What Polkadot is and how blockchains can be combined
Over the 10 years of cryptocurrencies existence, many blockchains have appeared in the world with completely different goals. Making them work together is almost an impossible task. However, Polkadot start-up promises to cope with the issue and has already received $1.2 billion for this.
Polkadot startup is headed by one of
Ethereum founders Gavin Wood. The project itself is overseen by the non-profit organisation Web3 Foundation. Its main goal is to unite the blockchains and allow crypto enthusiasts to enjoy the benefits of each chain.
In late June, the Web3 Foundation held a regular investment round for Polkadot. Participants included companies such as Placeholder, Longhash incubator, ChainX and Innogy Corporate Ventures.
It is not known exactly how much investment the project was able to raise, but the Web3 Foundation claims that thanks to the last round, the total cost of the project exceeded $1.2 billion. It means that Polkadot can proudly bear the title of “unicorn” - a startup who managed to break through the $1 billion mark.
What Polkadot is
With the development of many blockchains there was a problem of data
exchange between them. The question became especially relevant when developers began to introduce not only public blockchains, but also closed commercial chains.
There are quite a few important applications of combined blockchains. For example, they can permanently change the market landscape of cryptocurrency exchanges.
“The most important use case is decentralised exchanges, when it is possible to natively trade different assets on the same platform,” says Satoshi Fund developer Andrei Sobol.
Of course, there are many issues about such systems, in particular, the security ones.
“First of all, the problem of the custodian. Who will keep the keys of 2waypag assets that are spinning on a different chain,” explains the specialist.
The technology needs to take its time to live through to that moment, and in the meantime it is possible to build other use cases, which is what Polkadot is working on.
The project, in particular, is engaged in the development of multi-chains. To put it simply, it is working on “branches” that unite various chains of blocks into a single entity, which allows them to exchange data without “sagging” in safety.
And to do that, no build-ups on blockchains themselves are needed, as well as there is no need to hold hard forks.
In general, Polkadot has set itself an ambitious goal - to build the infrastructure for the new fully decentralised Internet called Web3.0.
This is the idea that Ethereum co-founder Gavin Wu made at the end of 2016. In mid-2017, the Swiss non-profit organisation Web3 Foundation appeared, that started the implementation of that idea. By October, the project completed the
ICO, during which it managed to raise over $145 million.
The launch of Polkadot
blockchain is scheduled as late as for Q3 2019. However, it does not prevent the project from keeping on raising the money. The company plans to get another $60 million for its product development, say the sources of The Wall Street Journal. Moreover, the project can go to its goal in different ways: either through a public ICO or through a private proposal, as happened during the last round of investment. Polkadot blockchain
The uniqueness of the Polkadot blockchain is that it allows different cryptocurrency ecosystems to exchange not only tokens, but also other arbitrary data.
This data consists of three main components: relay chain, parachain, and bridges. They allow you to interact with different chains of blocks and at the same time maintain their own characteristics, for example, an increased level of security or anonymity.
Parachain or parallel blockchains form the basis of the Polkadot ecosystem. Different applications are built on them, and each one of those “branches” can have a completely original architecture. Also, this component is used to conduct transactions.
Relay chain unites all parallel blockchains. This part provides security, as well as the process of information exchange between the chains.
Bridges connect the entire system with the original blockchains, for example, with Bitcoin or Ethereum.
The Polkadot system itself works on one of the versions of the Proof-of-Stake consensus principle, where the production of blocks and confirmation of transactions take place with the help of proof of the share.
That’s what node validators do. Blocks are written to the chain on the relay chain and they get them from the collators that monitor transactions on parallel blockchains.
Polkadot also distinguish such thing as nominees. They vote for validators and share their reward or punishment.
Polkadot has its own
token - DOT. It performs several functions. For example, you can vote for important changes in the system with cryptocurrency. At the same time, the project developed a system of protection from voting usurpation by privileged users.
So, for the most of cryptocurrencies that support voting, one token is equal to one vote during the voting process. It turns out that the one, who has more tokens, holds more “yes” or “no” votes, and therefore has a stronger impact on the ecosystem.
In Polkadot, in general, the system is same, but more balanced. Users can increase the strength of their token during a vote if, for example, they decide to leave it in staking. Such a mechanism allows less wealthy cryptocurrency holders to defend their position, especially if they are strongly convinced to be right so even willing to abandon tokens for quite some time.
Also, the coin supports the operation of the system and it can be used to pay for some goods or services.
The future is in the union
Since the development of many blockchains, the question of their interaction becomes more relevant than ever. After all, what is the use of all those chains if they cannot be effectively integrated into the global ecosystem.
Polkadot is just about to solve that problem. Together with its competitors like Cosmo blockchain, it builds a future in which users can choose which chain to use. And the user can do that in just a couple of clicks, without going into too much detail of what is “under the hood”.
Therefore, it is not surprising that Polkadot has become one of the crypto-unicorns - projects with a value of over $1 billion. However, it’s not the right time to relax, after all, the startup has not presented its product yet.
Author: Alexey Ryabukha