Since the advent of Bitcoin as a Cryptocurrency, we’ve witnessed the growth of Cryptocurrencies as a payment method, store of value and financial assets. Blockchain technology has also evolved over the last decade, with different innovative blockchain concepts having come into being.
This Post Contains
- What Is Polkadot Blockchain?
- How Polkadot Blockchain Works.
- Relay Chain.
- Consensus Algorithm– Nominated Proof-of-Stake (NPoS).
- Polkadot (DOT) Tokenomics.
- Coin Statistics.
However, for the most part, blockchains have failed in the quest to address the challenges of Interoperability of cryptocurrencies, DeFi protocols and blockchains.
Polkadot blockchain has been designed in such a way that will address this hurdle of Interoperability among blockchains. Making it easier for blockchains to link with other blockchains and transfer their data and assets cross-chain.
What Is Polkadot Blockchain?
In a Layman’s terms Polkadot is a “blockchain for blockchains”
Polkadot is an open-source Layer 0 blockchain ( a multichain network on which other blockchains can be built) designed to connect multiple blockchains and make blockchains interoperate.
The Layer 0 network means Polkadot blockchain can connect public, private chains, permissionless blockchains and permissioned blockchains. Allowing these independent blockchains (Parachains) to seamlessly share data, assets and transactions through the Polkadot network (Relay Chain).
Unlike other cross-chain protocols that only make it possible to swap in between tokens on different blockchains, Polkadot enables cross-chain transfer of data, assets and tokens giving blockchains connected to the Polkadot network ability to interoperate with other blockchains.
How Polkadot Blockchain Works
The Polkadot network serves as a foundation (relay chain) on which other Layer 1 blockchains are built (Parachains). These Parachains are designed for specific purposes and then integrated into the relay chain.
The Parachains are developed based on the framework laid down by the relay chain, they can then implement new features, thereby giving room for a Flexible, Interoperable and Scalable ecosystem.
While other blockchains only allow developers to build dapps using smart contracts, Polkadot gives them full control over the underlying blockchain itself.
The relay chain is the main engine of the Polkadot network. It determines the network’s consensus, cross-chain Interoperability and shared security.
The relay chain also provides the framework for designing the Layer 1 blockchains running on the Polkadot network.
Its main function is to coordinate the network and ensure its security as a whole.
Parachains (Parallel chains) are independent layer-1 blockchains that run in parallel to each other and are connected to the relay chain. Each parachain can be designed to serve specific purposes and have its own design, governance, features and functionality. The parachains are interconnected, flexible, share the security of the relay chain (Polkadot network) and are scalable as only one blockchain doesn’t have to process a large amount of data or transactions at once.
In order to become a parachain on Polkadot, projects have to participate in a parachain auction.
Parathreads are Parachains that are run on the Polkadot network on a pay-as-you-go basis.
They’re an alternative way of using Parachains but on a temporary basis, as they access the Relay Chain when they need to. And payment is made for the time the Parathread is connected to the relay chain.
Consensus Algorithm– Nominated Proof-of-Stake (NPoS)
The Polkadot network uses the Nominated Proof-of-Stake consensus algorithm, a variation of the Proof-of-Stake adopted by most blockchains.
Nominated Proof-of-Stake is the process of electing validators to participate in the consensus protocol of the Polkadot network.
With the Nominated Proof-of-stake, specific roles are assigned to nominators, validators, fishermen and collators who collectively ensure the security of the ecosystem.
Related: What Is Solana?
Nominators elect validators that they trust, and stake their DOTs in support of their validators. If some of these candidates are selected as validators, the nominators get a percentage of the staking rewards those validators earn on the job.
Once elected by nominators, Validators secure the Relay Chain, participate in consensus with other validators, validate transactions, validate proofs from collators on the parachains and produce blocks on the Relay Chain. In return, they earn staking rewards which are shared with the nominators who have staked their Dot tokens to support them.
Their job is the most demanding as they need to build their reputation before they can be selected as validators on a regular basis. Unlike nominators, only a limited number of candidates can be selected as validators. Which is why they need to gain the trust of Nominators by building a long-standing reputation.
They play the most important part in securing the network.
Collators are assigned to a specific parachain, they work together with validators by collating transactions and linking them into a block after which the proofs are verified on the relay chain by validators.
Fishermen monitor the network and report any malicious activity to validators. They earn rewards when they detect and report these malicious activities.
Polkadot (DOT) Tokenomics
Dot coin is the native cryptocurrency of the Polkadot network.
The Dot coin is used for staking to ensure the smooth running and security of the Polkadot network.
DOT gives holders a say in the governance of the Polkadot ecosystem. Holders of DOT coin can participate in the decision-making process of the Polkadot network and lend their voice on how the platform should be run.
DOT is also used to pay transaction fees, connect Parachains to the network and elect validators.
Polkadot token is inflationary which means that there’s no maximum number of DOT tokens and the number will increase as time goes on.
Current Price: $18.79
Market Cap: $18,561,132,074
Total Supply: 1,103,303,471
Circulating Supply: 987,579,314.96
All Time Low: $2.69
All Time High: $55
Exchanges: Binance, OKX, DigiFinex, FTX, and Bybit.
Polkadot network is striving to address the challenges of Scalability and Interoperability of blockchains in a unique way compared to other projects. Interesting projects such as Kusama Network ( Polkadot’s canary network) have also been launched by the blockchain.
Whether you’re launching your DeFi project or you’re a cryptocurrency enthusiast, Polkadot ecosystem is a protocol you should consider as it is one for the future.