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What is Polkadot?

by Ethereum 2 months ago in product review

Polkadot and ethereum

Polkadot connects different individual blockchains in a single network; wants to do with the blockchain what the Internet did with lonely computers around the world.

Polkadot was founded by Dr. Gavin Wood, Robert Habermeier and Peter Czaban within the framework of the Web3 Foundation, a Swiss foundation dedicated to facilitating an easy-to-use and fully functional decentralized web.

Wood is a Thiel Fellow and renowned technologist, and has an extensive resume in the cryptocurrency and blockchain space - he's a co-founder of Ethereum, founder of Parity Technologies, and creator of the smart contract programming language Solidity.

Habermeier, also a Thiel Fellow, is a reputed blockchain and crypto developer.

Czaban is the Director of Technology for the Web3 Foundation.

Why is Polkadot special?

Polkadot can process multiple transactions on several different blockchains in parallel using its 'Parachain' function. Called a fragmented multichain network, Polkadot can help make blockchains like development of Ethereum more scalable. Additionally, users can add custom blockchains to the Polkadot network with little or no friction.

To better understand the added value of Polkadot, it is best to explore the various issues that have limited and restricted blockchains. Let's dive into our Polkadot guide.

Problem # 1: Scalability.

Most of the popular blockchains are not scalable due to their structure.

For example, long ago, it cost between a few cents and a few dollars equivalent to ETH to transact on Ethereum, the world's most popular blockchain. Today, Ethereum fees have cost more than $ 250.

Most blockchains run into scaling issues in one form or another. It is impossible to speed up transactions, and as the demand for transaction processing increases, each transaction starts to cost more.

Bitcoin, which was established as a means of transferring value from peer to peer, can only process 4.5 transactions per second.

Development of Ethereum, introduced as Blockchain 2.0, does a little better, with about 12 transactions per second.

In comparison, Visa / Mastercard processes more than 2,500 transactions per second.

Slow payment processing is one of the main obstacles for Bitcoin and other cryptocurrencies to become commercial payment methods.

Problem # 2: Limited or null data communication and exchange.

Dozens of blockchains were created in isolation, and it is not possible for them to communicate or exchange value with each other. For example, you cannot send BTC on the ETH network. Even with DeFi services that allow working with multiple currencies and blockchains, oracle services such as ChainLink must be used to obtain accurate data in real time on the current value of each currency.

Problem # 3: Lack of personalization.

Until the development of Ethereum, blockchains did not support any customization of the transfer of value from one owner to another. Bitcoin, for example, only allowed peer-to-peer transactions. Smart Contracts allowed customizing and programming what can be achieved on a blockchain, to a limited extent.

How does Polkadot work?

Polkadot leverages four main components to achieve its goals: Relay Chain, Parachains, Parathreads, and Bridges.

The Polkadot relay chain:

The relay chain is the main architecture that holds everything together. Polkadot uses Relay Chain primarily to verify transactions, similar to how Bitcoin and Ethereum use the Proof of Work and Proof of Stake (POS) processes to verify transactions. At Polkadot, users can stake the native DOT token to aid in the work of verifying transactions.

As a central component of the Polkadot, the relay chain level coordinates the system as a whole, performing important functions such as verifying transactions and making decisions about how to run the entire Polkadot architecture. There are not many programmable or customizable options in this layer of the Polkadot.

The list of functions of the Relay Chain includes:

Transaction validation.

Nomination of the parties that will stake their coins for validation.

Preservation of historical data.

Health monitoring of the entire Polkadot system.

The Parachain:

A Parachain is a complete blockchain application that lives on top of the Relay Chain. It is described by Polkadot in his whitepaper as "an application-specific data structure that is globally consistent and validatable."

The Relay Chain, or base layer, handles the security, transaction validation, and governance functions of each Parachain.

The Parachain is similar to other blockchain networks like Bitcoin or Ethereum Blockchain. Polkadot is unique in that it can contain multiple blockchains within itself. Hypothetically, you can house both the Bitcoin and Ethereum blockchains within itself and place each as a Parachain.

If the Bitcoin and Ethereum blockchains are on Parachains within Polkadot, they will be able to communicate with each other, and can even pass transactions from one to the other - imagine converting BTC to ETH without an exchange. Blockchains communicate through a protocol called XCMP, which stands for "Cross-Chain Message Passing."

The Parachain tier only has a limited number of available slots, which are auctioned off by the Polkadot community.

