Polkadot is another potential Ethereum killer that has a significant contribution to the crypto space. Gavin Wood, the co-founder of Ethereum, designed this platform to run several chains in a parallel way. It’s one of the most innovative projects in the crypto space that establishes a connection between different blockchain networks.
It means that Bitcoin, Ethereum, and other incompatible networks can exchange value and data using this protocol. The Polkadot project was launched in 2016 and its native token, DOT, was introduced in the market in August 2020. The project became more popular when it was listed on coinbase in June 2021.
Polkadot is the brainchild of Gavin Wood, the co-founder of Ethereum, who invented the solidity smart contract language. Dr.Wood released the first draft of Polkadot in Oct 2016. He was aimed at introducing a sharded version of Ethereum.
In 2017, Dr. Wood founded the Web3 foundation in collaboration with Parity’s Peter Czaban. This non-profit organization was introduced to support the research and development of the project. Web3 Foundation raised around $145 million for the project through the first token sale in Oct 2017.
Parity Technologies was then selected for project development. But a problem appeared when someone hacked the Parity Multisig Contract in Nov 2017 and froze around $90 million worth of ETH permanently. Polkadot filed a petition in the Ethereum Community to find a way to release those funds. But the problem is still unresolved.
Even after such a huge loss, Web3 Foundation and Polkadot announced that they still have enough funds to complete their development milestones. Web3 foundation again launched a private token sale in 2019 to raise required funds for the project and they closed this sale at a successful valuation.
Polkadot started testing its relay chain in May 2018 by introducing several Proofs-of-concept (PoCs). The organization publicly launched, Kusama, an unrefined and unaudited form of the project in Aug 2019. This canary network was used to test sharding, staking, and governance under real economic conditions.
The First Mainnet Chain Candidate of Polkadot was launched on May 27, 2020, that was managed by six validators of Web3 Foundation because the first version of Polkadot operated as a proof-of-authority network. The second phase of Polkadot was launched on June 18, 2020, which operated as a nominated proof-of-stake network.
The third and fourth phases of Polkadot were launched in July 2020. These updates were launched to distribute governance rights among different entities.
Polkadot is currently among the top 10 cryptocurrencies (in terms of market cap) with a circulating supply of 1 million tokens. The number of tokens is expected to increase by 10% per annum.
These tokens are rewarded to the participants who validate transactions by staking their tokens. The remaining tokens are stored in the network’s treasury to incentivize the participants accordingly.
What Makes Polkadot Different?
Like many other cryptocurrencies, Polkadot is a decentralized protocol and a digital token that enables users to transfer funds to each other without dealing with an intermediary.
The reason why it became so popular is that it’s playing a vital role in the mass adoption of blockchain technology. Most blockchain networks exchange little to no information with each other due to which users can’t transfer money from one platform to the other.
They’re bound to create a new account on a blockchain network if they need to send or receive money from someone on that particular blockchain. Polkadot is filling this gap by introducing parallel blockchains (parachains). With this protocol, the users can securely transfer data/value without dealing with an intermediary.
The parachains will also facilitate the developers by allowing them to create a standard Dapp or Defi project that can smoothly run on all the platforms. This will help save a lot of time and resources the developers are currently using for building apps on competing networks.
How Does Polkadot Work?
Like many other cryptocurrencies, Polkadot uses a decentralized protocol to transfer funds from one digital wallet to another. Polkadot blockchain authorizes and broadcasts transactions that are performed using its platform.
Polkadot isn’t just limited to authorizing transactions, it can do a lot more than that. This network allows the creation of three types of blockchains including the Relay Chain, Parachain, and Bridges.
The Relay Chain
The relay chain is the most important part of this blockchain where transactions are finalized. It processes data and transactions on several chains in parallel, aka parachains. The relay chain boosts Polkadot’s capacity to perform 1,000 transactions per second by separating the addition of new transactions from the validation process.
Unlike older generation blockchains, Polkadot divides the network into individual segments using sharded architecture. Thus, the transactions are processed in parallel rather than sequentially. This layer enables networks to incorporate new protocols while using their own PoS mechanism.
The parachains run alongside the relay chain and they’re responsible for verifying the accuracy of transactions. Parachains help with eliminating high fees, congestion, and incompatibility of legacy blockchains while improving interoperability, scalability, and cross-chain functionality.
Polkadot uses these protocols to interact with other blockchains. The developers are currently working on building bridges with Ethereum, Cosmos, Bitcoin, and EOS. Using this method, Polkadot will allow users to swap tokens without using a centralized exchange.
Benefits for DOT stakeholders
DOT token holders can lock their tokens in a special contract using Nominated Proof-of-stake consensus. They can then perform one or more of the following roles to earn some benefits:
Validators: These participants validate different transactions processed through parachain blocks. These contributors can also vote for changes proposed for the network.
Nominators: These participants delegate their staked DOT tokens to trustworthy validators to secure the relay chain.
Fishermen: These participants are responsible for reporting bad behavior to the validators.
The participants receive DOT rewards when they perform these roles by staking their DOT tokens.
Polkadot Future Prospects
Polkadot is focused on establishing 150 parachains in 2022. The team is currently working on launching the Parity’s bridge that will connect Polkadot to Kusama. After the successful launch of this program, they will connect Polkadot to Ethereum through Snowfork’s bridge. The team believes they will find more participants once these protocols are launched successfully.
Polkadot has a significant role in the crypto space as it’s designed to support the mass adoption of cryptocurrency globally. Polkadot is focused on eliminating the gas fee and congestion while allowing users to swap different crypto tokens smoothly. Feel free to get in touch with us if you need more information about Polkadot.