What is Polkadot?
To begin to comprehend Polkadot, we must first address the existing issue of blockchain interoperability. Today, many blockchains run in isolation, with no way for one chain to “speak” or “operate” with another. Similar to the time before the internet, when computers were isolated systems that stored data but couldn’t connect with one another, until TCP/IP was invented. On its own, Ethereum, Solana, and Bitcoin are fantastic, but they need to be able to communicate with one another seamlessly. Polkadot network is a method of creating and connecting blockchains. It was established and released in 2017 by Dr. Gavin Wood, a co-founder and CTO of Ethereum, who opined that Ethereum will just be a ‘small piece of the puzzle’.
What Can Polkadot Achieve?
Polkadot is “the internet of blockchains,” and as blockchain technology becomes more widely used throughout the world, there will be a need for a blockchain communication mechanism, similar to how HTML allows websites, browsers, and servers to communicate with one another.
Polkadot’s technology allows data to be transferred between public, open, permissionless blockchains and private, permissioned blockchains. Communication between public and private blockchains is a crucial aspect of this project. What exactly do we mean when we say that? Consider the possibility of developing apps that obtain permissioned data from a private blockchain and utilize it on a public blockchain. For instance, a school’s private, permissioned academic records chain could send a proof to a degree-verification smart contract on a public chain. Health records, digital identity for voting, and so on may all be used in the same way; the possibilities are endless.
Technology Behind Polkadot
Polkadot is built as a network layer 0, allowing layer 1 blockchains like Ethereum to work together on the same network. At its core, Polkadot is a proof-of-stake blockchain which consists of Relay Chain and Parachains.
Relay Chain
The heart of Polkadot network, where all blockchains on the network are connected to — like spokes to the hub of the wheel. It’s responsible for network’s shared security, consensus and interoperability.
Parachains
Sovereign blockchains that can have their own tokens and optimize their functionality for specific use.
Parathreads
Similar to Parachains but with a pay-as-you-go model. More economical for blockchains that don’t need continuous connectivity to the main network.
Bridges
Allows Parachains and Parathreads to connect and communicate with external networks like Ethereum and Bitcoin.
Blockchains on Relay Chains can be optimized for specific use case, allowing teams to incorporate exactly the functionality they need. Relay chain allows Polkadot to process transactions from all chains in the network in the same time, increase scalability.
Network Updates
Polkadot enables forkless (no chance of parties being in disagreement and forming alternative chains) on chain upgrades, with teams able to bring new features to their blockchains on Polkadot, easier and faster.
Cross-Chain Communication
The relay chain provides a safe means for chains to communicate with one another. The cross-chain messaging mechanism allows chains to transmit any form of data across two distinct blockchains, such as Ethereum and Bitcoin. As an example, consider a token, account balance, or real-world stock price. This encourages the development of new sorts of services that take advantage of the unique capabilities of various chains.
Governance
Polkadot is governed transparently on chain by all stakeholders, by proposing and voting on referenda, using native token DOT. At the same time, side blockchains chains are completely sovereign and free to govern their own blockchains how they see fit.
Network Security
Polkadot uses Nominated Proof of Stake to select validators. All validators in Polkadot have the same weight in the consensus protocols. That is, to reach greater than 2/3 of support for a chain, more than 2/3 of the validators must commit to it, rather than 2/3 of the stake. Likewise, validator rewards are tied to their activity, primarily block production and finality justifications, not their amount of stake. This creates an incentive to nominate validators with lower stakes, as they will earn higher returns on their staked tokens.
Customization
Polkadot’s Substrate FRAME pallets — offer individual components needed to create a customized blockchain using Polkadot substrates, without having to start from scratch. It essentially offers drag and drop, making it easier to create applications.
Potential of Polkadot
Polkadot has the ability to create a blockchain ecosystem to reshape the world, aiming to create a speedy, interconnected, smooth-functioning network that allows high customization and good foundation to any new projects that are added as Parachains to their network.
Consider a world in which large enterprises could use it for data storage, finance, or healthcare; governments could use it for smart contract law and identity management for voting and education; and consumers could benefit from gaming, personal savings, and social networking; and all of these could communicate and interact with one another, some on private and others on public, custom-built Polkadot-connected blockchains.
Source: medium.com/polkadot-network
The Polkadot network is only now starting to grow and develop, with numerous promising projects being created on Parachains via public auctions. With a fully operational system, according to Dr. Gavin Wood, would be capable of processing up to 1,000,000 transactions per second.
Summary
Putting a value on Polkadot might be as complex as attempting to value the interconnectedness of computers around the world on the internet today. Polkadot may well be the internet of blockchains, allowing world governments, major businesses, and charities to function in the most secure manner possible, free of fraud, data exploitation, and other issues that plague the internet today.
We can be guaranteed that no election will be rigged with phony votes, that private data will not be hacked or leaked, and that sustainable clothes or food sources will be verified through a supply chain. Such operations now need human participation, which breeds distrust, conflicts of interest, and, as a result, corruption.
DISCLAIMER: The information contained in this article is for educational purposes only and does not constitute any form of advice or recommendation by Wheatstones, and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.