Have you heard of Gavin Wood? No?!
Well, that’s the first CTO of the Ethereum Foundation, the inventor of Solidity, and the writer behind the Yellow Paper specifying the Ethereum Virtual Machine. And nowadays, Gavin Wood is also the leading figure behind Polkadot.
That is relevant because Polkadot was finally launched in 2020 after 2 years of development, grabbing a lot of attention. In fact, the project got so much attention that in a matter of a few months Polkadot’s DOT token got into the top 10 cryptocurrencies by market cap.
Table of Contents
What is Polkadot?
For starters, Polkadot is a sharded blockchain project with the focus of improving blockchain interoperability and scaling, and their objective is to become similar or even better than Ethereum.
There are lots of projects that want to become essential to Web 3.0 and surpass Ethereum in functionality, but Polkadot is not just a wishy-washy whitepaper with a token trading around.
Polkadot is founded by Dr. Gavin Wood, Robert Habermeier, and Peter Czaban within the Web3 Foundation.
And while Habermeier and Czaban may not be that well known, Wood gathered a lot of influence in the crypto world thanks to being an Ethereum co-founder, Parity Technologies founder, and the creator of the smart contract coding language Solidity.
Polkadot’s vision is to build an ecosystem in which different projects can build their projects upon and rely on its security instead of building from the ground up. It aims to improve the interoperability, scalability, and speed of blockchain technology.
The network connects blockchains through a system involving a Relay chain, several shards called parachains, and bridges.
The main relay chain provides the consensus for the whole platform and handles cross-chain transactions.
The parachains scale horizontally and are designed to process an enormous number of transactions in parallel. Parachains can have state machines that can help create dedicated blockchains.
Besides Parachains, there are also the Parathreads. The two are mostly similar, but Parathreds employ a flexible pay-as-you-go model rather than buying a full slot.
Also, the bridges are the pieces of code that work as consensus-adaptors to external chains.
The Dot token
The first ICO for the DOT token took place back in 2017, with a price of $0,29 per token, and managed to raise over $134 million even though the token was not usable until the network’s launch. After the first candidate of the network was launched in May 2020, Polkadot had a second ICO in July with a price of $1.25 per DOT. And just like the first ICO, it was preceded by a private pre-sale.
Since the beginning, the role of DOT was to enable the governance system, incentivize the Nominate-Proof-of-Stake consensus protocol, and be used for fees and payments.
The DOT based Governance
The Polkadot governance system basically employs a referendum-like method called Referenda. The voting system aims to engage a large part of the community by granting token holders voting rights based on their stake.
To become a voter, a DOT holder must lock their tokens up for at least the enactment delay period beyond the end of the referendum. There is also the possibility to vote without locking, but the vote’s value is drastically reduced.
The governance system not only goes as far as voting but also covers the proposing.
Any holder can propose a referendum by depositing a minimum amount of DOT for a certain period of time.
Additionally, the governance system includes a Council and Technical Committee. The two organizations don’t have any real power. They are meant to make and manage proposals, as well as lines of defense against software errors.
The DOT Staking
Polkadot has a staking consensus protocol at the base. But besides becoming a validator with a 24/7 active node, the staking also engages a system of nominators.
The validators are clearly there to validate transactions.
On the other side, the nominators are there to nominate a validator. The nominator attributes his stake to up to 16 validators that he trusts and will earn rewards based on their activities. However, if the nominated validator won’t act accordingly, the nominator will suffer consequences as well.
It’s important to note that the validators and nominators secure the Relay Chain. As for the shards, they are taken care of by collators which have the role of collecting shard transactions and produce proofs for validators.
The DOT based Fees and Payments
In order to prevent the abusive use of resources, Polkadot uses a network fee system similar to Ethereum’s Gas-metering model. The operations are charged in DOT prior to execution, and once the fee is paid, the nodes will validate the transaction.
