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Polkadot is an open-source sharded multichain protocol that connects and secures a network of specialized blockchains, facilitating cross-chain transfer of any data or asset types, not just tokens, thereby allowing blockchains to be interoperable with each other. Polkadot was designed to provide a foundation for a decentralized internet of blockchains, also known as Web3.
Polkadot is known as a layer-0 metaprotocol because it underlies and describes a format for a network of layer 1 blockchains known as parachains (parallel chains). As a metaprotocol, Polkadot is also capable of autonomously and forklessly updating its own codebase via on-chain governance according to the will of its token holder community.
Polkadot provides a foundation to support a decentralized web, controlled by its users, and to simplify the creation of new applications, institutions and services.
Polkadot, a Nominated-Proof-of-Stake network, is usually called the blockchain of blockchains that “bundles lots of different blocks up all at the same time that can be executed in parallel.” To solve the problem of competing projects tackling similar issues in isolation, interoperable Polkadot was created to enable different blockchains to communicate with each other. The story of Polkadot in fact starts with the Ethereum network whose co-founder Gavin Wood created Polkadot in 2016 alongside Peter Czaban and Robert Habermeier. Raising $145m with ICO in 2017, Polkadot was launched officially in 2020. Its native token, DOT is currently one of the top ten crypto with a market cap around 30.3 billion dollars.
What is Polkadot?
Polkadot seeks to solve two problems, scalability and interoperability. There are three components in the Polkadot ecosystem: the Relay Chain, Parachains and Bridges. The Relay Chain is the mainchain that overlooks all network transactions. The individual user-created blockchains are called Parachains which connect to and are secured by the Relay Chain. Parachains allow multiple chains to run simultaneously, to enable scalability and increase transaction speed. Lastly, Bridges are used to connect to established blockchains like Bitcoin and Ethereum with a “break-in” or “break-out” smart contract.
How does Polkadot work?
Since all the transactions are finalized in the Relay Chain, a greater speed is needed. The Relay Chain separates the addition of new transactions from the act of validating and the mechanism lets Polkadot run over one thousand transactions every second according to a test in 2020. Polkadot employs a variation of Proof-of-Stake consensus that is called Nominated-Proof-of-Stake(NPoS). Here are multiple roles in the mechanism of NPoS.
Validators, validating data provided by “Collators” in Parachain blocks, secure the Relay Chain by staking DOT and also vote on proposed changes to the network.
The role of nominators is to secure the Relay Chain by staking DOT and selecting credible validators to whom they allocate their votes.
Collators maintain Parachains by collecting a full history of each Parachain and aggregate these data as transition proofs to the Validators.
Fishermen are those who monitor the Polkadot network and report any nefarious activity to the Validators.
DOT serves three distinct situations: governance, staking and bonding. DOT holders have full control over the protocol and can vote on network governance, upgrades and fees. Vote weight is determined by token amount. By staking, DOT holders can help secure the Polkadot network as Nominators and Validators. Good actors would be rewarded while the bad ones would lose their stake. Thirdly, new parachains would be added by bonding tokens. On the other hand, those outdated or non useful Para Chains would be removed by removing bonding tokens.