Polkadot (DOT), the interoperable protocol for building Web 3.0


What is Polkadot?

Polkadot is a new generation protocol that unites a network of several interconnected blockchains. The Polkadot network facilitates scalability by allowing these specialized blockchains to communicate with each other in a secure and transparent environment.

The Polkadot protocol is designed to connect and secure unique blockchains , whether they are public networks, private consortium chains, oracles or other Web 3.0 technologies. It makes it possible to create an Internet where independent blockchains can exchange information under common security guarantees.

Thus, the Polkadot network allows to transfer arbitrary data – and not just tokens – through blockchains. Using Polkadot technology, it is possible to create applications that get data from a private blockchain and use it on a public blockchain.

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For example, a private blockchain containing a school’s academic records could communicate evidence of credential checks with a public blockchain, without disclosing the information it contains.

The Polkadot project is supported by the Web3 Foundation , an organization based in Switzerland and founded in 2017 by the famous Gavin Wood , co-founder of the Ethereum blockchain .

The Web3 Foundation was created to promote and mentor technologies and applications in the field of decentralized protocols, especially those that use modern cryptographic methods, for the benefit and for the stability of the Web 3.0 ecosystem.

It was this organization in particular that commissioned Parity Technologies to build Polkadot . Also founded by Gavin Wood , Parity has a leading team of distributed systems engineers, cryptographers, system architects and researchers.

The Polkadot ecosystem

The architecture of the Polkadot network

The Polkadot network being a multi-chain including an interoperability protocol, it consists in particular of the Relay Chain , para-chains , parathreads and bridges.

The Relay Chain

The Relay Chain is the central chain of the Polkadot network and can be considered as the parent blockchain. All Polkadot validators store their DOT on the Relay Chain .

Its role within the Polkadot ecosystem is essential and consists in coordinating consensus and communication between para-chains via bridges.

Transactions on the Relay Chain will likely have higher fees than those performed on para-chains. This is because most of the computational work should be delegated to para-chains, which have varying implementations and characteristics.

Currently, a block of the Relay Chain is produced every 6 seconds. This is subject to change depending on the needs of the network at a specific time. Thus, the production time of a block can go down to 2 or 3 seconds in order to increase the capacity of the network to process many transactions.

Representation of the Relay Chain
Representation of the Relay Chain

 

Para-chains

The para-chains (or parachains) are at the heart of the Polkadot network and make it very special. Most of the operations carried out on the entire Polkadot network are delegated to these secondary chains, called para-chains.

Since these are intended for a specific use case, this allows the network to allocate its resources as needed.

A para-chain is a data infrastructure specific to an application, globally compatible and verifiable by the validators of the Relay Chain of Polkadot . Most often, a para-chain takes the form of a blockchain , but they do not have to be real blockchains.

Para-chains can have their own economy with their own native tokens , without the DOT being necessarily necessary for their operation.

The Polkadot protocol allows para-chains to finance their implementations on the network in a decentralized and secure manner. The reasoning in this regard is treated as crowdfunding.

When locations on the Relay Chain are auctioned, anyone can create a new fundraising campaign to secure a para-chain slot. When a campaign is created, up to four time slots can be selected, for a total duration of approximately two years.

Representation of a para-chain
Representation of a para-chain

Parathreads

Para-threads work the same way that para-chains, with the exception that they can participate temporarily in the Polkadot network, without the need to rent a dedicated location .

Thus, the chains which would not have the possibility to acquire a complete slot on the network can still participate in the shared security of Polkadot.

In addition, this option also offers an exit ramp to para-chains, in the event that they no longer need a dedicated slot, but still want to use the Relay Chain.

Representation of a parathread
Representation of a parathread

Bridges

Bridges represent the means for two distinct chains to communicate between them. For example, bridges allow para-chains and parathreads to connect and communicate with networks external to Polkadot, such as Tezos , Ethereum or even Bitcoin.

Representation of a bridge
Representation of a bridge

The different roles of the participants in the consensus

The participants in the Polkadot network are divided into 4 groups , each with a specific role.

 

Nominators

Nominators  secure the Relay Chain by selecting good validators and storing DOT.

They are responsible for the designation of their staking of DOT tokens to validators. By allocating their staking, they are able to elect all of the active validators and share the rewards paid to them. Nominators can also play the role of validators.

Representation of nominators
Representation of nominators

Validators

Validators secure the Relay Chain by storing DOT, validating evidence from collectors and participating in consensus with other validators.

These serve two purposes. First, they check the validity of the information contained in a set of blocks of a para-chain assigned to it. Their second role is to participate in the consensus mechanism to produce the blocks of the Relay Chain based on the validity statements of the other validators.

In the event of non-compliance with the consensus algorithms, a sanction by the removal of some or all of the DOTs staked by the validator is applied. Thus, it deters bad actors.

