Polkadot Network (DOT)
A next-gen sharded network enabling chain communication and interoperability.
Polkadot describes itself as the next-generation blockchain protocol, with the ability to link numerous specialised chains into a single global network. Polkadot, which was formed by the Web3 Foundation and focuses on creating infrastructure for Web 3.0, wants to challenge Internet monopolies and empower individual users. Polkadot was created as part of a larger vision for a web that is fair, safe, and resilient by default (Web 3.0).
The Polkadot ecosystem, which is powered by the DOT, the network’s native coin, aims to address several of the current constraints of blockchains, such as scalability and security. It functions as a solution that combines the technology’s individual features.
The concept was created in 2016 and took a few years to come to fruition. The DOT coin did not enter the market until August 2020, and Polkadot was listed on Coinbase in June 2021, giving it final recognition.
The name of the network is already distinctive: On fabric, a polka dot design is made up of a series of huge filled circles of the same size. The circles most likely represent the several blockchains as well as the general design, the Polkadot crypto universe.
Polkadot’s history is intertwined with that of Ethereum. Dr. Gavin Wood, who was the CTO and primary developer of Ethereum, is the company’s creator. Solidity, the company’s smart contract programming language, was created by him. The project’s principal developer departed Ethereum in 2016 to work on a more sharded blockchain, and he published Polkadot’s white paper in October of the same year.
Wood co-founded the EthCore Blockchain Technology Company, which ultimately became Parity Technologies, while working at Ethereum. Important blockchain infrastructure technology, such as the Substrate development framework and the Polkadot network, were developed by the company.
Wood also co-founded the WEB3 Foundation in 2017, a non-profit organisation dedicated to supporting Polkadot’s research and development as well as its fundraising activities.
The organization’s first negative event occurred in July of the same year. A hacker took 153K ETH (about 33 million USD at the time) from three distinct wallets by exploiting a weakness in Parity’s multisig wallet implementation.
The foundation launched an initial coin offering in October, which raised $145 million in less than two weeks, making it one of the largest ICOs to date.
However, only a few days after the token sale, Parity Technology was hacked again. The ICO smart contracts were compromised, resulting in the freezing of 66 percent of the assets raised ($150 million). The event was unavoidable, and it hampered the project’s initial progress.
The WEB3 Foundation team was able to secure enough funding to continue meeting its development goals in the following months through a private sale, and by 2019, everything was back to normal.
Working / Architecture
Polkadot’s central chain is the Relay Chain. In DOT, all Polkadot validators are staked on the Relay Chain and validate for the Relay Chain. The Relay Chain has a limited number of transaction types, including ways to interact with the governance mechanism, parachain auctions, and NPoS participation. Smart contracts, for example, are not supported on the Relay Chain because it was designed with minimal functionality in mind. The primary task is to coordinate the entire system, including parachains. Other tasks are given to the parachains, each of which has its own implementation and features.
Polkadot parachains are distinct layer-1 blockchains connected to the Relay Chain that run in parallel. Each parachain can have its own look, feel, functionality, and governance. By linking to Polkadot, parachains gain access to the entire network’s security, eliminating the need to build their own validator community and allowing them to trade data other than tokens.
Polkadot was founded on the notion that one size does not fit all when it comes to blockchain architecture. Rather, to enable various functionalities and use cases, all blockchains make tradeoffs. For instance, one chain may prioritise identity management while another prioritises file storage. Because blockchains can have specific designs, they can provide better services while also increasing efficiency and security by eliminating redundant code.
Parathreads are parachains that use a pay-as-you-go concept to connect to Polkadot. They lower the entry hurdle for blockchains that do not require constant network connectivity. Depending on their needs and the availability of parachain slots on the Relay Chain, blockchains on Polkadot can transition between becoming parachains and parathreads.
Traditional blockchain technology lacked bridges, or the capacity for one blockchain to communicate with and transfer value to another.
Let’s say you want to buy an NFT in ETH but you only have BTC. Previously, you’d have to convert BTC to fiat currency before converting to ETH, or you’d have to buy ETH for BTC on an exchange. Without an intermediary layer, whether it’s an exchange or fiat, it’s impossible to transmit value or data from one Blockchain to another.
Validators stake the native token to secure the Relay Chain (DOT). They validate proofs from collators on the parachains, participate in consensus with other validators, and produce blocks on the Relay Chain if elected to the active set. They get staking incentives in exchange.
