Polkadot is a next-generation blockchain protocol with the objective to bring multiple blockchains together into a single network. The protocol builds on the foundations of previously launched blockchain networks like Ethereum and Cardano. The Polkadot blockchain seeks to provide a framework where individuals can effortlessly build their own blockchains, and it offers transparent and seamless exchange of data among different blockchains.
Back in 2017, Parity Technologies launched Polkadot as an open-source project, in collaboration with the Web3 Foundation. Dr. Gavin Wood, the mastermind behind the Polkadot crypto is Dr. Gavin Wood, co-founder of Ethereum and the author of the Solidity smart contract programming language. Robert Habermeier – the co-founder of Polkadot, is well known for being a distinctive member of the Rust programming language community.
How Does Polkadot Network Works?
The four pivotal elements that keep the Polkadot blockchain functioning properly are the Relay Chain, the Parachains, the Parathreads, and the Bridges. Let’s find out a little more in detail about them, shall we?
- Relay Chain:
The Relay Chain is the central Polkadot blockchain where all transactions are validated. The Relay Chain separates the addition of new transactions on the chain and the act of validating them, which allows the Polkadot blockchain to facilitate speedier transactions than most of its contemporaries. The Relay Chain is responsible for the network’s security, consensus, and cross-chain interoperability.
The Polkadot Relay Chain uses a variation on the Proof-of-Stake (PoS) consensus algorithm, dubbed the Nominated-Proof-of-Stake (NPoS). This allows any user staking the Polkadot coin, DOT, to play one or more of the following roles on the network:
- Validators – A validator, as the name suggests, can validate transactions performed on the chain, participate in consensus, and propose and vote on suggestions about the Polkadot blockchain’s workings.
- Nominators – Nominators secure the Relay Chain by picking validators they trust. Nominators assign the Polkadot coins they staked to the validators, and give away their own votes to them in the process.
- Collators – Collators are essentially nodes that collect data related to transactions made on Parachains and put them into blocks to be validated and added to the Relay Chain.
- Fishermen – Fishermen monitor the Polkadot crypto network and report any suspicious conduct to the validators.
Parachains are the independent blockchains running on top of the Relay Chain. Parachains make use of the Relay Chain’s resources to confirm the accuracy of the transactions made on top of them. Each Parachain on the Polkadot blockchain is meant to serve a specific purpose. Every parachain is maintained by the collator responsible for producing blocks on that chain.
Parathreads operate much the same way as a full parachain. The basic difference between parachains and parathreads is the fee structure. The registration of a parachain on the Polkadot blockchain is done through a governance proposal or a parachain slot auction. However, there’s a set fee for Parathread registrations that is much lower than the cost of registering a Parachain.
Bridges are the special Parachains that connect the blockchains running within the Polkadot ecosystem to external blockchains like Bitcoin, Ethereum, EOS, and Cosmos. This allows the seamless transfer of tokens between the Polkadot blockchain and outside networks without requiring a centralized exchange.
What Advantages Does the Polkadot Blockchain Bring Over Other Blockchains?
Polkadot doesn’t have to employ a singular blockchain to provide all kinds of services since the parachains allow the Polkadot ecosystem to employ separate, specialized blockchains to serve different purposes.
- Cross-Chain Communication:
The best thing about the Polkadot parachains is that they are able to cooperate by communicating with each other. Along with enabling different token transfers, the parachains can exchange messages and ask for information.
- Scalability and Increased Speed:
While almost all blockchains that came before the Polkadot crypto had issues with the swift processing of transactions, Polkadot does not suffer from that same problem. Since all the parachains process transactions and produce blocks parallelly with the Relay Chain, the speed of the network overall is increased by a significant margin.
- Easy Upgradability:
In the case of almost all of the Polkadot blockchain’s predecessors, blockchain upgrades sometimes require forking the network, which takes quite a lot of time and effort. Hard forks especially can be quite difficult for the community members, even causing network splits like Bitcoin Cash. However, with the Polkadot crypto, the parachains and the main blockchain can upgrade themselves without the need for a chain fork. This particular feature allows the projects built on the Polkadot blockchain to implement and adapt to technological updates with ease.
- Transparent Governance:
The Polkadot coin, DOT, maintains the Polkadot crypto ecosystem. The Polkadot blockchain is designed to be fully run by its community, and the network allows its users to govern the network in a completely decentralized manner. They can vote on an existing proposal or can propose any changes to the protocol.
Projects Building on the Polkadot Blockchain:
With the numerous unique features of the Polkadot blockchain, it’s no wonder that various projects have been building on Polkadot since 2018. These Polkadot projects are diversified and span several industries. Let’s take a look at some of the most popular Polkadot projects built within the ecosystem till date:
Founded in 2019 also by Gavin Wood, Kusama is based on the same codebase as the Polkadot blockchain, albeit being an early, unaudited release. The networks share the same underlying architecture, and governance on both the platforms is decentralized and permissionless, so all users who own the native tokens get a say in how the networks are run (Kusama’s native coin is called the KSM).
