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Polkadot Explained | Complete beginner's Guide.


Scaling and intereoperatibility , two buzzwords that are bandied about way too frequently in the cryptospace liberally peppered into every second white paper together with Ethereum killer and community governance. So then forgive me if I'm a little skeptical when a project touts this as their main emo out of the gates, however. There is one project that did in fact peak my interest, one that may have been flying under your radar for over three years, one that has just launched their main net and could indeed be that scalable, interoperable community governed utopian blockchain. My name is"MrCrypt" and in this article I'm gonna give you everything that you need to know about the polkadot network. I'll dive into the tech team, use cases and tokenomics and broader adoption potential. You may also want to stick around till the end if you want to find out my personal view on polka dot and whether or not I'm adding it to my portfolio. Now some of the boring stuff before the fun starts. I'm a crypto guy, but not a financial advisor. Shocking, right? So yeah, that means I don't give financial advice. Please, only use this as an educational resource. I'd also like to take the time to welcome anyone new to the blog over here at the cryptolibrarynow I cover everything from news to reviews and guides, so if that sounds appealing, then I do suggest hitting up that subscribe button and pinging that bell. Get this knowledge straight from me to you. . Alrighty. Are we ready to roll with this review?

 What is Polkadot?

Now? What the hell is the polka dot network anyway? Well, according to their white paper, they are a quote. Next generation blockchain protocol that unites an entire network of purpose built blockchains, allowing them to operate seamlessly together at scale. Ok, so that's a bit of a mouthful, but basically it's a multi chain framework platform that's designed to offer interoperability and scalability solutions for those blockchains that are built on it. This is a compelling pitch mainly because scalability and interoperability are two of the most pertinent problems. Facing blockchain networks today. Scalability because networks are bloated and slow, they cannot realistically be expected to reach the throughput and efficiency required to be used on a global well scale. Interoperability because blockchains operate as independent silos, and it's often hard to transfer information and value from one to the other. Polkadot is able to solve these problems because it's one network that's made-up of a collection of separate blockchains, a SHA-rded blockchain, it connects several chains together in a single network, allowing them to process transactions in parallel and exchange data between chains. I'll come back to this tech in a bit. Now of course this is just the performance aspect of Polkadot. There is one more angle that they're trying to attack and that is governance. This is actually also a really important consideration, as a lack of governance structures means users cannot easily agree on future code changes. This intransigence often leads to destructive chain splits that we've seen at other blockchains. Polkadot was built from the ground up with important governance mechanisms in place, mechanisms that allow the Community to vote on code changes and upgrades. We'll come back to this as well as all of the tech on the polka dot platform, but first I want to give you a bit of a back story on polka dot. Now, despite polka dot only just recently launching their main net, the project has quite an interesting history. 

Who founded Polkadot?

The original polka dot white paper was released back in October of 2016. It was the brainchild of Doctor Gavin Wood, who was one of the founders of Parity Technologies. For those of you who haven't heard his name before, he was also one of the original. Cofounders of Ethereum and he's the inventor of the solidity smart contract language. So something of an overachiever. Then in 2017, Doctor Wood and a fellow parity founder Peter Sarban founded the Web-3-foundation. This was a Swiss nonprofit organization that would support the research and development of the Polka dot network. Of course, this being 2017, it was one of the most opportune times to do an ICO. So this is exactly what they did. In October of 2017, the Web Three Foundation conducted the polka dot public sale and they were able to raise an eye watering $145 million. This was in return for 50% of the 10 million dot dot token supply. Subsequent to this race, Webtree unsurprisingly chose parity as the company that would develop the polka dot network. Parity developed a number of other blockchain related products and one of those was a multi signature wallet. This was the same wallet that parity used in order to store their large treasure chest of ICO funds. Well, ten days after the fundraiser, someone was able to accidentally and permanently freeze most of the funds in the wallets. Now I remember this happening and it was the second such incident on the parity wallets in a matter of a few months. The end result was that at least 66% of the total funds raised in the IC O were lost forever. There are also a number of other users who lost access to funds in the incident, and in total about 513,000 ETH were thought to have been lost. Despite this, though, Polka dot and the Web 3 foundation still had enough funds to meet their development milestones, and they forged on $90 million is but a scratch. Of course, when you have such high name value behind your project, there are always more investors willing to fill the breach. Polkadot was able to raise more capital in 2019 by selling off some of their initial dot. This was all through a private sale. Then, in July of this year, the Web 3 Foundation had one more bite of the cherry they decided to run a third private sale where they were able to raise a total of 3982 Bitcoin, almost $47 million at the time of this video. So Polkadot does have quite a storied history and that is before it even fully launched. But there must be a reason that investors are willing to invest such sums in a project like this, despite it losing 66% of its initial reserves. I think it comes down to some pretty extraordinary tech, so let's take a look at that, shall we? 

