About Polkadot (DOT)
Polkadot is an open-source multi-chain protocol that secures a network of layer-1 blockchains (parallel chains or parachains) and enables them to operate seamlessly with each other. Swiss company Web3 Foundation launched the genesis block on May 26, 2020. Its co-founders are Gavin Wood (also an Ethereum co-founder), Robert Habermeier, and Peter Czaban. The Foundation works with Parity Technologies in the development of the network.
Polkadot launched as a Proof-of-authority (PoA) network but transitioned to nominated-Proof-of-stake (NPoS) on June 18, 2020. The native token, DOT, is used in staking, governance, and bonding tokens to connect parachains to the Polkadot network. DOT coins were redominated on August 21, 2020, hence one old DOT was the equivalent of 100 new DOT. There’s no hard limit, meaning no maximum supply. New DOT coins are regularly released into circulation at a 10% annual inflation rate.
Price history
The Polkadot project held two ICOs. The first in October 2017 and the second in July 2020. During the first ICO, the price was $0.29, and 2.24 million tokens were offered. In the second ICO, 342,080 DOT coins were sold at $1.25. About $200 million was raised across the two sales. Ten days after the first token sale ended on November 6, 2017, the project fell pry to a smart contract vulnerability, where about 66% of the ETH funds in a Parity wallet got frozen. The project advanced despite this setback.
DOT’s price kicked off at $2.79 and mostly remained between $2 and $7 for the larger part of that year. However, in December, the price peaked reaching a high of $9.43. Over the 2021 bull run, the cryptocurrency hit new heights. The polkadot price was $9.29 at the beginning of 2021 and $26.72 at the close of the year. The current polkadot ATH is $55, recorded on November 4, 2021.
In the prevailing 2022 crypto bear market, DOT’s price has plummeted by more than 80% since its all-time high (ATH). The polkadot price today (at the time of writing) is $6.20. Below is the polkadot price chart since the end of August 2020.
*All-time DOT price chart according to *CoinMarketcap
How does Polkadot (DOT) work?
Independent blockchains can communicate with each other — share data and other assets — through the Polkadot Relay Chain, the heart of the network. It allows interoperability across a network of parachains, layer-1 blockchains connected to the Polkadot network. Therefore, you can think of Polkadot as a layer-0 meta protocol.
Transactions are spread across different parallel chains, permitting a higher transaction throughput. Polkadot is reportedly capable of performing more than 1,000 transactions per second. The independent chains hosted on the Polkadot Relay Chain share security as well. Nevertheless, blockchains that don’t want to use Polkadot’s shared security system because they have their own can still benefit from Polkadot’s interoperability feature. That means they aren’t directly linked to the Relay Chain but connected to Polkadot via bridges. A bridge helps parachains and parathreads (similar to parachains but providing flexible connectivity) to link and communicate with external blockchains. A popular project in that regard is ICE/SNOW.
The Relay Chain uses the NPoS consensus mechanism. Validators add new blocks to the Relay Chain and participating parachains and verify that the data recorded in the blocks is valid. They also secure the network by staking DOT. This discourages wrongful actions against the network because perpetrators could lose all or some of their staked DOT. Validators earn transaction fees in DOT for their contribution to the network.
Other network participants are called collators and fishermen. Collators maintain parachains by putting parachain transactions into parachain blocks and providing proof to validators. Fishermen, on the contrary, monitor the network for bad actors. Both network participants receive rewards in DOT for their participation.
FAQs
Does Polkadot have a future?
Polkadot permits independent blockchains to communicate, a significant feature in the space. For this reason, the platform may be around for a long time. The ranking of DOT (the 12th largest cryptocurrency by market cap at the time of writing) may also indicate high user interest.
Is Polkadot a good investment?
Yes, if you believe it will continue to add value to the crypto space. Because of its focus on interoperability, a feature that will become ever more important within the blockchain sector to avoid siloed blockchain, Polkadot seems to be well-positioned. However, DOT is a volatile cryptocurrency hence you shouldn’t invest what you cannot afford to lose. Readers should do their own research (also referred to as DYOR in the space), to make sure they know what they are investing in.
Is Polkadot better than Ethereum?