Representation of validators
Representation of validators

The collators

The collators maintain the para- chains by aggregating user transactions and producing evidence of state transitions for validators. They also monitor the network and prove bad behavior to validators.

Collectors maintain a full node for a particular para-chain, which means they keep all the information needed to be able to create new blocks and execute transactions the same way miners do. on other blockchains.

Representation of collators
Representation of collators

Fishermen

The fishermen are complete nodes of para-chains , like collators, but their role is different. Instead of bundling state transitions together and producing the next blocks of para-chains, fishermen monitor the process and ensure that no invalid state transitions are included.

Thus, fishermen submit invalidity reports if they find that a fault has been committed during the production of a para-chain. If they are right about the reported fault, they are rewarded with a lot of DOT tokens, but they risk losing their stake if they are wrong.

Representation of a fisherman
Representation of a fisherman

Polkadot’s consensus algorithm

More precisely, Polkadot uses Nominated Proof-of-Stake (NPoS) as consensus for the operation of its network. This consensus, described as hybrid, is notably composed of GRANDPA and BABE, two mechanisms each playing precise and complementary roles.

BABE

BABE block production mechanism (for Blind Assignment for Blockchain Extension ) is the block production mechanism that runs between nodes and determines validators for new blocks.

The BABE protocol allocates block production slots to validators based on their DOT token staking and using the Polkadot randomization cycle .

Every 6 seconds (value may fluctuate depending on the speed of creation of a pre-established block), Polkadot validators participate in a lottery that tells them whether or not they are selected for validate the block of a slot.

Since this mechanism is based on a random component, several validators can be candidates for the same slot.

In other cases, a slot may be empty, resulting in inconsistent block creation time. If this occurs, an algorithm secondaire takes over and selects a validator capable of validating said block concerned.

GRANDPA

GRANDPA finishing protocol (for GHOST-based Recursive ANcestor Deriving Prefix Agreement) is the finalization device that is implemented for the Relay Chain of Polkadot.

This protocol can finalize a new block, regardless of the number of blocks passed since the end of the last block. If network latency is low, GRANDPA can finalize blocks almost instantly.

If the network is congested, GRANDPA can theoretically finalize millions of blocks at a time without any overload . The operation consists of finding a common blockchain prefix on which all validators can agree.

Diagram representing the interaction between certain elements of the Polkadot network
Diagram representing the interaction between certain elements of the Polkadot network

The Kusama Network

Kusama is an experimental network for Polkadot, a first unaudited version of the code that is available prior to a potential implementation in Polkadot. For developers, Kusama is a testing ground for Polkadot updates, blockchain governance, and para-chains.

Far from being a simple testnet, the Kusama network works like Polkadot, but remains a network dedicated to experimentation .

Thus, Kusama is a network accessible to all and investors who have participated in the various Polkadot fundraisers can claim a proportional amount of KSM tokens , the native asset of the network .

It should be noted that the KSM token is notably available for trading on many platforms, the same ones that list the DOT. This is rather exceptional for a network solely dedicated to experimentation.

As Kusama network is fully operational, its KSM token follows all the use cases of the DOT token: staking, governance, etc.

What is the DOT token used for?

DOTs are the native tokens of the Polkadot network for the execution of the key functions of the platform. Before going into the details of the use cases of DOT, let us first observe its tokenomics : its name and its provisioning, among others.

The denomination of the DOT

The smallest unit of account in the Polkadot network is the Planck (a reference to the length of Planck, the smallest distance possible in the physical universe). You can compare Planck to satoshi for Bitcoin or wei for Ether.

UnitDecimal PlacesExample
Planck00.0000000001
Microdot (uDOT)40.0000010000
Millidot (mDOT)70.0010000000
Dot (DOT)101.0000000000

 

The supply of DOT tokens

Unlike Bitcoin and its 21 million BTC, DOT is inflationary , there is no maximum number of tokens in circulation . Inflation is designed to be 10% in the first year , with the rewards granted to validators based on the amount of DOT staked by them.

It should be noted that Polkadot will forge or burn DOTs in order to reward nodes that participate in the operation of the network and to control the rate of inflation.

Now let’s take a look at use cases for DOT tokens . These are numerous and should even increase as the protocol evolves. When Polkadot is deployed, the DOT has 3 very distinct functions: network governance , staking and linking of para-chains (or bonding ).

DOT and network governance

The first function of DOT is to give its holders the right to exercise full control over the governance of Polkadot. All the privileges which for other networks are exclusive to minors will be granted to holders of DOT tokens.

This includes handling exceptional events such as protocol upgrades and fixes. This governance function also includes the determination of network costs as well as the pace of auctions for the addition of para-chains.

Staking DOT tokens

The second function of DOT is to facilitate the consensus mechanism that underpins the Polkadot protocol. In order for the platform to function and allow valid transactions to be carried out between the para-chains, Polkadot relies on the holders of DOT tokens.

