Polkadot (DOT) is an open-source blockchain protocol for cryptocurrencies, dubbed the “blockchain of blockchains”, that allows different, incompatible networks to communicate with each other and share data.
Some refer to this ability as “multichain”.
Polkadot is considered a next-generation blockchain because it operates a blockchain that allows anyone to launch and operate their own blockchain on top of it while still allowing those different blockchains to be customized and unique.
Polkadot is able to provide this multichain-supported environment by operating two types of blockchains.
The main blockchain is called the relay chain.
User-created blockchains are called parachains (or parallel blockchains).
The relay chain maintains consensus, a shared security environment, and interoperability between all of the different chains.
The independent parachains get to have their own tokens and specific use cases.
A third blockchain, called a bridge, creates the network information paths that also the Polkadot network to interact with the different blockchains.
Bridges need to be built for individual blockchains.
Because the relay chain does the heavy lifting of maintaining consensus, security, interoperability, and processing transactions of several chains in parallel, custom blockchains are easy for developers to get started.
Polkdot uses a variation of proof-of-stake (PoS) consensus called nominated-proof-of-stake (NPoS).
With NPoS, if you lock up any amount of DOT in a special contract, called staking, you get to take part in the Polkadot network as one of the following:
- Validators – the workhorses, that validate network transactions in parachain blocks
- Nominators – secure the relay chain delegating their staked DOT to validators that they trust in exchange for a cut of the DOT earned by the validator they choose
- Collators – specialized role that keeps track of valid parachain transactions by storing a full history of each parachain, adding this data to the relay chain
- Fisherman –being replaced by Secondary Checkers, this role acts as the bounty hunters of the network, looking for validators that validate bad or compromised blocks
- Secondary Checkers
Along with a role, DOT stakes also receive rewards in the form of more DOT.
Polkadot was created by Gavin Wood, co-founder of Ethereum, Peter Czaban, and Robert Habermeier in 2016.
Gavin Wood is also the inventor of Solidity, the programming language used to create decentralized apps on Ethereum.
Gavin Wood founded a company called Parity Technologies in 2015 to help build projects on Ethereum.
Parity Technologies currently maintains Substrate, a development framework used by developers to easily create new parachains.
DOT is the native cryptocurrency of the Polkadot, but it plays an important role in the operation of the Polkadot network.
DOT can be bought or sold using cryptocurrency exchanges, or held or transferred using wallets.
DOT can be owned as mentioned above, but it can also be staked, which means locking up your DOT tokens with the protocol in exchange for staking rewards in the form of newly minted DOT and the ability to vote on network upgrades and changes.
DOT can process more than 1,000 transacts per second due to the relay chain performing the workload of the parachains.
It’s thought that as the Polkadot network grows and more parachains are added, the network could support millions of transactions per second.
DOT is a top 15 cryptocurrency by market capitalization, with an $8 billion mcap as of August 2022.
ADA has a total supply of 1.2 billion DOT, with a circulating supply of 1.12 billion ADA.