Since the introduction of the blockchain with the launch of bitcoin, there has been an increase in the development of blockchains over time. The bitcoin blockchain has evolved to address a wide range of issues related to online transactions. However, as more people recognize the blockchain’s potential, newer blockchain developments have emerged that aim to make it more than just a way to complete financial transactions over the internet.
This can be seen in Vitalik Buterin’s development of Ethereum. With the introduction of Ethereum, a new solution innovation, smart contracts, was born. A smart contract is a set of predetermined rules stored on the blockchain and can only be executed if certain conditions are met.
The Bitcoin network employs a proof-of-work consensus mechanism, which requires miners to solve a set of complex mathematical problems in order to create a new block for the blockchain. This process, however, has proven to be time-consuming and energy-intensive, as mining activities necessitate a large amount of computing power and, as a result, massive amounts of electricity.
Vitalik Buterin discovered some issues with developing a blockchain, which he refers to as the “blockchain trilemma.” This implies that no blockchain can simultaneously achieve decentralization, scalability, and security. When creating a new blockchain, blockchain developers are frequently confronted with the blockchain trilemma and must trade one for the other two in order to complete the blockchain.
Many developers have attempted to address the issue of blockchain interoperability and scalability, as it is one of the most significant barriers to the blockchain’s growth. Different blockchain networks are unable to communicate and share data, resulting in an interoperability problem. Currently, only Ethereum networks can share data with other Ethereum networks, and Bitcoin networks can only share data with other Bitcoin networks, resulting in interoperability and scalability issues. The Polkadot blockchain aims to address this issue as well.
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What is the Polkadot blockchain?
The Polkadot blockchain is a heterogenous multichain protocol. The relay chain is a feature of the Polkadot blockchain that allows data to be shared between different network protocols. Unlike previous iterations of blockchain, the Polkadot blockchain employs the relay chain to allow blockchains from various networks to communicate and share data, resolving the issue of interoperability.
The Polkadot blockchain introduces a model for blockchains to collaborate instead of working alone to ensure security, scalability, and cross-chain interoperability.
Polkadot is a next-generation blockchain protocol that connects a network of purpose-built blockchains, allowing them to work together at scale in a seamless manner.
Polkadot allows multiple transactions to be processed in parallel by connecting multiple specialized chains into one sharded network. This system eliminates bottlenecks that existed on previous networks that processed transactions one at a time.
Brief History of Polkadot: Who Created Polkadot?
The Polkadot blockchain was founded by Dr. Gavin Wood, who also happened to be one of the core developers of the Ethereum blockchain.
Dr. Gavin Wood served as Ethereum’s Chief Technical Officer and core developer. He also developed and invented Solidity, which is Ethereum’s core smart contract programming language.
Even though he was a principal developer, he retired from Ethereum in 2016 to develop a more sharded blockchain and published Polkadot’s white paper in October of the same year.
Gavin Wood co-founded Parity Technologies while still at Ethereum, which, however, was called the EthCore Blockchain Technology Company back then. The Substrate development framework and the Polkadot network are examples of major blockchain infrastructure technology produced by the company.
Wood also co-founded a non-profit organization established to support Polkadot’s research and development as well as its fundraising activities in 2017, known as the WEB3 Foundation.
The first major negative event that occurred within the organization in July of the same year was when a hacker took advantage of a flaw in Parity’s multi-sig wallet technology and stole 153K ETH (about 33 million USD at the time) from three distinct wallets.
The foundation hosted an initial coin offering in October and raised $145 million in just under two weeks, making it one of the largest ICOs to that point.
However, only a few days after the token sale, Parity Technology was hacked again. The smart contracts for the ICO were compromised, and 66 percent of the funds raised ($150 million) were frozen. The event was unavoidable and slowed the project’s early development.
In the months that followed, the WEB3 Foundation team raised enough funds through a private sale to continue meeting its development goals, and by 2019, everything was back to normal.
What is Polkadot architecture?