However, when the transactions take place within a shard, the users don’t necessarily need to hold DOT tokens. Each shard has its own economic model and may or may not have a token.
Polkadot and interoperability
As nowadays most blockchains are data silos, Polkadot attempts to bring them together and make them communicate seamlessly in one unified blockchain.
The model of parachains and bridges brings unprecedented possibilities in the field of blockchain.
The Polkadot network offers the possibility to “teleport” other cryptocurrencies in the ecosystem via a two-ways smart contract. It can also produce a tokenized version of the original coin.
It’s important to note that the parachains can communicate between them as well.
All cross-chain transactions use a queuing mechanism in which the Relay Chain validators are tasked to move transactions from the output queue of one parachain into the input queue of the destination parachain. In this operation, the Relay Chain will store only the associated metadata as hash.
The launch and the roadmap
After 3 years of development and research, the Polkadot project is largely completed as the Web3 Foundation is close to removing the Sudo module from the network. As presented by Gavin Wood, the project has to go through 7 phases until its compilation, from which 3 phases rely mostly on the dynamic the governance will take.
1. Chain Candidate (May 2020)
The Web3 Foundation launches a candidate chain as a proposal for the Polkadot Relay chain. This is the most centralized stage employing the proof-of-authority(PoA) consensus.
2. Switch to NPoS (June 2020)
After assuring the stability of the chain, the Web3 Foundation enables the transition to Nominated Proof of Stake with its Sudo key to change eras. In this phase, the network runs with a set of decentralized validators that are meant to increase over time.
3. Enabling Governance (July 2020 – We’re here)
In this phase, the Polkadot’s governance system is enabled, allowing for the election of the first Council and Technical Committee and start accepting public proposals.
4. Remove Sudo
The Web3 Foundation initiates a final runtime upgrade and removes the Sudo module. At this point, Polkadot becomes a live fully decentralized network, running without the Sudo Module. Root calls are only dispatched via governance.
From this point onward, the network upgrades will depend on the DOT token holders.
5. Polkadot balance transfers
The network starts allowing balance transfers. The DOT tokens become transferable and stop being just an indicator.
6. Rollout of the first parachains
Being built as a sharded blockchain, Polkadot is naturally going to allow parachains. And as time goes, the governance will roll out the first community proposed parachains, as well as the parachain auctions and parathread purchasing/leasing modules.
7. Enable core functionality
Once the governance enables the parachain auction module and the cross parachain message passing system (XCMP), Polkadot will have a fully functional Relay Chain.
Polkadot and the staking race
2021 is believed to be the year of staking. And taking into consideration that Polkadot managed to launch the NPoS consensus in 2020, it inevitably has to race with Cardano and Ethereum 2.0.
And right now, all three networks are quite in the same position.
The staking is live.
The network has limited functionality.
The smart contracts are yet to be functional.
And just like Ethereum and Cardano, Polkadot’s staking network is slowly but surely expanding. At the moment the article is written, there are 267 active validators and close to 763 million DOT looked in the network.
How Polkadot’s staking implementation will compare to the others and what the feedback of the crypto community will be is yet to be seen.
- Polkadot is a sharded blockchain project with the focus of improving blockchain interoperability and scaling, and their objective is to become similar or even better than Ethereum. Polkadot is founded by Dr. Gavin Wood, Robert Habermeier, and Peter Czaban within the Web3 Foundation.
- Polkadot connects blockchains through a system involving a Relay chain, several shards called parachains, and bridges. The relay chain provides the consensus for the whole platform; the parachains scale horizontally and can have state machines that can help create dedicated blockchains; the bridges work as consensus-adaptors to external chains.
- As explained by Gavin Wood, Polkadot has 7 phases: Chain Candidate, Switch to NPoS, Enabling Governance, Polkadot balance transfers, Enable core functionality. The project is currently in the 3rd phase of development.
- Regarding the staking algorithm, at the moment the article is written, there are 267 active validators and 763 million DOT looked in the network.