As of June 2021, Polkadot occupies the 9th place in the Top-10 with a total market cap of USD $20 billion dollars.
Polkadot, which created its Genesis block on 26th May 2020, quickly became a favorite of the cryptocurrency community. From the beginning, it had much going for itself. A flexible modular design and easy connectivity with other platforms attracted much attention quickly. The promise of being able to use Smart Contracts on one platform and connect with someone on a completely different one solved a big interoperability issue for the decentralised finance crowd.
The history of Polkadot begins with another famous crypto project — Ethereum. Gavin Wood, an accomplished software engineer with over 20 years of experience concurrently being a co-founder of Ethereum, introduced the Polkadot project in 2016.
His departure from Ethereum caused a huge media storm since he was not only the CTO but also developed Solidity — a programming language used for smart contracts. Rumours have it that Wood was not satisfied with the slow development of Ethereum 2.0 and decided to found his own company that aimed to deliver what Ethereum could not.
The DOT coin raised over $140 million during its ICO (Initial Coin Offering), making it one of the most well-funded blockchain projects in history. Polkadot builds upon Wood and his company’s development of Ethereum 2.0.
Polkadot is one of the flagship projects of Web3 Foundation , a Swiss non-profit organisation located in Switzerland’s Crypto Valley (Zug). Web3 Foundation focuses on driving decentralised web protocols and their applications.
Web3 Foundation strives to create an internet in which:
- Users own their own data, not corporations.
- Global digital transactions are secure.
- Online exchanges of information and value are decentralised.
Polkadot is vital to Web3 Foundation’s goals as it is a protocol optimised for both secure transactions and cross-chain composability that puts Polkadot ahead of other projects. Polkadot is decentralised even in time. One interesting feature of its interoperability is that you can create temporary connections between chains, in order to interact. Connect and disconnect at will!
Polkadot sees itself as building a space where both “information and transactions” flow. This occurs in a completely decentralised, trustless web under user control.
Polkadot is at the forefront of several technological developments in the decentralised space which include the following:
- Enables transfers across chains.
- Easily permits transfers between permissioned and permissionless chains.
- Spins side-chains to maximise throughput.
- Polkadot is designed to maximise decentralisation — for information (e.g., records) as well as stores of value.
- It allows temporary connections between chains to keep costs down.
Polkadot Consensus Protocol
Polkadot uses a hybrid consensus mechanism that relies on four roles: Nominators, Validators, Collators and Fishermen.
Nominators play a relatively passive role in the consensus mechanism, but their activity, done well, is vital to ensuring the quality of the participants operating within it. Nominators provide a stake to promote Validators, who are very active.
It’s the due diligence that a good Nominator does before supporting a Validator that helps bring good Validators into the system. Nominators need to understand their own risk and the loss of their stake if a Validator is slashed. Nominators themselves do not have to run nodes.
Validators are entrusted with contributing to the security of the network. They usually run cloud servers on Linux and stake their own financial resources as well, so the investment can be considerable.
Validators are the heart of the consensus mechanism, though, and the rewards are commensurate with their input. They validate proofs from Collators, and perform the actual consensus.
Collators are an integral part of this multi-chain environment. Unlike a single-chain environment such as Bitcoin, multi-chain ones need to worry about making sure a lot of different bits mesh. In Polkadot, Collators are the maintenance crews of a sort. They collect parachain transactions and create blocks within a chain for Validators to act upon. Moreover, they act as connection points between chains. It’s pretty important work!
Fishermen are an impending role, according to the company’s website. Fishermen will run nodes, but they will fill a different need than Collators. Fishermen will receive rewards when they find an invalid state change. However, the cost to the system of a false alarm is high, and Fishermen will need to stake so that they are motivated to be careful.
Polkadot vs Ethereum
Justifiably, Polkadot is often compared with Ethereum. Polkadot is a platform designed to give users control over the chain in question, while also letting them connect with other chains and platforms. By emphasising connectedness and innovation, Polkadot doesn’t try to replace anything; rather, it is designed to connect to everything.
In this sense, Polkadot is not attempting to become the next in a line of “Ethereum killers”. Instead, people who want to use Ethereum, or any other supported chain, are now able to connect to those chains through Polkadot. Whether a user is sending a token, or a school transcript, or ERC-721 standard artwork, Polkadot can make complex transfers happen.
As the popularity of Polkadot in the crypto community is growing, so is the support for the company in the industry. 2021 is turning out to be very successful for Polkadot, in terms of established partnerships.
In April, 2021, Tether announced that it is going to launch its USDT token on the Polkadot parachain. Another project that is going to use the Polkadot ecosystem is Enjin that plans on introducing the first NFT blockchain built on Polkadot.
Polkadot has also recently announced that it is currently working with six other blockchain protocols: Interlay, Snowfork, Darwinia, Centrifuge, ChainX, and Bifrost. The goal is to provide network bridges to its ecosystem and open cross-network functionality with other decentralised communities.
DOT coin: where to buy
DOT is the native coin of the Polkadot platform. It is used for governance, staking and bonding. The latter refers to the connection of other blockchains to Polkadot. DOT is what Nominators, Validators and Fishermen stake in the system, thus exposing them to losses if they perform poorly.
DOT’s volatility makes it attractive for crypto trading. Users can trade Polkadot on EXMO in the following currency pairs:
DOT price dynamics
DOT has been one of the darlings of the crypto community, both as a project and as a token. For the latter, the bull run of 2021 has proved to be excellent. Since the beginning of 2021, the coin’s price has grown by 170% breaking a new price record of $43,36 on 15th April 2021. The rapid price growth is mostly connected with the upcoming release of parahains, as well as new partnerships with other crypto projects.
However, with the overall drop of the crypto market, DOT’s price has decreased by 40% compared with the all-time high.
Mining and staking DOT
There is no mining for DOT. This is one way to control the volatility that is seen in other coins.
Staking is an important part of running a node. Stakes can run at 10,000 DOT, so as price increases, so does the cost of joining into the consensus mechanism. According to Staking Rewards , as of June 2021, Polkadot is ranked second in terms of staked capitalisation, with the staked value of $19 billion representing 64% of its circulating supply.
The Polkadot project has definitely got the attention of the crypto community in 2021. The ability to connect different blockchains using Polkadot’s parachain technology is what makes the project so attractive. The growing number of partnerships only proves that the project is just getting started.
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