Since the time blockchains have been around, users have had to choose which network to be a part of. Lack of interoperability has been a deterrent to the wide adoption of the technology. Polkadot is trying to change that. It is a blockchain protocol to connect other blockchains – even those that were previously incompatible. With this, Polkadot has the potential to unify the entire blockchain ecosystem.
How Does Polkadot Work?
The Polkadot network functions through a base chain and multiple additional chains. They work together to provide a fast and scalable infrastructure.
Relay Chain
The relay chain is the base chain of the network. It determines the security of the network and allows for communication across chains on the platform. In essence, it provides the foundation for the protocol on which all other chains are built.
The functionality of this relay chain is limited. This has been done intentionally to make cross-chain compatibility simpler and more efficient. For example, the relay chain itself does not support smart contracts. Its main function is communication and coordination of the network.
Parachains
The additional chains on the network are called parachains. Short for parallel chains, they are independent blockchains with their own governance and native tokens. Developers can build and launch parachains for their own unique purposes.
However, since they are linked with the relay chain, they can take advantage of its security solutions and interoperability. This allows the developer to focus on their own applications while the relay chain takes care of the rest.
Governance
Polkadot’s governance is a version of Proof of Stake consensus. The system is called Nominated Proof of Stake and allows for two types of users. The first is validators, who run nodes and enable blocks to be confirmed and added to the blockchain. Second, nominators back validators with their staked tokens.
The platform has a multi-layered governance structure. This allows users to perform on-chain votes on protocol changes and issue updates without relying on a hard fork of the network.
Polkadot Ecosystem
The platform’s ecosystem is made up of three main elements – The network, the governance and its native token, DOT.
The network is the backbone of the entire protocol and enables developers to create interoperable blockchains easily. As mentioned above, the relay chain provides coordination across the network and the parachains allow unique applications to exist on sovereign blockchains.
Second, governance keeps the system running smoothly and securely. Decision-making by Polkadot users ensures the future of the network is determined by those with a stake in its success. It also provides nominators and validators rewards for making their services and tokens available.
Finally, all these actions are powered by the native token of Polkadot, DOT. Owning this token grants you voting rights for decisions on the network. These include network upgrades, governance structure and status of parachains. It also secures the network through staking.
Bonding is another application of the tokens. To launch a parachain, you are required to “bond” tokens. During the period that the chain is active, these bonded tokens stay locked on the network. Once the parachain has been removed from the network, these tokens are unbonded and can be retrieved.
How To Stake Polkadot?
The staking process on Polkadot is a little complicated due to the various limitations placed by the network. Firstly, the minimum number of tokens for becoming a nominator is 10 DOT. However, even if you have 10 DOT staked you may not earn rewards. The minimum stake amount for rewards changes dynamically based on network characteristics. Second, there can only be 50,000 nominators on the network at any time.
If you meet all the required criteria, you can begin staking by
- Creating a Polkadot account.
- Then, head to their website and choose the staking link.
- Clicking on “Account actions” and adding a nominator makes you choose how many tokens you wish to stake.
- Finally, you can choose a validator and nominate them. You are now staked on the Polkadot network.
Benefits of Polkadot
Fast and Scalable
The Polkadot network can support transaction speeds much higher than the more popular blockchains. It currently reaches over 1,000 transactions per second, compared to 7 and 30 for Bitcoin and Ethereum respectively. Adding more parachains and developing the network further will only increase this number.
Interoperable
The main selling point of Polkadot is that it allows different blockchains to communicate with each other. This is a major advantage for the entire field of blockchain technology and brings the Web3 future closer.
Simple to Create
Creating a new parachain for your own application is a simple process. The relay chain takes care of most network complications, allowing you to focus on improving your own application’s experience.
Final Thoughts
There are hundreds of projects being developed for Polkadot. The protocol is making it much easier for developers to create unique solutions without fear of congestion or being locked to one blockchain’s ecosystem. While it is still too early to judge its effectiveness, Polkadot’s future looks promising.
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FAQ
Is Polkadot on Ethereum?
No, Polkadot is an independent blockchain protocol that allows different blockchains to communicate with each other. This means it can allow Ethereum to communicate with blockchains like Bitcoin, which is not traditionally supported.
Is Polkadot a Stablecoin?
No, DOT is the native token of the Polkadot protocol. It enables the functionality of the network and its staking. Its price moves independently like any other crypto token.
What is Polkadot Used For?
Polkadot is used by developers who wish to create interoperable blockchains with ease. This allows them to program their applications on a sovereign blockchain while still enjoying the benefits of the Polkadot network.
