What is Polkadot (DOT)?

In recent years, several blockchain projects have focused less on specific applications and more on general infrastructure improvements. One of these is Polkadot ( $DOT ), perhaps one of the most successful projects working to improve the fundamental technology that underlies decentralized applications (dApps).

Learn what Polkadot is, how it works, and why it is important for the development of blockchain and cryptocurrencies.

Key findings:

  • Polkadot (DOT) uses a nominated Proof-of-Stake (PoS) consensus algorithm.

  • Polkadot uses parachains and relay chain to create a much more scalable blockchain ecosystem.

  • Protocol bridges allow different blockchain networks to interact with each other.

  • The protocol also includes the DOT token, which is used in governance, staking, and bonding.

History of Polkadot (DOT)

Polkadot was launched by Peter Chaban and Ethereum co-founder Gavin Wood, who, by the way, coined the now-ubiquitous term Web3 in 2014. Wood published the Polkadot white paper in 2016. They also launched the Web3 Foundation in 2017. The foundation then raised over $200 million to develop the protocol by selling DOT tokens.

Polkadot is consistently ranked among the top 20 cryptocurrencies by market cap. At the time of writing, it is ranked 14th, has a market cap of $8.825 billion, and a daily trading volume of $188.37 million. There are 554.704 million tokens in circulation, and 876.051 million tokens are staked.

How Polkadot Works

Industry experts and developers identify three main obstacles holding back the development of blockchain technology: decentralization, scalability, and security. While most first-generation blockchains—a somewhat nebulous term—have made incremental improvements over time, they remain limited by these technical limitations.

The Polkadot blockchain aims to break down barriers between different blockchain ecosystems, allowing seamless communication between these networks to solve these problems. The vision of the project is to enable the transfer of tokens and data between all blockchains, creating the foundation for Web3 and eliminating bottlenecks.

According to Wood, many blockchain developers and fans, Web3 is the next iteration of the internet, where the underlying infrastructure changes. In this vision, people’s data will not be collected and used against their will by corporations or centralized organizations. In Web3, information is not supposed to be controlled or censored, and the entire system will be decentralized.

Polkadot allows completely different blockchain architectures to interoperate with each other to achieve the goals of Web3. It does this through parachains, or specialized blockchains with their own functionality and tokens. The network uses a nominated Proof-of-Stake (PoS) consensus algorithm and was inspired by the Ouroboros protocol.

Parachains and Relay Chain

Parachains are blockchains that can operate independently and be fully customized by the owner. They can host any application and have features and programming logic that are limited only by the developer’s imagination.

But what these parachains have in common is the relay chain, which is responsible for overall network security, consensus, and inter-chain communication. The relay chain verifies data and ensures that it is understandable; that is, it is responsible for achieving consensus and ensuring that transactions are carried out.

Bridges, On-Demand Parachains, and Substrate

Polkadot uses bridges that connect different blockchains, allowing them to exchange data. Bridges provide inter-chain interoperability, allowing Polkadot to interact with external networks such as Bitcoin (BTC) and Ethereum.

In addition to standard parachains, Polkadot offers on-demand parachains, which are a more compact version that only runs when needed. This solution is ideal for blockchains that do not require a constant connection to the Polkadot network.

Substrate

Polkadot doesn’t just solve technical problems, it also offers a powerful blockchain development platform called Substrate. Developed by Parity, the company behind Polkadot, Substrate allows developers to build their own blockchains using ready-made tools and solutions. This greatly simplifies the development process, allowing teams to focus on the unique features of their projects without having to spend time building the underlying infrastructure.

Consensus

Polkadot uses a nominated Proof-of-Stake consensus model, where participants are divided into three roles:

  • Nominators: Participants who stake their DOTs and elect validators they trust.

  • Validators: Participants who stake their DOTs, verify transactions, and participate in consensus.

  • Collators: Participants who collect and send transaction information to validators.

DOT Token: Three Roles

The DOT token plays three key roles in the Polkadot ecosystem:

  • Staking: Like other Proof-of-Stake blockchains, DOT staking incentivizes network participants to act honestly by using DOT as collateral for good behavior. Those who stake their DOT are rewarded.

  • Governance: DOT holders are given voting rights in referendums, a voting system where the weight of a vote depends on the amount of stake held.

  • Bonding: Since the number of available slots for parachains is limited, they are leased out via auction. The winner of the auction is the one who offers the highest bid. The DOT participating in the auction is reserved (locked) on the blockchain until the end of the lease period. In the future, auctions will be replaced by the Agile Coretime concept.

The Future of Polkadot

Polkadot is considered by many to be one of the most promising networks of the future, as it aims to lay the foundation for a variety of goals. While the project is still in its early stages, there are many developments that suggest its approach could become the standard for building Web3.

Polkadot may or may not become the leading platform for developing blockchain applications, especially since Ethereum is also releasing its own updates that address many of the same issues. However, what is particularly appealing is the combination of the Substrate development tool and fundamental technical advantages that could attract many developers.

Polkadot’s parallel processing of transactions across parachains (currently supporting up to 100, with support for several hundred expected) gives developers a lot of freedom. Those building on parachains have a lot of power to change state and create common rules.

Polkadot can process about 1,000 transactions per second. The theoretical upper limit of Polkadot's transaction throughput is 1 million transactions per second.

Polkadot claims that the parachain model is more decentralized and trustless than layer 2 scaling solutions. Many teams have already created parachains, so the future of this growing ecosystem looks promising. As of 2024, millions of transactions have been processed on parachains.

How to get DOT

The DOT token itself is not available on centralized exchanges, but it can be traded on decentralized exchanges built on a parachain. The tokens you see on other exchanges are built on a different blockchain and are wrapped or pegged versions of DOT. You can buy wrapped DOT on exchanges like Binance, Coinbase, Kraken, and Gemini. However, it is not available on popular decentralized exchanges like SushiSwap or UniSwap.

If you have DOT, you can store it in several wallets. Some examples are Ledger, Fearless, Polkawallet, and Polkadot-JS Plus. Polkadot Vault is a wallet that you can install on an old smartphone. You can store it in airplane mode and use it as cold storage.

Should You Buy Polkadot Now?

As with any cryptocurrency, the decision to buy depends on your personal outlook for the project and its cryptocurrency.

Will Polkadot Reach $1000?

Cryptocurrency prices are determined by market sentiment, supply, demand, and economic conditions, making price predictions nearly impossible. DOT could reach $1,000, but it is also likely to lose value.

Summary

Polkadot is a blockchain and ecosystem designed to build decentralized and other applications. Developers can rent (and in the future, buy) time slots for their applications to use the Polkadot relay chain. Like many blockchain projects, Polkadot is still in development. Its future, like the future of all blockchain projects, is uncertain.

#DOT #Polkadot #Полезное #ИсторияКриптовалют #ЧтотакоеDOT