What is Polkadot?
Polkadot has emerged in the cryptocurrency market as an innovative financial subsystem capable of connecting multiple types of blockchains and contributing to a vision of a decentralized World Wide Web. Contrary to the way that banks and financial systems as central authorities own people’s financial information, Polkadot is a fluid yet structured entity that allows users sovereignty over their financial data through the secure, monetizable, collective oversight of financial transactions.
Polkadot’s uniqueness as a cryptocurrency lies in its interoperability, or how it lets blockchains that were previously incompatible communicate. Polkadot is very fast and scalable, using parachains to offload processing demands from its system’s main relay chains. It democratizes and universalizes the accumulation of money by allowing users to earn money through participatory economics, rewarding multiple types of members of its governing body with the DOTs to accelerate the technology’s growth.
Polkadot’s developers include Ethereum co-creator Gavin Wood. The nonprofit Web3 Foundation is the primary research organization that maintains Polkadot’s open-source code.
Polkadot launched on May 26, 2020.
Polkadot works bifunctionally as a protocol (the network) and a token (the system of monetary value and exchange).
The Polkadot network functions by facilitating communications between multiple, unrelated blockchains. This means that it can essentially manage the communication channels between other cryptocurrencies. As such, Polkadot is not only a cryptocurrency itself but a powerful tool to send data and value across the larger cryptocurrency network. The token, or the unit of value in the Polkadot system, is DOT. Polkadot works as both a governance token and as a staking agent. As a governance token, it gives currency owners a say in the future of the protocol. As a staking agent, it allows Polkadot to verify transactions and issue new Polkadot crypto, or DOT.
Polkadot uses a proof-of-stake system to distribute value. Staking is the process by which a network participant gets to add to the latest batch of transactions to the blockchain and earn Polkadot crypto in exchange. There are multiple roles within the staking system, with validators, collators, and fishermen requiring technical savvy. These are:
- Validators: those who stake their own crypto in order to validate a new transaction, influence the protocol, and earn a monetary reward in proportion to their stake. They accept the high risk/high reward heuristic that comes with their position and are the most direct investors in Polkadot.
- Nominators: those who let investors participate in indirect staking. Nominators delegate DOT to validators they trust to follow the rules of the protocol. In exchange, nominators get a cut of the DOT that the validators receive. Nominators’ investments are less risky.
- Collators: those who track valid parachain transactions and submit them to the relay chain validators.
- Fishermen: those who find and report bad behavior across the network.
These interrelationships aid in the equitable distributions of rewards. By universalizing the process by which money is accumulated and distributed, and by basing the accumulation of value through directly participatory means, Polkadot is truly a very human enterprise.
Polkadot doesn’t stop there, however. In its meta-role in facilitating interoperable blockchain communication, it also follows a nonlinear upwards curve in both speed and scalability. Parallel blockchains, or parachains, reduce the processing demands on the main blockchain. By doing this heavy lifting, they allow upwards of 1,000 transactions per second. As more parachains are added and the network grows, Polkadot gets faster and more efficient.
Polkadot takes a unique approach by letting blockchains pool their security, which means that the blockchains’ security is aggregated and applied to all.
By connecting to Polkadot, blockchain developers can secure their blockchain from day one.
We do not provide investment advice, only objective data which illustrates the capacity of this technology. Polkadot has many advantages. It allows for unique communication channels between other blockchains and cryptocurrencies; it is highly scalable and very fast; it has a governance structure that democratizes participation in developing the protocol; and, though it comes with its own risks, with the right tools, there is ample opportunity to make money. Investing in Polkadot, therefore, seems like a logical and fruitful decision. To go a step further: Polkadot’s mission is to help decentralize, and therefore democratize the web. This could make investing in Polkadot a very worthy endeavor.
Find out more at https://polkadot.network/ and https://www.coinbase.com/learn/crypto-basics/what-is-polkadot.