What Is Polkadot and How Does It Work?

Polkadot is a protocol that connects blockchains and allows data to be sent across incompatible networks like Ethereum and other networks. The primary purpose of why Polkadot was created is because of how fast and scalable it is. 

Moreover, the DOT token is always used for governance and staking so that you can buy it on any exchange platform like Binance, Crypto.com, and more. Like other cryptocurrencies, it’s a decentralized coin that can be purchased and solid on exchange platforms like you would buy Ethereum and other currencies. 

Is Polkadot a cryptocurrency that interests you? Well, don’t go anywhere because, in this article, we will discuss more about the mysterious cryptocurrency many underestimate. 

Let’s dive right in! 

How does Polkadot work? 

Polkadot is a cryptocurrency coin that can process large amounts of information compared to other cryptocurrencies. The large amounts of parachains do lots of heavy work for the main relay chain. The Polkadot network can process over 1,000 transactions per second, while larger cryptocurrencies will be able to process less than 100! 

However, the Polkadot network is continuously growing, which means more parachains are added. Thus, Polkadot should be able to move faster and maybe even reach up to millions of transactions per second in the future! 

Parachains are responsible for delivering transactions among parachains. They are application-specific blockchains in the Polkadot network. Every single para chain within the Polkadot network is its own blockchain and has its own unique features. 

Anyone who bets for the Polkadot token during a contract can perform the following functions: 

  • Role validation: Data is validated in the para chain block. Moreover, a consensus is held, and votes are gathered for any proposed changes within the network. 
  • Collecting roles: Nodes will store a record and add the most recent data about transactions performed of the parachains in blocks in order to add them to a relay chain. 
  • Role nomination: Trusted validators are selected, and the validators assign the DOT tokens. This is how the votes are given. 
  • Fishing roles: These roles monitor what is going on in the Polkadot network and report any suspicious behaviors. 

When was Polkadot created? 

Polkadot was founded by Gavin Wood, the co-founder of the famous cryptocurrency- Ethereum, with the help of Peter C. and Robert H. back in 2016. In other words, people will know the Web3 Foundation developed Polkadot. 

Gavin Wood was the co-founder of Ethereum, but he also managed to create a programming language for writing decentralized apps (dapps) on the Ethereum network. He initially began as a scientist, working for Microsoft. Still, after he invented the Ethereum network, he would pave the way for many new cryptocurrencies considered excellent investments in today’s world, including Polkadot. 

In 2015, Gavin Wood founded a company called Parity Technologies. Since Ethereum was invented right after Bitcoin, the primary purpose of Parity Technologies was to build and implement more projects that wish to develop on Ethereum. Furthermore, it worked on software that was powering Ethereum. 

Alongside Parity Technologies, there is also Substrate, which is a software development framework used to create parachains for the Polkadot network. 

Why is Polkadot important? 

Developers who build decentralized systems and who have to engineer these systems from scratch consider Polkadot to be a vital blockchain. But unfortunately, the developers use all their time, talent, and resources to build the proper networks rather than creating a standard for everyone who wants to build off Polkadot. 

After all, Polkadot’s primary aim is to build value on all blockchains rather than only on a single one. 

Where can you buy Polkadot, and what is its value? 

Polkadot is available on major crypto platforms. However, even though many platforms allow you to buy the crypto coin, we wouldn’t recommend you trust all of them! Your best bet is to buy Polkadot on popular platforms such as Binance, Crypto.com, Coinbase, Gemini, and more. 

These crypto platforms we mentioned offer extensive security and have many phases of ID verifications. Nevertheless, you are better off investing in these platforms rather than random platforms that might scam you. 

Polkadot’s (DOT) value is at $9.40 with a market cap of $9.3 billion, but as of now, the crypto market is ‘bleeding’ and has many price fluctuations. Moreover, within one year, the crypto token managed to gain significant value, and within a range of one year, it managed to reach $30 nearly, but due to the global recession that is going on, the prices have staggered back down to around $9. However, the coin is expected to reach a higher price soon and bounce back up and generate many returns for DOT coin holders.  

How does Polkadot handle staking? 

Polkadot uses a proof-of-stake consensus mechanism to ensure maximum security within the network, verify transactions, and create new DOT coins. There are numerous ways that Polkadot holders can interact with their staking system, depending on how much time and money they want to use. 

Let’s get started with the Validators. They are the ones who do most of the work and can’t be successful if they don’t possess the necessary technical knowledge. In order to become a validator and become successful at it, you need to run a node and have no downtime. Additionally, you need to stake a certain amount of your own Polkadot capital. 

When you become a validator, you have the authority to verify if transactions are legit or not, add new transaction blocks on the relay chain, and even earn more Polkadot capital with lower transaction fees. 

On the other side, we have nominators. Nominators allow investors to stake indirectly. You can consider delegating your Polkadot capital to a validator that you think will take care of it, complying with the rules. However, you need to be careful who you choose and ensure that the validators abide by the rules. 

Furthermore, we have Fishermen and Collators, as we mentioned before. They are less committing than becoming a total validator, but you need to have the required technical skills. In other words, Fishermen will report suspicious behaviors across the Polkadot network, while Collators will track para chain transactions and directly submit them to chain validators. 

Last but not least, something beneficial about network participation is that you can receive rewards. 

The Polkadot Governance 

Three types of users can influence the software development of Polkadot: 

  • The council: Council members are elected by Polkadot holders and are accountable for proposing any amendments that need to be made to the software. However, proposals that Council members make require much fewer votes to be approved than those by regular Polkadot holders. 
  • Polkadot holders: Those who purchase the coin can use their DOTs to request any changes to the blockchain networks and even approve any requests for changes that other holders have asked. 
  • Technical Committee members: Teams that build Polkadot. This team can make special proposals in emergency cases, and Council members vote on these types of members. 

What makes Polkadot different from Ethereum? 

Polkadot and Ethereum share the same owner, but there isn’t only one owner here. As a result, there are many questions about what makes Polkadot different from Ethereum. However, many new projects have been with the Ethereum project, and Polkadot simultaneously shares similarities in operations and design. 

Both the Ethereum and Polkadot blockchains operate the main blockchain where transactions are finalized and allow smaller blockchains to leverage their resources. In addition, both Ethereum and Polkadot use staking instead of mining in order to keep the network syncing. 

Parity technologies that the co-founder of Ethereum created allow developers to deploy applications by leveraging ETH’s code that would run on Polkadot as well. 

Furthermore, Polkadot’s development framework uses a copy of ETH’s blockchain to use on its own blockchain designs. 

Wrapping it up 

That’s all for this article. First, we showed you what Polkadot is and how it works. Now, it’s your turn to invest in the crypto coin and seek to receive many returns in the long term. Alternatively, you can choose to stake DOT, which yields a 10-12% return in the long term. 

Furthermore, we love the coin because it doesn’t have a supply limit like Bitcoin and some other cryptocurrencies. This is excellent for its value and doesn’t make you think twice whenever you invest in the coin. Moreover, the crypto coin shares many similarities with Ethereum, which is a good sign for Polkadot!