You may not imagine the name Polkadot when you think about cryptocurrency, but this project offers something which sets it apart from other blockchains. The pink dots scattered across its website and white paper are a clue that tells us precisely what it does: store value for people all over the world using decentralized applications (dApps).
The Polkadot is a blockchain network designed to connect blockchains. For example, blockchains like Bitcoin and Ethereum are incompatible and don’t play at all with each other. Polkadot creates a communication link between two projects on the blockchain, giving them the ability to communicate with one another.
But wait, there’s more.
Polkadot also offers its Substrate framework, which allows users to develop their own blockchain quickly. The network can host these user-built blockchains while overseeing network transactions and security. As a result, Polkadot positions itself as a significant player in the DeFi marketplace.
With DeFi, users have control of their funds. There’s no need for a third-party entity – like a bank – to perform basic transactions. This ecosystem is designed to disrupt traditional finance while giving individual users power over their assets.
Who Created Polkadot?
The Web3 Foundation, a Swiss foundation developed to manage and oversee a decentralized internet, created the Polkadot project in 2016. This entity has three founders: Peter Czaban, Robert Habermeier, and Gavin Wood.
Wood is the most famous of the trio. His popularity is a result of his involvement with both Ethereum and Parity Technologies. To a large extent, he’s responsible for Solidarity, the programming language used for smart contracts on the Ethereum blockchain. Wood’s counterpart, Habermeier, brings with him a background in blockchain and cryptography, while Czaban touts experience in machine learning and business development.
Is Polkadot Valuable?
Polkadot was created to provide a platform that could manage and support multiple blockchains in a decentralized manner. As a result, Polkadot – which is an open-sourced project – allows blockchains to operate in parallel with one another.
With that purpose in mind, the Polkadot team identified several key goals it hopes to attain:
- Interoperability amongst various blockchain networks.
- Provide scalability.
- Offer the best security possible for blockchain networks built on the platform.
- Support in developing and updating blockchains that don’t fork.
- Creating a sustainable and eco-friendly validation platform.
How Does Polkadot Work?
The primary piece of Polkadot’s network is its relay chain protocol. This protocol handles the consensus and security of the platform, along with its cross-chain interoperability. Additional components of the Polkadot system include the following:
- Parachains – These are blockchain networks that have their own tokens and ecosystem. Parachains use their own governance mechanisms and are typically optimized for specific uses.
- Parathreads – Similar to parachains, parathreads rely on a pay-as-you-go model. As a result, these blockchains are better suited for networks that don’t require constant connectivity.
- Bridges – With this protocol, parachains and parathreads can communicate to outside networks. This is how Polkadot offers interoperability to its users.
Polkadot is built on the proof-of-stake consensus mechanism with a bit of a twist. The project’s native token, DOT, gives network validators the power to vote on Polkadot decisions. This voting power incentivizes DOT holders to behave with integrity since they have a financial stake in the project itself.
As you probably guessed, Polkadot’s DOT token has more uses than just as a voting and governance coin. The project also uses it to pay for fees charged when blockchains communicate with one another. Additionally, DOT is used for various roles within the platform that perform specific functions. These roles include nominators, validators, collators, and fishermen.
You can read more about these roles and other aspects of the project on the Polkadot Technology page.
If you want a better idea of what Polkadot is and how it works, check out the video below:
Why are People Investing in Polkadot??
With its Substrate framework in place, Polkadot is attracting developers in droves. The appeal of the Polkadot platform is in its “ready-made” options that make life easier for developers. Many investors know that if developers are using the platform, it must be worth exploring a little further, which is exactly what Polkadot wants.
Furthermore,, Polkadot drives momentum to its platform with parachain auctions. These auctions give projects the opportunity to persuade voters to cast their vote for them. Projects with the most votes for each auction earn a sought-after spot on the Polkadot network.
One final way Polkadot has piqued the interest of investors is through its ecosystem. Since its inception, the platform has shown significant growth by supporting popular protocols and providing the framework for developers to succeed. As Polkadot continues to welcome new projects, the expectation is that the platform’s growth will expand as well.
What is the Future of Polkadot?
As you can see, Polkadot did not rise to prominence by sitting on its laurels. The project has been moving forward since its inception, and it’s clear, based on the Polkadot roadmap, that it plans to continue doing so. Polkadot expects to continue offering high-quality, innovative features and functionality to its users.
Among these features include horizontal and vertical scalability and nested relay chains. These solutions will look to answer questions such as “How far can a blockchain scale on the Polkadot blockchain before it breaks?” As the project searches for the answer, one thing is for sure: Polkadot isn’t standing pat.
Will Polkadot Continue On Its Current Path?
If it doesn’t stay its course, that will be news to Polkadot. You know the phrase, “Act as if?” That’s how Polkadot behaves. The project regularly has conferences and gatherings to inform its users, token holders, and investors of the latest goings-on.
A major reason to believe Polkadot will continue on its current path is the sheer number of industries impacted by the platform. There are financial applications, data storage projects, and Internet of Things (IoT) tools. So if you’re looking for something in the blockchain world, there’s a good chance you can find it on the Polkadot network.
What Does Polkadot Bring to Decentralized Finance (DeFi)?
Polkadot offers developers a way to quickly and efficiently develop dApps on its platform, which is a big reason the project became so popular. Recently, however, Polkadot has seen a rise in decentralized exchanges (DEX’s) built on its platform. Polkadex, Polkapool, and Orderbook are just a few DEX’s built using the Polkadot network.
Even though these decentralized exchanges offer different features and functionalities, all incentivize growth within the DeFi market. These projects, and many others, are excellent examples of the creative and unique ways DeFi is changing the world of finance.
A New Way to Look at Blockchain Interoperability
Polkadot aims to provide a unique way for blockchains to scale and communicate with one another. In addition, the platform brings a fresh solution to answering the interoperability problems plaguing the blockchain industry with its relay chain technology. With Polkadot, blockchains that have long existed in silos can now communicate with one another.
Additionally, Polkadot features its Substrate framework, which draws developers to its network. With developers come investors, which serves to make Polkadot an even bigger force in the blockchain market.
To learn more about Polkadot, its organization, and its roadmap, check out the following links and resources:
Polkadot Network – https://polkadot.network/
Polkadot Roadmap – https://polkadot.network/launch-roadmap/
Polkadot Team – https://polkadot.network/about/
Polkadot Technology – https://polkadot.network/technology/