Parachains offer a unique element of security. In theory, the Bitcoin blockchain can be hacked with a 51% attack. Such an attack could be prevented by the collective nature of the Parachains under the overall security structure of the Relay Chain.


Parathreads are temporary spaces in the Polkadot network, used primarily for testing ideas.

Parathreads are similar to Parachains in that they allow the construction of a blockchain or special use application.

The difference between Parathreads and Parachains is that Parachains are more resource intensive and more permanent than Parathreads - Parachains require a significant initial investment to cover the high return.

As Polkadot says, "Parathreads have the exact same API and functionality as Parachains, but on a pay-as-you-go basis."

Think of Parathreads and Parachains as a Process and a Thread that run on a computer's CPU. A process can have many threads, and the threads of a process must share the resources of the process.

Similarly, Parathreads must also share resources within a Parachain because they are temporarily rented places on a Parachain to practically test ideas in a living environment.

Parathreads also allows smaller community projects that could not compete in an auction for an exclusive Parachain. Parathreads allow these projects to experiment and demonstrate their effectiveness before committing to the initial costs of a Parachain.

Parathreads must share scarce resources between several Parathreads running on a particular Parachain; as such, the communities in each Parathread must compete for resources with each other, and must pay the owners of the hosting Parachains for each processing block.

Parachains that have decreased the size of the community and are not using the validation resources can be moved to become Parathreads to free up the limited slots of the Parachains while preserving functionality.

Chains that might not otherwise be able to compete in an auction for their own Parachain or do not believe it is economically viable can share Polkadot's security resources by paying host Parachains for the processing of each block.


Bridges, or the ability of an individual blockchain to communicate and transfer value to another, have been absent in traditional blockchain technology.

Let's say you want to buy an NFT priced in ETH, but you only have BTC. Traditionally, you would have to convert BTC to fiat and then convert it to ETH, or buy ETH for BTC on an exchange. You simply cannot transfer value or data from one Blockchain to the other without an intermediate layer, be it an exchange or fiat.

Bridges change that restriction, and allow Parachains, which are essentially blockchains embedded within the Polkadot ecosystem, to communicate and share data.The economic sovereignty and diversity of the respective blockchains are not affected when communicating or transacting through the bridges.

Bridges are available in both centralized and decentralized versions, which could lead to an avenue of communication with central banks if (when) they start minting digital fiat currency.

It is important to note that bridges are a planned feature of the Polkadot Blockchain, and have yet to be put into production. According to Polkadot, "it will be updated as more information is determined and becomes available."

The Polkadot Token (DOT):

Polkadot uses its native token, DOT, for payments, transaction processing and governance. DOT is also used for PoS (Proof of Stake) relay chain validation.

The DOT token performs multiple functions on the Polkadot network, such as compensating validators, as a government token, or as a currency.

There are currently 1 billion DOT tokens allocated, up from the initial maximum offering of 10 million DOT due to a network rename.

Polkadot Price (DOT)

The DOT token has traded between $ 2.90 and $ 40.70 since its launch in August 2020. The main exchanges that Polkadot (DOT) trade is typically Binance, OKEx, and Houbi Global.

Polkadot Staking

Unlike the Power of Work (PoW) consensus, in which miners use electricity to validate the blocks to be added to the Blockchain, the Proof of Stake (PoS) requires users to validate the blocks by betting their coins. In the PoW consensus, anyone can create a node and mine the blocks. In contrast, in PoS, validators are specific participants who direct the nodes (also called validator nodes) to propose and validate the blocks that are added.

Like other PoS systems, Polkadot users can use a DOT to gamble and have the owner become a validator of transactions for the entire ecosystem. nominate your DOT to other validators,

or become nominators themselves to share in the rewards.

If a DOT holder does not wish to do the verification themselves, they can also nominate another DOT holder to stake their DOT tokens; it is as if you select someone to be your representative. A DOT holder can name up to 16 validators to stake their tokens on it. Hence the Polkadot consensus mechanism is called NPoS (nominated proof-of-stake).


It is no coincidence that the same developers working on the transformation of Ethereum into zEthereum 2.0 are also bringing the Polkadot ecosystem to the world.

In building Polkadot, the team has paid special attention to remedying all the deficits that plagued and limited previous blockchain systems, such as the lack of personalization of Bitcoin or the lack of scalability of Ethereum 1.0.

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