Polkadot (DOT): what is it, how does it work?
Dwain Ross
12 / January / 24
Visitors: 177
Polkadot is an Ethereum-competing blockchain created in 2017 that aims to be more scalable, yet secure, it allows "specialized" blockchains to interact. In other words, Polkadot allows other blockchains to interact with each other in an environment with shared security guarantees.
In this way, the network allows developers greater freedom, and Polkadot can develop a significant ecosystem.
Polkadot was founded by Gavin Wood, co-founder of Ethereum. He also founded the Web3 Foundation, which is designed to oversee and promote the project. The Polkadot blockchain continues to be developed by Parity Technologies, which is improving the protocol with its Substrate framework.
Polkadot consists mainly of a relay chain (primary blockchain - Layer 0), parachains and paratrades (secondary / specialized blockchains - Layers 1).
The relay chain (Layer 0) carries out the main Polkadot transactions and connects the various parachains and paratrades. The goal is to delegate more specialized functions to paratrends.
On the parent blockchain, blocks are generated every 6 seconds, but the fund indicates that it can reduce this time to 2 or 3 seconds if necessary. Fees on this main chain are relatively high for the Proof of Stake blockchain (around €0.3-1 per transaction).
Polkadot network
Parachains (Level 1) are secondary blockchains attached to a relay chain. They have a lot of freedom in building their network and can even create their own token for their blockchain. Thus, these parachains are linked to each other by the relay chain and share common security guarantees.
However, projects wishing to get a place in a parachain must participate in a crowdfunding process.
Polkadot paratrend
Paratrends are also secondary blockchains connected to the Polkadot network. The difference is mainly economic. Unlike parachains, which have guaranteed access once elected, paratrends have no such access and must pay additional fees when they are used. However, they get the same access to the relay chain without having to win auctions (crowund credits).
This network structure allows Polkadot to qualify as "Forkless" and "Future proof", given that the biggest changes to the network will occur through parachains rather than in the main chain.
Finally, the entire network is based on the NPoS consensus. NPoS is a derivative of the Proof-of-Stake consensus, where additional entities (Nominators, Validators, Collectors, Fishers) help to ensure the stability and security of the network through innovative mechanisms: BABE (block creation mechanism) and GRANDPA (finalization mechanism).
Polkadot Crowdlands and Parachains
As mentioned above, Polkadot Crowdlands (auctions) are used to obtain a parachain slot for two years.
The first 5 auctions are held and the project with the highest number of blocked DOT tokens wins the corresponding parachain.
Users who invested in the parachain will receive tokens from the winning project, but their DOT will be locked in the protocol for about two years.
Other users will be compensated for their DOTs and will not receive any reward at the end of the auction.
Some of Polkadot's parachain projects
- Moonbeam: a platform that aims to make Ethereum smart contracts compatible with Polkadot.
- Acala: a decentralized financial protocol on Polkadot that is compatible with Ethereum (DEX).
- Clover Finance: a cross-chain platform that aims to solve wallet problems by offering a wallet compatible with all blockchains.
- Litentry: a decentralized cross-chain identity aggregator
- Manta: an on-chain solution designed to improve privacy and interoperability.
What is the DOT token used for?
DOT is a native token of the Polkadot blockchain and is required to interact with it. The token is used to pay transaction fees for DOT and other Polkadot-based tokens.
Platform Management
The governance of Polkadot is divided between DOT holders and a 13-person board (currently it can include 24 people). The purpose of this council is to represent all passive users who do not participate in the management of the project. Decisions on future development are made by referendum.
Ensuring the security of the network
As in all PoS blockchains, pledged tokens are used to secure the network. Locked DOTs are used to create nodes in the network that validate transactions.
Overall, Polkadot is a promising project that has the potential to become one of the leading blockchains in the future. However, before making a final decision on whether to invest in Polkadot, it is important to carefully evaluate the potential advantages and disadvantages of the project.
