What is PolkaDot ?
Polkadot is a blockchain network which can be described as a ‘blockchain of blockchains’, or multichain. It is hard to define what Polkadot is because it is one of a kind object so we need to understand its structure first.
The project is maintained by a team led by Gavin Wood, the former CTO of the Ethereum project.
Problems with existing blockchains…
Decentralisation, speed and security. For any blockchain you can think of, it is a game of choosing one or two out of the three. This is known as the blockchain trilemma. Let’s examine a couple examples…
Ethereum is successful because it has a convenient architecture for implementing smart contracts. But far too many people abuse its functionality and create useless projects like CryptoKitties. At the end of 2017, this project occupied almost 12% of the whole network, paralysing the transactions which also lead to skyrocketing fees.
EOS, on the other hand, offers almost instant transactions. However, it has nominated block validators which opens doors for manipulation. This is why EOS is considered by many as a very centralised network.
All blockchains make trade-offs to support certain features.
There is another issue which limits our transition from Web 2.0 to Web 3.0. Hundreds of public blockchains exist out there all serving specific purposes. All these networks are isolated from each other and no information can be exchanged between the projects. This is as if different banks or institutions were not allowed to interact with each other. Such lack of interoperability is preventing mass adoption of the blockchain technology.
Polkadot aims to resolve all of these problems.
Polkadot under the hood
The two main structural components of the Polkadot multichain are Relay chain and Parachains.
Relay chain is central to everything. It is responsible for security, consensus and cross-chain interoperability across the whole network, and has an intentionally reduced functionality. For example, smart contracts are not allowed.
The validation mechanism is actually called “Nominated Proof-of-Stake”. Nominators bond their stake to particular validators in order to help them get recognized by the network and be allowed to mine the blocks. Profits and loses are shared with nominators. In this way, untrustworthy validators will be excluded from the system.
Parachains are blockchains that connect to the Relay chain and delegate their consensus and security computations to it. In this way, parachains become fast and congestion-free.
Each parachain can still has its own governance rules but it must be able to pass blocks that the Relay chain can understand. The job of transitioning from a given parachain to the Relay chain is done by special nodes called Collators.
Parachains are built to serve a single purpose. For example, one of them might be good for fast transactions while another is designed for smart contract implementation.
Parachains and Parathreads
While Relay chain is permanent, parachains can disconnect and connect back to the network. The connection is established on a subscription basis – similar to monthly payments you make to Netflix to watch its content.
Parachains are blockchains that run constantly and lease their space in the Polkadot network by locking the funds for the duration of the lease.
Parathreads use a pay-as-you-go model. Parathreads are blockchains that need to be woken up and run less frequently.
What makes Polkadot especially good?
At the moment, almost 100 parachains can be connected to the multichain, signifying a previously unseen level of scalability and speed. A fully operational system is predicted to be able to process up to 1,000,000 transactions/second. And all of this while remaining genuinely decentralised – we don’t need to worry about the trilemma anymore.
By design, parachains and parathreads can communicate. Even existing blockchains like Bitcoin and Ethereum could join the Polkadot family via so called bridges. This resolves the isolation issue we discussed about existing blockchains.
In addition, the costs of running such networks are significantly reduced because there is effectively one chain (Relay) responsible for operation.
Another important advantage of Polkadot is being developer- friendly. The majority of parachains are built using Substrate, a modular framework that allows blockchains to be built to specification within hours. Since the Relay Chain is built on Substrate, any Substrate-based blockchain can easily connect to the network.
The Relay Chain of the Polkadot Network has been live since May 2020.
Kusama can be thought of as a test network for Polkadot. Right now, the functionality of the Polkadot protocol is being tested on this network. A special mechanism of distributing subscriptions to parachains – called candle auctions – is also checked.
There is a lot of trust in the future of Polkadot as more than 100 projects (KILT, Acala, Edgeware, Centrifuge, Katal, Polymath etc) have already decided to use the Polkadot mechanisms in the past months.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.