There are several successful Ethereum alternatives, and Polkadot is one of them.
In this post, I’m going to be sharing with you everything you need to know about Polkadot.
Why a lot of people seems to be excited about the project, and its potential future.
So, without wasting any time, let’s get started.
What is Polkadot?
Polkadot is a blockchain network protocol that aims to connect all types of blockchains in order to create an internet where any type of data can be transferred across any type of blockchain.
The project claims to be a true multi-chain smart contracts protocol that makes it possible to transfer data across public, open, permissionless blockchains as well as private, permissioned blockchains.
Such that developers can build applications that get permissioned data from a private blockchain and make such data available on a public blockchain as needed.
The Polkadot team
Polkadot was co-founded by Dr Gavin Wood, Robert Habermeier, and Peter Czaban.
The trio is the core developers of the project.
More so, as an open-source, public blockchain, anybody can contribute to the Polkadot codebase.
For a more comprehensive list of developers contributing to the development of Polkadot, you may check the “Commits” on Parity Technologies Polkadot GitHub repository.
Web3 Foundation is the core body overseeing the development of the project.
Features of Polkadot
The core and unique features of Polkadot include scalability, customizable, interoperability, self-governance, forkless upgrade.
Let’s briefly explain each of these features below.
1. Scalability
As a sharded multichain network, Polkadot can process multiple transactions on different chains simultaneously.
These sharded chains are referred to as “parachains” because they run parallel to each other on the Polkadot network.
This makes it faster and more scalable than traditional blockchains such as Bitcoin and Ethereum which process transactions sequentially.
Thus the reason why Polkadot is better suited for mass adoption and capable of accomodating any future increase in demand and traffic without sacrificing speed.
2. Customisation
Every blockchain is adapted to support its unique applications and use cases.
For example, a blockchain network for identity management will have different functionalities compared to say one for data storage.
Polkadot supports all types of custom blockchains. Thus developers can tweak and optimize their chains for specific use cases.
This leads to greater speed and efficiency as only essential codes are needed to get the blockchain up and running.
3. Interoperability
One of the obvious features of Polkadot is that it supports the interaction of all types of blockchains with one another.
Such that information can be shared across blockchains seamlessly and without requiring the services of centralized bodies who can doctor the records.
4. Self-governance
All parachains on Polkadot are independent. And their respective communities can govern their chains as they deem fit.
Developers can customise their chains’ governance system and optimise it to suit their specific needs, independent of the main chain or other parachains.
5. Forkless upgrade
Blockchain upgrades are referred to as forks. And forks can either be soft or hard, depending on the nature of the upgrade.
A hard fork usually happens after an upgrade of the core features of the blockchain which almost always split the network into two.
This is usually a problem that divides the community and potentially affects project development.
To avoid this, the Polkadot network is developed to enable forkless upgrades.
Thus allowing blockchains to evolve and adapt easily as better technology becomes available with time.
Components of the Polkadot blockchain
The Polkadot blockchain consists of 10 components divided into 3 categories
1. Chains
- The Relay Chain
- Parachains
- Parathreads
- Bridges
2. Consensus roles
- Nominators
- Validators
- Collators
- Fishermen
3. Governance roles.
- Council Members
- Technical Committee
Let’s take a close and brief look at each of these comments below.
1. The Polkadot Relay Chain
This can be referred to as the core of the Polkadot blockchain.
The Relay Chain is responsible for the network’s shared security, consensus and cross-chain interoperability.
2. Parachains
Parachains are independent blockchains built on Polkadot usually with their own native token, governance model, and custom application(s).
3. Parathreads
Parathreads are similar to parachains but with a pay-as-you-go model. And are considered more suitable for blockchains that don’t need continuous connectivity to the network.
4. Bridges
Bridges enable Parachains and Parathreads to connect and communicate with external, non-Polkadot-based blockchains such as Ethereum and Bitcoin.
5. Nominators
Nominators on Polkadot help secure the Relay Chain by selecting trustworthy validators and staking or locking up DOTS on the network.
6. Validators
Validators on Polkadot help secure the Relay Chain by staking DOTs, validating proofs from collators and validating transactions.
7. Collators
Remember that Polkadot is a shared blockchain that process transactions simultaneously via independent shards.
Collators maintain these shards by collecting shard transactions from users and producing proofs that these transactions are valid and presenting them to the validators.
8. Fishermen
Fishermen monitor the network and report bad behaviours to validators.
Collators and users running any Parachain full node can function as a fisherman on the Polkadot network.
