‘Forkless Upgrade’ feature.
How Does Polkadot Work?
Polkadot’s architecture consists of four crucial elements—Relay Chain, Parachains, Parathreads, and Bridges. The Relay Chain is the main blockchain where the network finalizes the transactions. Additionally, it provides security to the parallelly-running sharded blockchains, referred to as parachains. In turn, parachains are quasi-autonomous blockchains that are fully-customizable, have their own set of rules, and can offer diverse sets of use-cases.
Parathreads help in establishing links with relay chains that run on a ‘pay-as-you-go’ security setup, getting instantaneous leases for short periods. Finally, bridges allow interoperability with external blockchain networks like Bitcoin and Ethereum.
Projects On Polkadot?
Some of the projects that can be found on Polkadot are Acala, Moonbeam, Centrifuge, Edgeware, Polkastarter, Exeedme, and Akropolis. Acala offers DeFi services and its native crypto—ACA—is used as a governance token. Moonbeam is an interoperable, Ethereum-compatible platform used for deploying cross-chain smart contracts. Its token, namely GLMR, is used for paying transaction fees. Centrifuge is another project that makes lending possible against real-world assets, serving as a gateway for these assets to enter DeFi.
Edgeware, a parachain on the Polkadot ecosystem aims to create smart contracts and is based on the Substrate Framework. Another project is Polkastarter which functions as a decentralized fundraising platform, facilitating interoperable cross-chain auctions as well as token pools. Exeedme is a Polkastarter-based gaming platform and Akropolis helps in fostering community economies through under-collateralized borrowing and lending.
Usage Of The DOT Token
The native token of Polkadot is DOT and its main use cases are governance, staking, and bonding. First, ownership of DOT tokens grants you voting rights on the platform. This can relate to network fees, upgrades, as well as the addition or removal of new parachains.
Secondly, a Nominated Proof-of-Stake (NPoS) consensus mechanism serves in staking DOT tokens by the network validators and nominators. This is also the platform’s primary security mechanism, which restricts the validation of fraudulent blocks.
Thirdly, network participants can use DOT tokens for bonding, where the network locks the tokens for adding new parachains. Additionally, DOT can be traded and swapped on crypto-exchanges, both centralized and decentralized, like Binance, Kraken, and Huobi.
In a rapidly-digitizing world, Polkadot facilitates a self-sustaining space wherein individuals control their assets, as well as data. The Web3 Foundation—Polkadot’s developer—has been consistently working towards the creation of a truly-decentralized financial domain. In doing so, it has footprints in online identity, social networks, and cloud storage, alongside finance.
As a part of this holistic journey, Polkadot represents the ideals of community-oriented development. In the days to come, the platform is the most likely to become a go-to solution for small, medium, and enterprise-grade blockchain projects. This article was our attempt at preparing you for the future world.