Polkadot Technology -:

Starting off with the architecture of the network, Polkadot is built quite differently from other blockchains. First off, polka dot is built on top of the substrate blockchain framework substrate is another product that was developed by the Parity team that's used by other developers to build their own blockchains. The main benefit of doing this is that polka dot. These chains and applications can communicate, transact and transfer data with other substrate based chains. When it comes to the network itself, as I mentioned, it's a sharded blockchain. This basically means a blockchain that has been split off into numerous other components. In the case of Polkadot, these separate chains are called para chains. These separate para chains are subsequently connected to and are secured by the polka dot relay chain. Same. They'll also be able to connect to the various other networks outside of the polka dot ecosystem, so let's break these down a bit more, shall we? The relay chain. This is the heart of the polka dot network, which is responsible for security and the cross Shard interoperability. The para chains. These are the sovereign blockchains in the network. That will have their own token and will be optimized for their own use cases. The bridges these are special blockchains that will allow the power chains in the polka dot ecosystem to communicate with external networks. Bitcoin, Ethereum, etc. So you can see exactly where this general idea of interoperability comes about. But it's not just the interoperability benefit that comes from this sharded blockchains have immense value when it comes to scalability. This all comes down to the concept of parallel execution, and transactions allow me to. Explain. Given that the transactions are taking place in the individual parachain, they can be done in parallel. They don't have to be processed one by one in a single chain as you have with traditional systems. This also means that if one of the individual para chains is bloated, it won't affect processing on all of the other blockchains. So yeah, sharded blockchains are highly efficient. It's one of the reasons that Ethereum is also moving to a sharded blockchain in Ethereum 2.0. OK, so that's an overview of the architecture, but how does consensus work? 

Polkadot Consensus -:

Well, on the polka dot network we have four distinct roles that manage the state of the blockchain. These aren't the validators, the collators, the nominators, and the fishermen. Let's start with the nominators. They are basically tasked with selecting the validators on the network. They will have to state dot in order to be a nominator. Then the validators are the nodes that secure the relay chain this is done by staking the native dot tokens. These guys will validate the proofs from the collators and they will join the other validators in the consensus. Next down the list we have the collators. These maintain the transactional state in the individual. Gods, they will then forward this onto the validators and finally you have those fishermen. These are tasked with reporting bad behaviour to the validators. These guys can be either collators or any full node on the network. Now when it comes to the actual consensus mechanism used, Polkadot has opted for a completely unique protocol. Formally, it's called the Ghost based recursive ancestor deriving prefix agreement. Thankfully for you though, you won't have to hear me say that again as it's just shortened to its acronym "Grandpa". But don't let the name fool you though. It's anything but old and slow. It has instant block finality and has unique measures in place to process millions of blocks at once in the event of any network partition. The exact mechanics of the Grand Park consensus are beyond the scope of this video, but I have linked to this handy block. Just below should you want to give it a bit of a read. 

OK, so it's pretty clear that Polkadot has some cutting edge tech, but what's more important is how the blockchain evolves and upgrades, how it deals with disagreements. This is a governance component. 