The DOT required to participate in the network varies depending on the activity being undertaken, how long the DOT is locked out and the total number of DOT stakes.

Note that the DOT staker has a deterrent effect on malicious participants, who will be punished by the network by being inflicted with a reduction in their DOT.

The annual interest rate for staking DOT tokens is estimated at around 20% . However, the inflationary aspect of DOT must also be taken into account. Thus, DOT supply inflation is designed to be 10% in the first year .

Bonding parallel chains

The third function of DOT is possibility of adding new para-chains by binding the DOT, called “ bonding “. Like with staking, this is a form of proof of stake.

The DOT tokens engaged in this process are thus blocked during the bond period. They are released on the wallet which guaranteed it when the duration of the guarantee has elapsed and the para-chain has been withdrawn.

Fundraising for Polkadot and its DOT token

The Polkadot project and its DOT token have raised a total of $ 183.7 million during several public Initial Coin Offerings (ICOs) and private investment funds.

The first fundraiser took place in October 2017, during which 140 million dollars was raised by Polkadot. In the second fundraiser, Polkadot raised an additional 43.7 million dollars.

The project is notably supported by numerous investment funds, including IOSG Ventures, LongHash Ventures, Fabric Ventures, Polychain Capital, Kenetic Capital, HashKey Capital and Fundamental Labs.

The Polkadot team

The Polkadot project being completely open source, the people working for the project are numerous and are divided through third companies developing solutions based on the protocol . It includes the teams from Parity Technologies , ChainSafe, Soramitsu and Edgeware.

Thus, the development of the Polkadot ecosystem is not under the direction of a fixed team , since anyone can participate. However, the project being carried by the Web3 Foundation and Parity Technologies , let’s take a look at who are the founders of these entities.

President of the Web3 Foundation, founder of Parity Technologies and co-founder of Polkadot, Gavin Wood is undeniably the head of the project. Co-founder of Ethereum alongside Vitalik Buterin, he is notably at the origin of fundamental elements of the blockchain industry. Gavin Wood is the creator of the Solidity language , the Proof-of-Authority (PoA) consensus and the Whisper protocol.

CTO for the Web3 Foundation, Peter Czaban works to support the development of the next generation of distributed technologies. With a master’s degree in engineering from the University of Oxford, he previously worked in defense, finance and data analytics.

Co-founder of Polkadot, Robert Habermeier has a background in research and development in the fields of blockchain, distributed systems and cryptography. A long-time member of the Rust community, he has focused on leveraging this programming language to build highly competitive and efficient solutions.

How to buy DOT?

The DOT appearing in the top 10 of the most capitalized cryptocurrencies on the market, it is available for trading on most major platforms. DOT is listed on Binance, OKEx, KuCoin, Huobi, Kraken and Bitfinex, among others.

Due to the high liquidity of its markets, we recommend that you use Binance exchange to buy and sell DOT:

 

Explanations for buying DOT on Binance

  1. Register on Binance
  2. You will receive an email and will need to click on a link to verify your account
  3. Deposit funds on the platform
  4. Click on the menu Market and search for the pair DOT / BTC
  5. You only have left to buy DOT for the amount of your choice
  6.  You are now in possession of your first DOT!

 

How to store DOT?

The most secure way to store your DOT tokens is undoubtedly to use a hardware wallet .

To store your DOTs outside the exchange platforms, there are many wallets in the form of mobile applications and browser extensions.

However, as the Polkadot project is open source and open to all developers, a lot of third-party wallets have emerged. For this reason, we strongly recommend that you use wallets officially supported by Polkadot . Namely:

Other reputable wallets deemed safe enough also support DOT, including Trust Wallet , MetaMask , Crypto.com App .

Our opinion on Polkadot

Supported by the Web3 Foundation and Parity Technologies , the Polkadot project is relatively well supported to develop an effective and functional solution on a global scale.

With the ambition to become one of the pillars of Web 3.0, the challenges that Polkadot must meet are substantial. Using its complex and interoperable architecture, the Polkadot network appears capable of meeting the needs of Web 3.0 and its applications.

By creating a real mesh of subnets with para-chains and parathreads, the Polkadot blockchain plays the role of general structure, and makes sure that everything works correctly and that everyone follow the same rules.

The DOT being at the heart of the functioning of this infrastructure , the token is real use cases and is essential to ensure the security of the network. Between nominators, validators, collectors and fishermen, everyone can join the Polkadot network according to their capacities and needs.

However, Polkadot remains particularly complex to approach and is reserved for the moment for connoisseurs. The open source aspect, however, allows it to ensure that anyone can join the project, whether from a technical point of view or for any other component of the project.

Undeniably, Polkadot is currently one of the more serious contenders in Ethereum (ETH). The project is still quite young, however, it will still have to prove itself to developers of Web 3.0 applications.

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