Kusama is Polkadot’s canary network. The title comes from the idea that canary birds were used in coal mines so they could detect Carbon Monoxide and other toxic gases and warn the miners of their presence. Similarly, Kusama plays the role of a canary by detecting any shortcomings or vulnerabilities in the Polkadot codebase. Kusama was developed to be a test bed for any and all new features planned to be implemented on the Polkadot blockchain. Once the new features land on Kusama and prove to work just fine, they are integrated with the Polkadot crypto network.
Polkastarter is a DEX (decentralized exchange) built for cross-chain token pools and auctions. Other features of Polkastarter include token swaps through smart contracts, permissionless listings, private pools with password, and high slippage price alerts.
Powered by the Polkadot crypto ecosystem, Polkastarter is able to facilitate cross-chain swaps, and stay connected to the Ethereum Network and other blockchains for liquidity. With Polkastarter, projects will be able to raise capital fast in a decentralized and interoperable environment.
Energy Web Token (EWT) is a project launched with the objective to integrate the blockchain tech into the energy sector. The project is also creating a decentralized energy exchange.
As of right now, electricity markets around the world are mostly overly centralized and monopolistic. Consumers generally shop exclusively with the large players, which limits the options available to them. The non-profit Energy Web platform intends to instead bring about a consumer-centric energy market, with the help of blockchain technology.
The Energy Web Chain uses a proof-of-authority (PoA) based consensus mechanism and utilizes a copy of the Ethereum Virtual Machine (EVM) for distributed computations. The block rewards and the various charges on the Energy Web Chain are paid in the Energy Web Token (EWT) – which is the platform’s native crypto token.
Ankr is a blockchain infrastructure marketplace for Web 3.0. The Ankr project allows consumers to make use of customized and user friendly nodes. Essentially, Ankr enables easy access to blockchain technologies and DeFi by eliminating the need for complicated setups or high technical knowledge. The native coin of the network is ANKR.
Ankr allows easy deployability of the Polkadot coin validators, and collaborates with other Polkadtor projects building within the Polkadot ecosystem.
Polymath is a security token platform that has very recently moved from Ethereum to the Polkadot ecosystem. As of right now, both Polymath’s ST20 security token (ERC-1400) and native POLY token (ERC-20) are live within the Polkadot crypto network. Following the shift from Ethereum, Polymath is looking to further develop its token’s functionalities utilizing Polkadot’s unique benefits.
According to the developers behind the SORA project, SORA is on its way to become the decentralized central bank for the world. Put simply, SORA is an economic system that decentralizes the notion of a centralized bank. The SORA network provides various tools for decentralized applications that use digital assets, like facilitating atomic token swaps, bridging tokens to other blockchains, and creating programmatic rules.
Injective Protocol is one of the very first universal DeFi platforms for cross-chain decentralized derivatives trading. Market creation on the Injective platform is entirely open and permissionless, which enables any user to create a market using only a price feed and deploy it to the overall Injective ecosystem. With its unique layer-2 structure, the Injective protocol is also able to avoid high gas fees, as well as network congestion.
MANTRA DAO is a community governed DeFi platform that offers financial products such as staking and decentralized lending. MANTRA DAO makes use of the Rio Chain, a blockchain that is scalable, provides the maximum security, and connects to the Polkadot blockchain.
Litentry is a decentralized, cross-chain identity aggregator protocol that is intended to serve multiple networks. Litentry allows users to aggregate identities from other chains, and comes with an identity matching and identity staking mechanism.
Poolz Finance is a decentralized platform for conducting cross-chain IDOs (Initial Dex Offering). Poolz Finance allows users to create a pool for a new token where the investors get instant access to said tokens. The protocol aims to better connect project owners & early-stage investors.
So, Is the Polkadot Coin a Good Investment?
Despite the fact that Polkadot is fairly new to the crypto scene, it’s already one of the best-performing altcoins out there. Back in August 2020, when the tokens first started trading, the prices were around $3 /coin. Since then, the prices have gone up to about $39 as of the beginning of March, 2021, which showcases a gain of around 983.8%.
Polkadot is already considered an alternative to Ethereum by many in the crypto community. Indeed, it’s undeniable that the new features Polkadot plans to implement in near future (like external audits for its parachains) prove it a suitable replacement for Ethereum. Whether Polkadot manages to dethrone Ethereum or not, that remains to be seen, but when it comes to the Polkadot coin price predictions, it’s very likely that the prices will continue to rise in 2021. Moreover, Polkadot price predictions also state that given that the hype surrounding Ethereum continues to grow, it could also help Polkadot prices go up, since the two cryptos are quite closely linked.
In terms of market cap, Polkadot is already among the top ten highest valued cryptocurrencies across the globe, with a market cap of over $35 billion. At this point, it’s quite safe to say that the Polkadot coin has proven to be a much better investment than most of its contemporaries.
And there you have it, a detailed look at the Polkadot ecosystem! We do hope this article has helped you understand the network a little better. For more posts on cryptocurrencies and trading advice, do give our blog a visit!
Do check out our other curated lists as well.
Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.
Subscribe To Our Newsletter
Join our mailing list to receive Cryptocurrency investing and trading recommendations to your mailbox.
You have Successfully Subscribed!
Subscribe to get notified on latest posts.