Polkadot Update' s(Forkless)-:

As you will no doubt know when there are updates that are required on a traditional blockchain, a fork is required. The new code has to be forked away from the old code base and all of the nodes have to agree to run with the new code. If they don't, then you have a split with two different blockchains. Not the best outcome, however. Polkadot has developed a governance system that's able to completely bypass the need for any sort of forks. The blockchains can effectively update themselves without the need for any sort of human intervention. Essentially, the Polkadot blockchain has a system of transparent Unchained voting mechanisms built into the relay chain. Participants in the relay chain will vote on important development initiatives aimed at upgrading and securing the polka dot network. There are two types of governance roles at Polkadot and these are the Council members and technical committee. As is the case with many other governance protocols, the negative token in this case Dot is used in order to participate in these governance decisions. This includes tabling proposals, bonding and voting. Oh, there is one more thing to point out here. Each of the individual shards para chains are free to develop. Their own governments mechanisms they don't have to conform to those of the polka dot network. This gives them the freedom to develop a mechanism that's well suited to their individual circumstances anyways. This is just a basic overview. There's way more info below on the governance if you want to know more about that. I now want to move on to perhaps one of the most important components of the network. I am, of course, talking about that native dot token. 

Polkadot Dot Token -:

There are three distinct purposes that are fulfilled by the dot token. These are staking fees and bonding in governance. Let's breakdown each of these, shall we? Firstly, and perhaps most importantly, you have the staking component. This is central to the consensus on the relay chain. As to the state of the transactions on the para chains. Validators will stake dot in order to partake in this. It also acts as a disincentive for any sort of dishonest behaviour like is the case with other proof of stake systems, there are rewards that will accrue in proportion to the amount that is staked. Next up for dot use cases we have the transaction fees users will have to pay docs to the validators in order to ferry messages to other para chains. You can think of this like gas in the Ethereum ecosystem, except these are paid to send data outside of the individual power chains and settle the state on the relay chain. So just take a note of that. Another use case for these tokens is to act as a bond. Basically, if you want to set-up a new para chain, then you'll have to tie us some dot in order to do that. When these power chains become outdated or are not used anymore, they can be removed from the network by withdrawing those bonded tokens, and then finally you have that governance component, the dot tokens. Are used in order to control the network through Unchained governments, those who hold the tokens will vote on important proposals, which include the following. Network fees, auction dynamics, schedule for adding power chains and upgrades, or other fixes.So there are clearly a lot of use cases for the dot token, but in order to determine how valuable it is, we have to look at the broader tokenomics. 

Polkadot Tokenomics -:

When dot was initially sold, there was a 10 million dot supply. Now if you're thinking this is pretty low for an initial supply, you're right. This is why polka dot actually held one of its first. Unchained governance votes to decide as to whether they should rebase the token supply. The vote passed with 86% in favour of multiplying that total supply. The preference from the voters was that they should increase total supply by a factor of 100 times, so this had the effect of increasing the supply from 10 million dot to1 billion dot. So not only was it a great indication of how Unchained governance can be used on the polka dot network, but it will also make using dot a lot more practical with fewer decimals. Basically now something else that you should know about the tokenomics is that it will not have a capped supply. There will be protocol inflation as a result of rewards going to the validators for securing the relay chain. Currently, the target inflation rate is set to 10% per annum with a total supply stake of about 50%. This is dynamic though, and can be adjusted up or down based on the actual amount that is staked. A portion of these newly minted dot will go to the block producers validators themselves, while the remaining portion will go to the Treasury. The exact proportion of these will also vary. This treasury is also another neat component of the government portion of Polkadot, as it can be used in order to fund future development that's voted on by the community. OK, so this is well and good, but how in the hell does this impact on the price of dot? Well, clearly, inflation does increase the outstanding supply, which causes a drag on price. However, you also have to consider that there are some. There are forces on the supply side that could lessen this inflationary impact. Firstly, when validators are staking, they're locking up dot in order to earn a share of those block rewards. You then also have those para chain creators who have to bomb their dot in order to create said chain. Both the staking and the bonding will take dot off of the open market and hence reduce that circulating supply. In the end, the only factors that impact on the price are the balance of the supply and demand on the market. There's also an additional demand component that you can't forget about and that is the demand in order to pay for fees. The larger that the polka dot ecosystem becomes, the more para chains that will have to pay fees in order to send data and thus the more demand there will be for dot. And there is of course one more use case of tokens that is for Unchained governance there is value in being able to control the future direction of the blockchain if there's anything. We've learned from the current defi craze. It is that governance tokens can have crazy valuations despite having no other use cases. OK, so taking all this together, you have reduced supply from those who are staking and bonding dot. Then you have demand from the power chains to pay fees and from those who would like got to take part. In the voting reduce supply and increase demand is generally price positive. I also think that this is likely to counteract the yearly block reward inflation rate. Ok, so the tokenomics are impressive, but what do things look like for dot on the open market? 

