WHAT IS POLKADOT (DOT)?
Polkadot is an open-source blockchain network that was launched in 2020. It is a global network of blockchains where users can operate or manage their blockchains. Polkadot also provides connectivity between blockchains without any third party and allows the transfer of information in a very secure manner.
Users can create parallel chains called “parachains”, which allow for efficient management of the blockchain network. This design decision by the developers of Polkadot, combined with its consensus mechanisms makes it extremely energy efficient.
Polkadot Whitepaper Explained!
EMERGENCE OF POLKADOT
Ethereum was Co-founded by Vitalik Buterin and Gavin Wood. Ethereum was innovative with the introduction of smart contracts, which are programs that can be executed on the blockchain. However, there were constraints with Ethereum.
It did not scale well, resulting in extremely high gas fees. It also faced issues with upgradeability. To solve this, Layer-1 chains were made, which are built over the Ethereum mainnet and became popular due to lesser gas costs.
This came with the additional restrictions of building additional mechanisms for inter-chain communication. Hence Gavin Wood founded Parity Technologies to gain experience in building clients for Ethereum, Bitcoin and Zcash before working on a protocol that would solve the weaknesses within existing blockchains.
This marked the beginning of Polkadot.
Polkadot Whitepaper: This blockchain protocol aims to be an ecosystem of chains. There are four parts:
- Relay chain:
The relay chain is the foundation of the Polkadot ecosystem. Network consensus, security and interoperability between chains and threads are achieved through this Relay chain.
Parachains are user-generated chains that are targeted toward specific applications. They are built on top of the Substrate framework and the features and parameters within them are highly configurable.
Parathreads are similar to Parachains, but are much lighter and don’t need to be in sync with each other always. This is economically advantageous for lighter purposes.
Bridges are mechanisms using which inter-chain communications can be conducted. They also allow connectivity to chains like Ethereum and Bitcoin. Bridges allow for features such as token exchanges between blockchains.
Relay chains and Parachains in Polkadot’s architecture
Coming to consensus, Polkadot took inspiration from the Ouroboros consensus method and came up with the Nominated Proof of Stake consensus.
Simple description of voting process
There are 2 types of people who manage the blockchain. One is the Nominator and the other is the Validator The Nominator is responsible for backing the Validators by staking a part of their Tokens (in this case, the DOT token in Polkadot).
In Polkadot, a nominator can back up to 16 validators at a time. The more backing a validator has, the more chances the validator has at becoming a member of the Active Set. The members of the Active Set are responsible for maintaining the blockchain (proposing blocks, validating them and adding blocks to the blockchain).
The process of selecting the validators in Polkadot is called the weighted sequential ‘phragmen method’. This is an algorithm that chooses the Validators according to the amount of stake backing them. Each Active Set lasts for a period called the Era. Currently, the Era is set for 24 hours. This means that an Active set can validate transactions and append blocks for 24 hours, after which new Validators are elected into the Active Set.
Additional Read: Polkadot vs Chainlink
POLKADOT’S (DOT) TOKENOMICS
The DOT token has a lot more applications in Polkadot, compared to its contemporaries like Ethereum and Solana:
Owners of the DOT token can vote on various parameter proposals of the blockchain (including but not limited to gas fees).
- Parachain Bonding:
To add a parachain to Polkadot, one must lock a fixed amount of DOT tokens. The tokens will stay locked until the purpose of the parachain is over and the parachain is ready to be removed.
- Network Operation:
DOT tokens are required by members of the blockchain (Nominators) to elect Validators, as mentioned in the architecture.
Token holders can participate as Nominators to stake support for Validators. Validators who are selected into the Active set receive equal incentives. The incentives received by a validator in the Active Set are distributed among the stakeholders in proportion to the number of tokens staked.
If any Validator is found to be performing illegal activities, their stake is slashed, and the amount of slash is proportional to the number of tokens staked for the particular Validator. This disincentivizes Validators from illegal activities and also disincentivizes Nominators from staking for potentially bad Validators.
ADVANTAGES OF POLKADOT (DOT)
Polkadot has a wide array of advantages. Some of them are:
- Better decentralisation:
The Nominated Proof of stake algorithm, combined with the weighted sequential ‘Phragmen method’ for electing the Active set members means that better decentralisation can be achieved. Also, people with more stake cannot exert as much influence on the blockchain as is possible with other Proof of stake consensus algorithms.
Parachains deployed on Polkadot can be built easily using the Substrate framework. Substrate enables various features for the end-user application and allows full flexibility for the characteristics that the parachain would need. Substrate allows lightning-fast syncing between nodes and makes network upgrades painless. Configurable transaction fees are a killer feature of substrate-based parachains.