Nominators also contribute to the network’s security by staking their DOT on reliable validators, allowing them to join the active validator set. In exchange, nominators are typically given a percentage of the validator’s staking profits.
Collators aggregate parachain transactions and generate proofs for the Relay Chain’s validators. They can also use cross-chain message passing to transmit and receive messages from other parachains (XCMP).
Fishermen keep an eye on the network and report any suspicious activity to validators. The fisherman job can be played by any full node in the parachain.
A Polkadot based on the Substrate
Substrate is a modular blockchain technology that will serve as the foundation for most parachains in the Polkadot ecosystem. It enables developers to easily design and launch a blockchain with a choice of feature options to suit a variety of project requirements. WebAssembly smart contracts, multi-level permissioning, encrypted transactions and state, account-level locking, and governance tools are among the choices available. Polkadot can readily connect with substrate-based protocols, allowing them to form parachains in the system and share security.
Polkadot is the flagship protocol of the Web3 Foundation, a Swiss non-profit organisation whose purpose is to enable an open-source, fully functional, and user-friendly decentralised web.
Dr. Gavin Wood, Robert Habermeier, and Peter Czaban founded Polkadot.
Wood, the president of the Web3 Foundation, is the most well-known of the three, given to his industry clout as a co-founder of Ethereum, the founder of Parity Technologies, and the author of the Solidity smart contract scripting language. Web3 is also credited to Wood, who coined the concept.
Habermeier is an established blockchain and cryptography researcher and developer who is a Thiel Fellow. Czaban is a former Web3 Foundation Technology Director with extensive experience in highly specialised finance industry.
Polkadot’s governance is built on the proof of stake protocol, which has the primary purpose of ensuring that the majority of the stake always has authority over the network. Polkadot’s proof of stake is a nominated proof of stake (NPoS) system, in which validators are backed by their stake as a symbol of faith in their good behaviour.
The key difference with the more generic delegated proof-of-stake (DPoS) mechanism used in EOS, for example, is that if nominators choose a lousy validator, they risk losing their stake.
Several on-chain voting mechanisms, such as referenda with variable super-majority thresholds and batch approval voting, must agree on protocol changes.
Polkadot’s multilayered governance model enables protocol updates to be implemented without the hard forks.
Polkadot provides interoperability and cross-chain communication, unlike prior networks that were essentially independent settings. Polkadot allows networks and applications to share information and functionality without relying on centralised service providers. This allows consumers to transmit information between chains and opens the door to innovative new services. For instance, a financial services chain can interface with an oracle chain that offers access to real-world data, such as stock market price feeds for tokenized equities trading.
DOT Token And It’s Tokenomics
The Polkadot network’s native coin, DOT, serves three purposes.
· It can be staked for the network’s operation and security;
· it can be bonded to connect a chain to Polkadot as a parachain;
· and it provides holders a say in the network’s governance.
DOT is inflationary, which means that, unlike Bitcoin, there is no limit to the amount of DOT that may be created. The rate of inflation is not set in stone; it is expected to be 10% in the first year. The DOT is used for validator incentives, with the rest going to the Treasury.
A Planck is the smallest unit of account in the ecosystem, equal to 0.0000000001 DOT.
DOT is ranked 14th largest cryptocurrency at the moment, is now trading at $15.06 (1,154 INR), as of MAY 3rd 2022. and as market size of more than $14.5 Billion. There are presently 987 million tokens in circulation.
Polkadot’s first initial coin offering (ICO) took place in October 2017, with a price of $0.29 and a total of 2.24 million tokens available. The second ICO took place in July 2020, with a Polkadot price of $1.25 and a total of 342,080 DOT tokens sold.
Polkadot is a project with a lot of potential. In a short period of time, it has risen to number fourteen in terms of market capitalization (as of May 2022), indicating that investors have high hopes for it. The task now is to beat back competitors (such as Cosmos) by creating the most seamless solution in this nascent decentralised financial ecosystem. As the buzz around Polkadot grows, with slot auctions going live and the network’s full capabilities attracting investors and projects, it’s natural to get caught up in the euphoria and wonder what this unique platform will look like in a year or two.
While there are some risks and potential drawbacks to the platform, it is backed by a strong team, has been joined by major partner projects, and has so far delivered on its promises. It’s no coincidence that the same people that are working on Ethereum 2.0 are also introducing the Polkadot ecosystem to the globe. Polkadot’s developers have paid special attention to addressing all of the flaws that plagued and hindered previous blockchain systems, such as Bitcoin’s lack of customizability and Ethereum 1.0’s scalability.
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