What Is Polkadot (DOT)?
Polkadot is an open-source blockchain and a Layer 0 meta protocol. It was created with the purpose of uniting different blockchains. However, in the grand scheme of things, it aims to provide a foundational network for the development of Web3. DOT is the native token of the Polkadot network.
If you’re interested in the Polkadot price, check out the graph above.
Essentially, Polkadot is referred to as a “blockchain of blockchains.” It connects specialized blockchains into one scalable network. By doing that, Polkadot allows users to transfer any type of data or assets across multiple networks. These networks include oracles, permissionless networks, as well as public and private blockchains.
Since Polkadot is a Layer 0 protocol, it means that Polkadot lies beneath other blockchains. This allows the network to autonomously update its own codebase without creating any forks. Of course, the community must first propose and decide on these updates.
Keep in mind that the DOT price, like many other cryptocurrencies, tends to fluctuate. Therefore, before making any purchase decisions, make sure to monitor the project's price charts.
The Story of Polkadot Network
Polkadot surely has an interesting story. Some people tend to relate it with Ethereum saying that Polkadot uses Ethereum to complete operations. Even though it has some relation to Ethereum, what you read in the previous sentence is not true.
The creator of Polkadot is Gavin Wood. If you’re not a newbie in the crypto world, you know that he was the CTO of Ethereum (thus the relation to Ethereum). Robert Habermeier and Peter Czaban are the other two co-founders of the project.
The first version of Polkadot was released in 2019 as a canary network called Kusama. The network was unaudited. Though in 2020, the genesis block of Polkadot was released. Now, Kusama is like a dedicated space in the Polkadot network that acts as a testnet, which allows developers to test various updates.
The Structure of Polkadot Network
On the surface, Polkadot appears to be a standard blockchain. However, if we looked deeper, it consists of four parts – Relay Chain, parachains, parathreads, and bridges.
The Relay Chain is the core of Polkadot. It revolves around consensus creation, interoperability, and shared security. Parachains, on the other hand, are the individual chains that are connected by the Polkadot network. Each parachain can have its own token and utility.
Parathreads are also something like parachains, however, they are based on a pay-as-you-go economical model. Parachains and parathreads are connected by bridges. Besides acting as links between parachains and parathreads, bridges also allow them to interact with external blockchains.
Additionally, when talking about structure, it’s important to mention that Polkadot employs the nominated Proof-of-Stake (NPoS) mechanism. The mechanism consists of nominators and validators. This is essentially what makes the Polkadot network secure.
Validators are the ones that secure the network by staking Polkadot tokens and confirming transactions. Nominators also stake their DOT tokens but they do that to back the validators.
Besides, the Polkadot treasury is another thing that keeps the network secure. Basically, every time tokens are traded within the network, a part of the trading fee goes to the treasury. It can then be used to improve the network.
The Main Features of Polkadot Network
The Polkadot network can have many labels as a network. However, these are among the main ones:
- Community-driven network. One of the features of the Polkadot crypto asset is that it grants governance rights to its holders. Thus, Polkadot users can contribute to various changes and upgrades of the Polkadot network;
- Sharded multi-chain network. This feature is related to the scalability of Polkadot. It allows the blockchain to process multiple transactions across different blockchains at the same time;
- Highly versatile and adaptable network. The Polkadot network can be upgraded without creating a fork. Besides, the network allows users to easily share information and functionality with one another.
What About the DOT Token?
Now that you know the essence of the Polkadot network, let’s get back to its token. For starters, note that the DOT token is inflationary. This means that its supply is not fixed.
Initially, Polkadot coins were minted on Ethereum (again, the connection to Ethereum) during the first ICO. At that time, 10 million DOT tokens were issued out of which 5 million were sold generating $145 million.
As mentioned above, just like with most crypto assets on the market, the Polkadot price is pretty volatile. This means that the DOT price is affected by various factors that affect the whole market.
When it comes to the usage of the Polkadot token, it can be used in three ways:
- For staking. By staking DOT tokens users get rewarded and contribute to the security of the network;
- For bonding. By bonding DOT tokens, new parachains are added to the network. Thus, by removing the tokens, the outdated parachains can be removed as well;
- As a governance token. Holders of DOT tokens have the ability to participate in the decision-making processes of the Polkadot network.