The Polkadot crypto project is a next-generation blockchain that attempts to promote a heterogeneous multi-chain framework. It has garnered extreme attention from an entire community of investors, developers and users and is considered to be one of the most innovative projects in the cryptocurrency space. What does polkadot do and why is polkadot so special? Let’s delve into these questions.
What does polkadot do?
In simple terms, Polkadot (DOT) is a blockchain with a core network — the relay chain, where other blockchains connect and communicate with each other. By hosting blockchains, the relay chain also handles their security and transactions, allowing cross-chain interoperability (communication between different blockchains) to function seamlessly.
Powered by the DOT, the network’s native coin, the Polkadot ecosystem tries to resolve many of the limitations that blockchains currently hold, like scalability and security. It serves as a solution that implements the technology’s distinctive features conjointly.
As a matter of fact, besides sending DOT tokens across blockchains, Polkadot also allows them to communicate and exchange actual data. Thus, interoperability is the big problem that Polkadot tries to resolve. Instead of separate entities that work independently, blockchains should become part of the same ecosystem where information and money can be exchanged securely in a scalable way.
Why is polkadot so special?
While private blockchains have somewhat different technical protocols from public blockchains, Polkadot even resolves the communication between these two distinct types of networks. Polkadot’s flexible and adaptive network architecture facilitates building new technology on top, enabling developers to take advantage of the scalability, interoperability and security offered. Therefore, Polkadot’s network also represents a significant breakthrough for developers and entrepreneurs who want to build a new blockchain from scratch.
When trying to create a new blockchain, developers build a unique state machine and a consensus algorithm, which is not easy to implement and takes a lot of effort and time. Polkadot’s fundamental architecture aims at resolving this as it eliminates the need to build blockchains from scratch.
A blockchain built within Polkadot uses the Substrate modular framework, which allows users to plug in the features they require while also allowing them to change them as needed. Moreover, it allows developers to customize the chain architecture, select specific components that suit their requirements, and bridge blockchains with other networks, including Ethereum and Bitcoin.
Why is Polkadot considered innovative and special? Generally, the unique properties of blockchains are decentralization, speed, and security in a trustless environment. While most blockchains tend to offer one — or just a few — of these distinguishing traits, their current architecture is not built to sustain all of the features at once.
How does Polkadot work?
As mentioned in the article, Polkadot provides a core network, the relay chain, and parallel blockchains called parachains.
The relay chain’s protocol determines the network’s shared security, consensus and cross-chain interoperability. It is the engine that keeps the whole infrastructure together, connecting other network participants and providing transaction finality. The relay chain was deliberately built to provide minimal functionality. For instance, smart contracts are not supported, and the chain’s primary responsibility lies in the coordination of the system as a whole, including parachains.
The term parachains is short for parallelized chains. They are sovereign blockchains with their tokens and governance and offer their specific use cases.
However, parachains use and take advantage of the relay chain’s security and interoperability for the finality of transactions. The use of the relay chain allows parachain’s system to work seamlessly while developers and users can focus on other specific goals like privacy or scalability and their particular applications.
In essence, parachains get to enjoy one of the network’s most significant benefits: using Polkadot’s established security and fast and scalable transaction speeds.
Tokenomics
The DOT token is what powers the network, being Polkadot’s native coin. It is used for payment of network fees, for governance voting and validating rights, for interoperability.
When messaging or exchanging data between two blockchains in the network, DOTs are used to pay for transaction fees. Voting on protocol updates or fixes also occurs by payments of DOTs.
Nominators also bond their DOTs to a dedicated validator they are backing. Bonding tokens help to increase the network’s attack cost and allow DOT holders to earn newly minted tokens as staking rewards.
The future for Polkadot
Considering the overall benefits for entrepreneurs, developers, users and investors, it looks like Polkadot’s evolution will be interesting to follow.
DOT serving as the protocol’s governance token and for staking to secure the network or bond new chains is a clear indication that the project aims at incentivizing usage by rewarding participants. Indeed, staking DOTs has become one of the most valuable incentives in the crypto space with an annual yield of 10% on average.
The platform’s stable and reliable network along with its roadmap adherence contribute to a promising scenario for the project. From the perspective of technology and economic value, Polkadot is among the most ingenious innovations of the blockchain industry and the next few months will be crucial to estimate the network’s actual capabilities.
Summary
This article has shown you what does polkadot do and why is polkadot so special. Hope you can get a further understanding about this topic.
