What is Polkadot (DOT)
Polkadot is one of the most exciting crypto protocols that looks to provide an ecosystem of interconnected blockchains. Polkadot creates this ecosystem by utilizing these components – Parachains, Relay Chain, and Bridges. In addition, the Polkadot protocol solves one of the most pressing issues of the current blockchain ecosystem – interoperability.
Before we go any further, let’s acquaint ourselves with the Polkadot team.
Who Made Polkadot?
Polkadot was founded by Gavin Wood, Peter Czaban, and Robert Habermeier in 2016. Gavin Wood is known for being the co-founder of Ethereum and inventing the Solidity language. Wood also co-founded Parity Technologies in 2015 with Jutta Steiner. These three have also co-founded Web3 Foundation – a non-profit responsible for maintaining the Polkadot protocol.
Another interesting thing to know about Polkadot is that it’s Substrate-based. Substrate is a modular framework that allows you to “create purpose-built blockchains by composing custom or pre-built components.” Substrate was made by Parity Technologies, another company co-founded by Gavin Wood.
What Problem Does Polkadot Solve?
The two major obstacles to mainstream blockchain adoption are scalability and interoperability. Scalability, aka speed, is pretty self-explanatory, however, what about interoperability?
Look at our blockchain ecosystem right now. We have so many smart contract platforms like Ethereum, EOS, Cardano, Tezos, Algorand. Every single one of them has its own set of decentralized applications. However, can an Ethereum dApp effectively communicate with an Algorand dApp? What if we have thousands of smart contract platforms in the future, and each of them becomes its own silos?
Without effective cross-chain communication, the ecosystem as a whole is not going to evolve. For example, imagine if you have an account on HSBC and your spouse has one in CIBC, you can’t transact with each other.
This is the primary problem that Polkadot aims to solve, which begs the next question.
How Does Polkadot Work?
As mentioned above, the Polkadot ecosystem has three major components:
- Relay Chain
Let’s look at each of these components.
The main Polkadot blockchain is the relay chain, whose main job is to finalize transactions. The relay chain separates the process of adding and validating new transactions. Because of this separation of processes, Polkadot can process over 1,000 transactions per second.
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The relay chain uses a validation of Proof-of-Stake (PoS) called nominated-proof-of-stake (NPoS). In this system, anyone can participate in network governance by locking up their DOT in special contracts. Participants can take one of the following roles:
- Validators: Validate data in parachain blocks. Vote on network changes and participate in consensus.
- Nominators: Delegate your staked DOT to validators and nominate them to take care of the network.
- Collators: These nodes store the full history of each parachain, They aggregate parachain transaction data into blocks and add them to the Relay Chain for finality.
- Fishermen: Monitor the network and report suspicious activity. Fishermen who stake DOT receive DOT rewards.
Parachains are custom blockchains that can be built on top of the Polkadot relay chain. The relay chain is used to finalize parachain transactions. To become a parachain on Polkadot, you must apply for a slot through a parachain auction. The relay chain hosts all the auctions. Projects bid for a slot and the slot duration using DOT tokens.
Teams can apply for a DOT crowdloan to bootstrap their auctions. People can contribute to a promising project by locking up their DOT tokens. Teams can structure their crowdloan and reward structure however they want.
Polkadot will be using bridges to interact with other blockchains. Currently, the team is developing bridges with Bitcoin, Ethereum, and Cosmos.
To ensure a decentralized and trustless bridge, Polkadot will be using the following methods to create the bridges:
- Bridge pallets: Substrate-based chains can use a bridge pallet to connect with Polkadot. A pallet is an in-built Substrate structure that allows this connection.
- Smart contracts: If a chain isn’t Substrate-based, they will need to use smart contracts to make the bridge.
- Higher-order protocols: If a chain doesn’t support smart contracts (like Bitcoin) you will need to use XCLAIM or other similar protocols. Particularly in XCLAIM, a collateral of higher value backs a swappable asset.
What is Polkadot Governance?
The following parties are responsible for Polkadot governance, aka looking after network well-being.
- DOT holders: Anyone who holds DOT can participate in governance by participating in staking and auctions.
- Council: Council members are elected by DOT holders and are responsible for proposing changes. Council proposals require fewer votes than those brought forward by DOT holders.
- The Technical Committee: The committee is made of teams that are actively building on Polkadot. The Council members choose the Technical committee members.
Polkadot is one of the most exciting projects in the entire crypto space and it elegantly solves the interoperability problem through its use of parachains and bridges. As the blockchain space becomes more diverse, projects like Polkadot are essential to breakthrough the ecosystem silo and ensure interconnectivity.