9. Council Members
Council Members are elected representatives of passive stakeholders on the Polkadot blockchain with the responsibilities of proposing and vetoing dangerous or malicious referenda.
10. Technical Committee
The technical committee is composed of teams actively building Polkadot. They can propose emergency referenda, together with the council, for fast-tracked voting and implementation.
The Polkadot (DOT) Coin
DOT is the native cryptocurrency of the Polkadot network.
The DOT coin was launched in 2017 via an ICO as an Ethereum-based ERC-20 token.
And then on May 26, 2020, the Polkadot mainnet (Relay Chain) was launched as a Proof of Authority (PoA) blockchain network.
This effectively turns DOT from an Ethereum-based ERC-20 token to a standalone coin with its own independent blockchain.
Like Ethereum (ETH), Polkadot (DOT) has no maximum supply.
As of the time of writing this line, there’s a total supply of 1,060,140,601 DOT coins with 979,191,466 (92% of the total supply) in circulation.
Polkadot (DOT) use cases
As the native currency of the Polkadot network, DOT serves three distinct purposes:
- Governance over the network
- Staking, and
- Bonding.
1. Governance
DOT holders maintain complete control over the network by being able to propose and vote for any changes to the network.
Voting is the only way decisions are made and implemented on the network and this is entirely in the hands of DOT holders.
Thus giving complete control over the network to the holders.
2. Staking
DOT is a staking coin that can be staked to secure the network and earn rewards.
Users can stake their DOT coin as validators or nominators on the network to earn staking rewards.
You can stake DOT and earn up to 14% APR on Binance and KuCoin —the two exchanges I mostly recommend.
For the complete list of the over 40 exchanges where you can buy and sell DOT coin, check their CoinGecko page.
3. Bonding
DOT is required to add new parachains to the Polkadot network.
And the staked DOT can be reclaimed when or if one wishes to remove the Parachain from the network.
This is called bonding. And it’s yet another use case for the DOT coin.
Is Polkadot (DOT) a good investment?
My major dislike for the DOT coin is its unlimited supply with a 10% annual inflation rate.
That means every year, 10% more DOT will be created and released into the market than there is before.
Eventually, with time, this will dilute the value of your investment as the price of the coin is likely to keep dropping as new coins are constantly being minted.
Except, of course, demand for DOT rises faster than inflation which is very unlikely.
So for me, I never invest in a coin or token with unlimited supply for the long term.
And when I do, I will keep a close watch on the progress of the project to know when to pull out.
However, I think that Polkadot is a generally good project with huge potentials.
I currently have no position in DOT. But it’s one of the coins on my watchlist.
And if I happen to get a good entry price at the next dip, I might be scooping up some to sell at a higher price based on my normal trading strategy.
Where can I store my DOT coins?
TrustWallet, Atomic Wallet, and SafePal Wallet are the most simple, easy to use mobile wallets to store and manage your DOT seamlessly.
For increased security, you may consider using the SafePal or Ledger hardware wallets to store, stake, and manage your DOT coins.
What will Polkadot be worth in 2025?
I think the market cap of the DOT coin should be somewhere around 100 billion by 2025.
And with a 10% annual inflation rate, the total supply would be about 1.5 billion DOTs.
If this scenario plays out, the price of DOT by 2025 should be about $66 per coin.
market cap / total supply = price
100,000,000,000 / 1,500,000,000 = $66.66666666666667
This is possible because I see Polkadot as not just an Ethereum challenger, but much more of a direct competitor to ChainLink and other blockchain oracle projects.
If you can just connect to Polkadot to access all other chains why would you want to use oracle networks instead?
And if you can just build on Polkadot and enjoy full access to other chains and data you need seamlessly why build on Ethereum instead.
That is the idea and if the project becomes truly successful and function as envisioned a $100 billion valuation is conservative, especially when the entire crypto market is worth tens of trillions.
Conclusion
Polkadot is still a work in progress and the full functionality of the chain is not fully developed yet.
However, there’re already several successful projects built and developing on Polkadot.
Some prominent projects developed and building on Polkadot include Darwinia Network, Polkerstarter, Kusama, ChainLink, Ocean Protocol, MXC Protocol, Speckle OS, Zerochain, etc.
And in less than 1 year, Polkadot has moved from being an obscure project to becoming one of the strong top 10 cryptocurrencies by market cap according to CoinMarketCap and CoinGecko.
This only shows that people appreciate the role and value the project brings to the crypto economy.
Interoperability and scalability are two prominent solutions that are much needed for blockchain to go mainstream and that’s exactly what Polkadot brings to the market.
What do you think about Polkadot (DOT)? Share with us in the comments section below.