Polkadot is a blockchain protocol designed to support multiple chains within a single network. His goal is to overcome a problem in today's blockchain landscape: hundreds of blockchains exist in isolation and have little ability to communicate.
Polkadot is developed by Parity Technologies, led by Gavin Wood and Jutta Steiner, two former Ethereum executives. The project is also supported by the Web3 Foundation, a closely related organization that provides the project with funding, advocacy, research, and collaborations.
Parity was founded in 2015. Initially, it started working on a node software for Ethereum, called the Parity Ethereum client. The company has removed support for that project, leaving it to focus on Polkadot and a related project, Substrate.
Development started in November 2017, when the developers posted the first code on Github.
The company launched two proofs of concept in mid-2018 and implemented the first Polkadot parachain in July 2018. Polkadot was launched in an “initial” state in May 2020, and token transfers were enabled in August 2020.
As of September 2020, the Polkadot relay chain has not yet been activated and chain auctions are not yet active.
What is Polkadot?
As noted above, the Polkadot design is intended to support multiple chains. It is not simply a single blockchain that exists in isolation. There are several advantages to your approach:
- Scalability: Polkadot supports multiple blockchains through a mechanism called "chunking" or parachutes. This allows transactions to be processed efficiently and in parallel.
- Interoperability: Different Polkadot applications and parachutes can share information and functionality thanks to the interoperable project design and cross-chain compatibility.
- Specialization: Each Polkadot parachain can be tailored to a specific use case or application.
- Forkless upgrades: Polkadot can be upgraded without time-consuming and splitting hard forks; New features can be added without checking the entire network.
Substrate and Parachains
Each Polkadot chain is called a "Parachain". Developers can create their own parachain with Substrate, a framework for building blockchains.
It is also possible to run blockchains developed with Substrate without being part of the Polkadot network; Polkadot simply provides interoperability, consensus, security, and other services for substrate-based chains.
Parachains can support functions found in many other blockchains, including smart contracts (Ethereum), ZK-snarks (Zcash), and UTXO transactions (Bitcoin). These characteristics are not a fundamental part of Polkadot; instead, these features can be added to and removed from parachutes.
Developers can also call functions that exist in other parachains.
There are many different use cases for Polkadot Parachutes, including Transaction Chains, Oracle Chains, Identity Chains, File Storage Chains, Data Preservation Chains, IoT Chains, Financial Chains, and Privacy Chains.
More than 25 projects are based on Polkadot, including Chainlink and Ocean Protocol. Here is a complete list of target projects.
Parachains are just one of several components that make up the Polkadot network. Other components include:
- The relay chain: The main communication center between the parachutes and Polkadot's "backbone".
- Parachains: Independent blockchains that run on top of the relay chain, linked together, and reserved by auction.
- Parathreads: a lighter alternative to parachains for developers who just want to try Polkadot, offered under a “pay-per-use” model.
- Bridges: modules and contracts that connect to other blockchains like Bitcoin and Ethereum.
Furthermore, there are several actors in the Polkadot network that keep the blockchain operational:
- The validators, who stake DOT tokens, validate collector tests, and participate in consensus.
- Nominators, who bet DOT tokens and secure the relay chain by selecting trusted validators.
- Classifiers, that collect transactions and create tests for validators.
- Fishermen, that monitor the network and report malicious activity.
The DOT token
Polkadot raised around $ 140 million by selling its DOT token in a 2017 ICO. The company also made two private sales in 2019 and 2020 and raised an estimated $ 100 million in those subsequent sales.
Due to a bug in Parity's Ethereum wallet, about half of the original ICO tokens were frozen. Those frozen tokens have not been recovered, but the loss has not affected Polkadot's ability to operate.
Polkadot began allowing investors to trade the remaining tokens starting in August 2020. Since then, DOT has been listed on more than 40 exchanges, and high trading volumes have caused the coin's market capitalization to skyrocket and to become one of the top five cryptocurrencies.
The DOT token was also “redenominated” by a factor of 100x at the time trading began. This did not change the market capitalization of the token; it just made the token amounts more readable.
There are three main uses for the DOT token in addition to basic financial transactions: governance, participation, and linking.
Against the competition
There are at least two blockchains that can be considered competitors. Cosmos, which started operations in March 2020, aims to build a network of chains like Polkadot. However, there are technical differences between each platform.
If Polkadot is correct, his approach provides a more cooperative shared security model.
Ethereum 2.0 also has features that are comparable to those seen on Polkadot. Both blockchains are based on fragmentation or different chains dedicated to specific purposes. Again, there are some technical differences: Polkadot claims that his approach offers better availability and validity, and that it can work with fewer validators per chunk.
The project can also be compared to Tezos, which is also designed to support upgrades without hard forks; however, there are some other similarities between the two platforms.
Polkadot is a promising project. Since many application developers are looking for ways to reach a wider audience, and since there are many different blockchains, the platform could prove useful to many.
The high ranking position in the DOT token market can also be beneficial to the reputation of the project.
However, there are also some issues: Polkadot's issues with token management, combined with the fact that there are more established platforms, could limit the scope of network adoption. Polkadot has yet to produce a "killer app" and it remains to be seen if it will enter the limelight beyond its initial price-related hype.