The Polkadot architecture consists of four major components.
The relay chain is the heart of the Polkadot blockchain and is responsible for the network’s shared security, including its consensus mechanism and its shared cross-chain interoperability with other networks. It is the core engine that keeps the entire infrastructure together, connecting other network participants and providing transaction finality.
Parachains: these are sovereign blockchains that can have their own tokens and optimize their functionality for specific use cases. The term “parachain” is actually a shortened term for parallel chains. The parachains take advantage of the relay chain’s shared security and interoperability.
Parathreads: These are similar to parachains but with a pay-as-you-go model. However, they are more economical for blockchains that don’t need continuous connectivity to the network.
Bridges: allow parachains and parathreads to connect and communicate with external networks like Ethereum and Bitcoin.
How does the Polkadot blockchain work?
The Polkadot blockchain is designed to create a model for the interoperability of blockchain networks using relay chains. The relay chain was purposefully designed to be as simple as possible. Smart contracts, for example, are not supported, and the chain’s primary duty is to coordinate the entire system, including parachains.
Parachains on the other hand, utilize and benefit from the relay chain’s security and interoperability for transaction finality. The utilization of the relay chain allows parachain’s system to run smoothly, allowing developers and users to focus on other specific goals like privacy or scalability, as well as their specialized applications.
Parachains have access to one of the network’s most important features: the use of Polkadot’s established security and fast and scalable transaction speeds.
To participate in the network, parachains must lease one of the hundred Polkadot slots. Because of its limited space, parachain’s slot allocation may become quite competitive and difficult to get in the future.
Parathreads and parachains provide similar tasks. They do, however, operate on a pay-as-you-go premise, allowing them to work just when needed even without being connected to the relay chain at all times.
Parathreads can participate momentarily without reserving a parachain space. Parathreads will have a slower block time than parachains but the same level of security and compatibility. Furthermore, based on the availability and demands of the relay chain’s slots, any blockchain can transition between being a parachain and a parathread.
Fourthly, bridges enable parachains and parathreads to interface with external networks such as Bitcoin and Ethereum, significantly enhancing the Polkadot blockchain’s interoperability. Bridges may potentially allow different tokens and coins to be transferred without the need for a central exchange.
Polkadot’s Transactions per Second
Polkadot is able to process all of this data because the various parachains do a lot of the heavy lifting for the main relay chain. As a result, the Polkadot network can handle over 1,000 transactions per second, compared to approximately 7 for Bitcoin and 30 for Ethereum.
Polkadot should become quicker as the network expands and more parachains are added, with rates reaching a million transactions per second.
Grandpa: Polkadot’s consensus mechanism
Grandpa is an acronym for GHOST-based Recursive Ancestor Deriving Prefix Agreement. A consensus mechanism is a means for reaching an agreement on a common state of affairs and is used to govern a blockchain. To continue building and progressing the blockchain, all nodes in the network must agree and reach a consensus.
Polkadot approaches consensus processes differently by proposing GRANDPA, which provides Polkadot with a more secure, scalable, and resilient network. It specifically enables networks to share security. The additional safeguards are then aggregated and applied to all.
Nominators: these secure the Relay Chain by selecting trustworthy validators and staking DOT tokens.
Validators: these secure the relay chain by staking dots, validating proofs from collators, and participating in consensus with other validators.
Collators: These maintain shards by collecting shard transactions from users and producing proofs for validators.
Fishermen: Fishermen are entrusted with monitoring the network and reporting inappropriate behavior to validators. In the Polkadot network, the fisherman job can be played by both collators and any parachain complete node.
Council members: These are elected to represent passive stakeholders in two major governance roles: proposing referendums and rejecting referendums that are hazardous or nasty.
Technical committe: Polkadot is made up of teams that are actively building it. Together with the council, can submit emergency referenda for expedited voting and execution.
How does Polkadot Token work
The DOT is the native token of the Polkadot blockchain. It performs three major functions.