- Minimal Carbon Footprint:
The Nominated Proof of Stake (NPoS) is considered to be one of the most efficient when it comes to carbon footprints.
UNIQUE PROJECTS RUNNING ON POLKADOT (DOT)
Polkadot Whitepaper: It processes all transactions from all chains in parallel; the concept can be called “parachains” so the transaction speed is fast compared to others. One of the main benefits of Polkadot is to establish security and fast and scalable transactions.
These are some leading projects of Polkadots, which makes it extremely competitive:
The project motive is to create DeFi hub that enables cross-blockchain liquidity and application
The smart contract that connects Ethereum projects to Polkadot; it allows the need for using new development tools to interact across chains.
Phala focuses on privacy-preserving cloud computing services.
It will allow users to access a variety of DeFi features while offering a number of different staking rewards and liquidity options.
POLKADOT (DOT) FACES STIFF COMPETITION
Some famous competitors of Polkadot and their features:
- SKALE Labs
● Near zero gas fees
● Random Node Selection/Frequent Node Rotation
● Storing files on the blockchain is possible within the SKALE Network.
● Avalanche is the fastest and 1st decentralised smart contract platform.
● There is 3 component of blockchains: The P-chain, G-chain and the X-chain
● It is eco-friendly, fast, and low cost.
● In its protocol, third parties are used for cross-chain transactions.
● It is based on three main cross-chain features, namely – Registration module, Data transmission module and Query module
- Cosmos Network
● Cosmos is a blockchain agnostic gateway between other chains in the ecosystem.
● Its focus on two key aspects – interoperability and customisation
● Applications: they always process and update their transactions quickly
● Networking: better communication between hub and zones
● The Proof-of-Stake module, which executes the authentication of transactions
POLKADOT’S (DOT) PERFORMANCE OVER THE YEARS
DOT/USDT | Source: Tradingview
Additional Read: Polkadot Price Prediction
POLKADOT WHITEPAPER SUMMARY (ROADMAP & VISION)
Polkadot aims to be the next-generation blockchain technology with the vision of a secure and resilient web that protects user interests using the principles of Web3.0. When new technology comes into the market, it takes time for it to be user-friendly and trustable for the audience.
Nowadays, the majority of people’s traffic is collected and/or controlled by several companies by their websites, and there is a high probability of data manipulation, fraud, and surveillance. Still, we trust the system blindly. More than 100 projects are currently being built for the Polkadot ecosystem.
It has projects like DeFi(decentralized finance), privacy-oriented data, and digital identity systems. Some of Polkadot’s services enable privacy of personal data by storing such data on their device only so there will be fewer chances for data manipulation. Some updates and features of Polkadot in vision to make it a better solution
- Past Updates
● POA – Proof of authority
● NPoS – Nominated Proof of stake
● Enabling Governance and Removing Sudo Phase
● Enable Balance Transfer
- Post-launch upgrades
● XCM (cross-consensus communication standard)
● XCMP (cross-chain message passing protocol)
Polkadot builds upon the concepts of Ethereum and Solana by being an ecosystem of chains instead of being one chain. An analogy to understanding Polkadot is that people can easily build porta-cabins in a city.
According to the purpose, people are free to build and dismantle the porta-cabins, and are also free to redesign existing porta-cabins in ways they see fit. Whereas Ethereum and Solana can be considered as skyscrapers where people are supposed to buy space for their own purposes.
We all know that such people are dependent on the existing structure of the skyscraper (walls, pillars, water supply, drainage, windows etc) and must design their spaces such that their “application” can fit within the skyscraper. This can lead to un-optimised spaces (lack of access to natural sources of light, un-optimised spaces due to intrusive walls, etc) and solving such problems may require additional expenditure.
HOW TO INVEST IN POLKADOT (DOT)
Use this three-step process to buy your first DOT token using the CoinDCX, crypto app.
- Sign Up for the CoinDCX account: Enter a valid email address and a user name on the sign-up page. Once the Email Id has been verified, set a strong password to secure your account.
- Verify the account: You need to complete your KYC, to buy a DOT token on the CoinDCX platform. All you need to do is upload the documents and your account will be set up in 15 minutes.
- Buy DOT INR: After the account has been verified, you can deposit any amount of fiat currency you are comfortable with and start your crypto journey!
Additional Read: Ethereum Whitepaper Summary
Disclaimer: User Generated Content – Original Content created by a member of BITS Pilani, under the consultation of Dr. Amit Dua, Assistant Professor, Computer Science Department, BITS Pilani, Pilani Campus in association with CoinDCX. The views and opinions expressed within this post belong solely to the author.
Author: Madhav Madhusoodanan, Tikesh Vaishnav