Polkadot positions itself as the next-generation blockchain protocol ,capable of connecting multiple specific chains into one universal network. With a solid spotlight on building infrastructure for Web 3.0 – and founded by the Web3 Foundation – Polkadot aims to disturb Internet monopolies and empower individual users.
Blockchain has been around since the inception of Bitcoin. While it has been known as a pivotal technology, there are also certain drawbacks to take into consider. Individual blockchains can’t communicate with another. Introducing interoperability between various chains could lead to the exchange of data, and eventually more powerful applications and services.
Developers have tried to “bridge” blockchains previously. Doing so allows chain A to work with chain B as vice versa. However, connecting many (think hundreds or thousands) blockchains at the same time remains a pressing issue. Polkadot’s team, and by extension, the Web3 Foundation, is confident that a elegant solution can be created throughout the next few years.
What is Polkadot?
Described as an open-source protocol built for everyone, Polkadot claims to be the next step in the evolution of blockchain technology. It’s a concept initially envisioned by Dr. Gavin Wood, co-founder of Ethereum. The team wants to focus its efforts on security, scalability, and innovation. To do so, the necessary infrastructure needs be created to not only support new ideas and concepts but also ensure that proper interoperability can be achieved.
An individual blockchain in the Polkadot ecosystem is known as a parachain (parallel blockchain), while the fundamental chain is called the Relay Chain. The idea is that parachains and the Relay Chain can easily exchange information at all times. You could think of parachains as being similar to individual shards in the planned implementation of ETH 2.0.
Any designer, company, or individual can spin up their custom parachain through Substrate, a framework for creating cryptocurrencies and decentralized systems. Once the custom chain is connected to the Polkadot network, it becomes interoperable with all over parachains on the network.
Building cross-chain applications, products, and services should become a lot more direct with this design. Cross-blockchain transfers of either data or assets have not been possible on a large scale before.
Securing and validating the data across these different parachains is done through network validators, where a small set of these validators can secure multiple parachains. These validators will also ensure transactions can be spread across multiple parachains to improve scalability.
The benefits of Polkadot
There can be many reasons for developers to explore the Polkadot ecosystem. Because of the limited idea of current blockchains, it’s evident there are a couple of core issues to address: scaling, customization, interoperability, governance, and upgradeability.
On the scaling front, Polkadot checks a lot of boxes. It acts as a multichain network, allowing it to process transfers in parallel across various individual chains. This removes one of the biggest roadblocks associated with blockchain technology today. Parallel processing is a significant improvement and can pave the way for broader worldwide blockchain adoption.
The people who search out customization can take advantage of a few different features provided by Polkadot. At this point, there is no “one blockchain infrastructure to lead them all”. Every undertaking has its singular necessities and prerequisites, and Polkadot allows every individual chain to have its design enhanced for that particular functionality. With the help of Substrate, developers can efficiently adapt their singular chains to suit the needs of the project.
On the interoperability front, having projects and applications share data flawlessly is a big factor. While it remains to be seen what kind of products and services this will create, there are many possible use cases. It can create an entirely new financial ecosystem, with every individual parachain taking care of one particular aspect at a time.
Any community associated with a specific parachain will be able to govern their network as they see fit. Moreover, all communities are crucial to the future governance of Polkadot as a whole. Gathering feedback from the community can yield valuable insights that evolve projects over time.
Also, Polkadot makes it very easy to upgrade individual parachains. There is no need for hard forks, as this can splinter communities. Instead, the native chain can be upgraded in a frictionless manner.
The DOT token explained
Like most other blockchain infrastructure projects, Polkadot has its own native token. Known as DOT, it serves as the network token, just like ETH is the token for Ethereum and BTC is the token of Bitcoin.
Several use cases exist for this token. First of all, it grants token holders with governance rights of the entire Polkadot platform. This includes determining network fees, voting on overall network upgrades, and the deployment or removal of parachains.
DOT is also designed to facilitate network consensus through staking. Like different networks that involve staking, all DOT holders are incentivized to play by the rules at all times. How come? Well, if they don’t, they could lose their stake.
The third option is to use DOT for bonding. This is required when new parachains are added to the Polkadot ecosystem. During a holding period, the bonded DOT is locked. It’s released once the bond duration has ended and the parachain is removed from the ecosystem.
Staking and bonding on Polkadot
Polkadot’s approach to interoperability goes well beyond just the exchange of data and assets. It is also a way to introduce new concepts, such as incentivizing honest token staking and bonding tokens.
Staking tokens on a blockchain network is not a new concept. Known as Proof of Stake (PoS) this consensus model works by rewarding users for staking coins on the network. With Polkadot, honest stakers are rewarded, while bad actors can lose their entire stake.
As we’ve mentioned, every new parachain is added by bonding DOT tokens. Bonding refers to committing tokens to the network for a specific period of time. Chains that aren’t useful or projects that are no longer maintained will be removed, and their bonded tokens returned.
On paper, there are numerous things that make Polkadot attractive to developers. It’s an ecosystem equipped of catering to individual coders, as well as small businesses and large corporations. Having the option to convey custom blockchains to suit explicit necessities, and upgrade them without hassle is a novel concept that could be valuable for the entire crypto space.
That being said, Polkadot remains an extremely young ecosystem. While many projects may be under development, it will take some time until the first big projects launch. According to PolkaProject, there are hundreds of projects being developed, spanning from wallets to infrastructure projects, tooling, DApps, and more.
As far as DOT is concerned, the Polkadot creators have claimed this is not a token designed for hypothesis. Although it has a monetary value on exchanges, it’s primarily designed for the purposes outlined above.
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