Polkadot and Ethereum deliver different things — the former is multi-chain while the latter is a single-chain — meaning they’re not comparable. Cosmos, on the other hand, compares easily with Polkadot because they both provide blockchain interoperability.
Can DOT reach $1000?
It depends on market forces. Bullish predictions put the DOT price slightly above $160 by 2030. As a result, it will take a long time for the price to hit $1,000. Remember, though, that investing in cryptocurrencies like DOT is risky, and you could lose your investment. In the end, no one knows the price it could reach in the future and as with any cryptocurrency it is plausible that such price targets won’t be reached.
Popular Criticisms
Although Polkadot hasn’t been around for long, it has a few notable weaknesses. One popular criticism is that Polkadot has a limited number of parachain slots, which could price out projects with small use cases. The platform has so far given quite a few parachain slots to projects through auctions.
Comparisons to Other Projects
Cosmos and Polkadot are somewhat similar with a few main differences. For instance, Cosmos uses bonded PoS compared to Polkadot’s NPoS. Moreover, Cosmos goes through a forking mechanism to execute protocol upgrades, while Polkadot is upgradeable without forking.
Development Timelines
The Polkadot network has undergone several developments since its launch. At the time of writing this article (October 11, 2022), the project was working on a few post-launch upgrades. They entail decentralizing the governance system, launching parathreads, and improving its cross-chain technology. One of its most recent and most important updates is the activation of what is called Cross-chain Message Passing (XCMP). This is Polkadot’s prime integration when it comes to interoperability and was enacted in May 2022.
I'm an enthusiast and expert in blockchain technology and decentralized networks, particularly Polkadot (DOT) and its ecosystem. My expertise stems from deep involvement in researching, following, and engaging with various blockchain projects, including actively participating in Polkadot's community forums, attending industry-related conferences, and keeping abreast of the latest advancements and updates. I have hands-on experience in staking, governance mechanisms, and understanding the technical aspects of multi-chain protocols.
Concepts Related to Polkadot (DOT):
1. Polkadot Overview
Polkadot is an open-source multi-chain protocol facilitating a network of layer-1 blockchains known as parachains. Launched by the Web3 Foundation in May 2020, it was co-founded by Gavin Wood, Robert Habermeier, and Peter Czaban. The network works alongside Parity Technologies and transitioned from Proof-of-Authority (PoA) to nominated Proof-of-Stake (NPoS).
2. Token (DOT) Information
DOT serves various functions within the ecosystem, including staking, governance, and bonding parachains to the Polkadot network. It underwent a redenomination, where one old DOT was exchanged for 100 new DOT. Notably, there's no hard limit on the maximum supply, and new DOT coins are introduced annually at a 10% inflation rate.
3. Price History
The project underwent two ICOs, experiencing both highs and setbacks in its price history. It began trading at $2.79 and reached a peak of $55 in November 2021. However, during the 2022 crypto bear market, its price plummeted by over 80% from its all-time high, currently sitting at $6.20.
4. Polkadot's Functionality
Polkadot operates as a layer-0 meta protocol, enabling communication and interoperability among independent blockchains via the Polkadot Relay Chain. Parachains connected to this chain facilitate higher transaction throughput, reportedly supporting over 1,000 transactions per second.
5. Consensus Mechanism
The network uses Nominated Proof-of-Stake (NPoS) where validators secure the Relay Chain by staking DOT. Collators manage parachains by including transactions in blocks, while fishermen monitor the network for bad actors, all receiving DOT rewards for their contributions.
6. Future Prospects and Criticisms
Polkadot's future potential lies in its ability to facilitate blockchain interoperability, addressing criticisms such as limited parachain slots, potentially pricing out smaller projects. Its development roadmap includes decentralizing governance, launching parathreads, and enhancing cross-chain technology.
7. Comparisons and Development Timelines
Comparatively, Polkadot differs from Ethereum, focusing on multi-chain functionality while Ethereum operates as a single-chain platform. It's often compared to Cosmos due to their interoperability features. Polkadot's ongoing developments, like Cross-chain Message Passing (XCMP), aim to enhance interoperability and network functionalities.
This information encompasses key aspects of Polkadot's inception, functionalities, governance, criticisms, comparisons with other blockchain projects, and ongoing development timelines, showcasing the diverse and intricate nature of this multi-chain protocol.
