What is Polkadot?
Polkadot is a next-generation blockchain protocol that aims to achieve complete interoperability across different blockchains by integrating all of them in a single network. It was founded by the Web3 Foundation, led by DR. Gravin Wood, the co-founder of Ethereum.
How does Polkadot work?
The Polkadot relies on many key elements in order to allow multiple blockchains to work together:
Relay Chain:
The Relay Chain is the backbone of the Polkadot network. It is a large blockchain who acts like a hub connecting other chains to itself. This structure allows different blockchains to communicate and share data. This chain is secured by validators who are accepting new blocks from all parachains.
Parachains:
Parachains are independent blockchains working within Polkadot's network. Each of these blockchains has a specific purpose to achieve. For example, one blockchain is going to handle smart contracts while another finalizes payments between parachains. Parachains are secured from a 51% attack or similar by leveraging Polkadot's shared security feature.
Cryptocurrency projects need to compete in a public auction in order to run a parachain on Polkadot.Parathreads:
Parathreads are quite similar to parachains. The main difference between the two is that crypto projects can get a parathread slot immediately, and for a short period.
Bridges:
Bridges play an important role in achieving Polkadot's goal of interoperability between blockchains. They will connect Polkadot to isolated networks like ethereum or bitcoin and allow for token swaps between those networks and Polkadot.
What problems does it solve?
Polkadot aims to solve three blockchain issues: scalability, limited to no interoperability across blockchains and hard forks.
Scalability :
Many blockchains suffer a scalability problem. Let's take Bitcoin and Ethereum for example. Both cryptocurrencies have very high transaction fees. While Ethereum gas fees used to be cheap back in the day, it cost up to $250 to send Eth these days.
The spike in gas fees is due to the huge demand for these cryptocurrencies and inability of their networks to process all the transactions in time. In fact, Bitcoin can only process 4.5 transactions per second. As for Ethereum, it processes transactions a bit faster at 12 transactions per second.
This scalability issue denies cryptocurrencies from becoming more mainstream means of payment because of how slow they are at processing transactions compared to Visa and Mastercard who can process up to 2,500 transactions per second.
With Polkadot being a sharded multichain network, It can process multiple transactions from all chains in parallel. This parallel processing feature gives it a huge advantage compared to legacy networks that processed transactions one by one, and makes it highly scalable and suitable for the development of dapps .
- Limited to no interoperability across blockchains:
Interoperability is the possibility to access and share information across different blockchains.
Most blockchains are isolated and don't communicate or share any data across each other. For example, you can't send BNB on the Ethereum network.
Polkadot aims to bring different blockchains under one roof by offering cross-chain communication. It leverages the different parts of its network we discussed earlier to build a strong interoperability between different chains.3.hard forks:
Blockchains, like any other software, need upgrades for adding new features or improving their security. These upgrades usually lead to hard forks, especially when new features are being added or when the network undergoes a major change.
Hard forks tend to be very time-consuming and may cause the network to split, like in the case of Hive.
The Polkadot network and its parachains can all be updated without the need for hard forks, allowing blockchains to evolve easier.
What is the DOT in Polkadot?
The Dot token is being used on polkadot for different functions:
- Governance: Dot holders can vote for protocol upgrades and decide which new features will be added.
- Staking: DOTs are being staked by validators and nominators within Polkadot's network in order to reach consensus.
- Bonding: In order to win a parachain slot, crypto projects' DOT tokens need to be locked.
In case you are looking forward to invest in this token, it is tradable on many tier 1 exchanges like Binance and Coinbase. Always remember to do your own research!
Thanks for reading this far, and feel free to ask any questions in the comments.
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