Polkadot token holders have complete control over the protocol. All privileges, which on other platforms are exclusive to miners, will be given to the Relay Chain participants (DOT holders), including managing exceptional events such as protocol upgrades and fixes.
This grant holders full governance power over the platform. This governance function includes deciding network fees, the auction dynamics and schedule for adding parachains, and extraordinary occurrences such as updates and fixes to the Polkadot platform. These functions are not legally granted to DOT holders; rather, the Polkadot underlying code will allow DOT holders to participate in governance.
Game theory incentivizes token holders to behave in honest ways. Good actors are rewarded by this mechanism, whilst bad actors will lose their stake in the network. This ensures the network stays secure.
The purpose of DOT will be to help the consensus mechanism that underpins Polkadot. Polkadot will require DOT holders to play active roles in order for the platform to work and allow for valid transactions to be carried out between parachains.
Participants will put their DOT at risk (known as “staking” or “bonding”) to fulfill these duties, acting as a countermeasure to fraudulent network involvement. The DOT necessary to engage in the network will vary depending on the activity, the duration of the DOT staked, and the overall quantity of DOT staked.
The capacity to add new parachains by connecting DOT (referred to as “bonding”) will be the third function of DOT. The DOT will be locked throughout their bonding period and will be released to the account that bonded them once the bond has expired and the parachain has been deleted.
New parachains are added by bonding tokens. Outdated or non-useful parachains are removed by removing bonded tokens. This is a form of proof of stake.
Benefits of Polkadot blockchain
Better security protocol: Polkadot proposes a new method by allowing blockchains to pool their security, meaning that the security of each blockchain is combined and applied to all.
Green, energy efficient protocol: Polkadot’s Nominated Proof-of-Stake (NPoS) model consumes a fraction of the energy used by traditional blockchains and has the smallest carbon footprint of all the proof-of-stake protocols studied in recent research.
Transparent on-chain governance: DOT tokens are used to engage in governance choices such as proposal tabling, voting, and bonding. Parachains are allowed to create their own governance processes, allowing for maximal independence while minimizing the impact on neighboring parachains.
Substrate is a development tool on the Polkadot blockchain that allows developers to build on the Polkadot chain. This considerably simplifies the process of creating a new blockchain.
It is intended to assist developers in creating their own blockchain while connecting to the relay chain and benefiting from its security, speed, and efficiency. The design allows developers to concentrate on adding value to their projects rather than investing time, effort, and money in creating infrastructure from the ground up.
Polkadot’s mainnet launch was accomplished through a multi-phase deployment plan. In Phase 1, the Genesis block of the Polkadot relay chain with staked validators was launched in May 2020. Polkadot was initially used as a proof-of-authority (PoA) platform, which meant that the network was managed by six Web3 Foundation validators.
The majority of users were able to claim their Ethereum tokens, and stake tokens, announce their intent to validate transactions, and propose validators.
The second phase, which began in June 2020, featured the introduction of the nominated proof-of-stake system, as well as the first validator election. The phase allowed DOT owners to claim validator slots and earn staking rewards.
Polkadot’s governance system was enabled by Phases 3 and 4 in late July 2020. The Council and Technical committees were elected for the first time, and public submissions were accepted.
The final phase approved balance transfers of the DOT token in August 2020. The current phase is defining the rollout of parachains that have been tested and optimized on Kusama and parachains testnets. Polkadot governance can authorize parachains and commence slot lease auctions if the entire process is completed and parachains are working smoothly on Kusama.
Polkadot blockchain is a very innovative project that intends to solve most of the issues seen with traditional blockchain iterations.
The Polkadot blockchain also provides a means for developers to build on the blockchain easily and access a more secured network rather than spending time and effort building from scratch.
The use of DOT as the protocol’s governance token and for staking to secure the network or bond new chains shows that the project intends to incentivize usage by rewarding participants. As such, staking DOTs has become one of the most valuable incentives in the crypto space, with an average annual yield of 10%.