Polkadot Trading and Price-:

Polkadot Trading and Price

Well, there appears to be quite a lot of interest all across the board. Even before transfers were enabled on the network on the 18th of August, there was massive trading volume for dot tokens. It was on exchanges like Huobi, Okex, finance checks, etc. Then on the 18th of August, Cracken also listed it, which is no doubt a vote of confidence, of course, although it's trading at these prices prior to the 21st of August, it was adjusted down by a factor of 100 to account for that replacement. I also have pretty strong suspicion that dot will be fast tracked to a coin based listing. Why do I think this? Well, there are a number of clues. Firstly, way back in September of 2019, Coinbase actually mentioned that they would be considering listing Polkadot along with a number of other assets. You'll also no doubt recognize Orchid on that list, a token which has been absolutely flying .Then another piece of evidence is the fact that Coinbase custody supports polka dot. This shows that Coinbase has already gone some of the way to integrate Poco Tech onto their platform. Basically, it's easy enough for them to port this over to the exchange from the custody platform. And finally, Coinbase has also talked about polka dot as a potential etherium. Alternative in a post before you can clearly see that it's on their mind. Of course, these are just my suspicions. I may be wrong, so don't quote me on it. So yes, there is a hell of a lot of interest in dot at the moment and I don't expect it to die down anytime soon. 

Is polkadot worth the hype?

You'll have gathered from this article that I'm quite impressed with Polkadot. They've been working on this beast for the past three years and despite the initial hiccup with the parity hack, have come out swinging. This is evidenced by the amount of funding that they were able to secure in not one, but two separate private rounds over the past year, dot is in demand and there is good reason for it. Their approach to the scaling and interoperability conundrum is a novel and unique one. It was built by some of the smartest brains in the blockchain world, and they have a lot of coin in the Kitty. In order to build it out. Fundamentally, it's also a hell of a lot more sustainable in the long run, with those Unchained governance mechanisms. They have effectively eliminated any of the value destruction risks that come from chain splits. Of course, I'm not oblivious to the risks and challenges that the project could face. Firstly, the blockchain space is becoming quite crowded, with a number of projects all focused on similar use cases. Not only do you have some pretty solid competition from established of contract blockchains, Tezos, Cardano, Ethereum, etcetera. But you also have other new and highly anticipated projects like the near protocol, DEFINITY and Avalanche can polka dot capture enough of a network effect in order to break above the mold. Time will tell, but if you find the tech compelling. The team accomplished and the token valuable, then dot should definitely be considered. This is my personal view and it's the reason why I will be picking us some dot in the coming days for My Portfolio.  Well, that's it folks. My review of polka dot trick be told. I've only just scratched the surface. The main net is still fresh out of the gates and I will no doubt be coming back to this project in the coming weeks anyways. I do need some feedback. What do you lovely people think of the project? And are there any other hot projects that you think I should know? That hit me up in the comments. Also, if this article was to your liking, then please share it with your friends and family.

You can read more such interesting articles on different cryptocurrncies just clicking on me.

Thank You.


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