What Is Polkadot? Scalability and Interoperability between Blockchains

Polkadot is a protocol whose primary objective is to solve the principle of interoperability by allowing two or more blockchains to connect without compromising their robust security. In this article, we will discuss the work behind Polkadot and how it is laying the foundation for Web 3.0. In addition, we will address the historical behavior of token value and give a brief prediction for 2022. 

What is Polkadot?

Polkadot (DOT) is a protocol that connects different blockchains and enables the secure flow of keys and data across previously incompatible networks. 

Parity Technologies and Dr. Gavin Wood, one of the co-founders of Ethereum, created Polkadot and invented the language used to create smart contracts, Solidity. He was also one of the founders of the Web3 Foundation.

A problem to be solved

When talking about Polkadot, we must keep the following term: interoperability. The Institute of Electrical and Electronics Engineers defines it as the ability of two or more systems or components to exchange information and use such information.

Layers and scalability

In the world of cryptocurrencies, there is an abstraction of layers by the coin’s functionality. Layers start from 0, i.e., layers L0, L1, L2, and L3.

Polkadot, the 0-layer

Due to the principle of interoperability, Polkadot belongs to layer 0, as it allows the creation of the foundations. This layer is responsible for creating the components that make it possible for another layer of one blockchain to operate. 

Layer 2 for scalability

The following layers are the most familiar to everyone, as layer one belongs to the first blockchains, such as Bitcoin or Ethereum. However, the problem is that this layer is not very scalable. Layer 2 augments the operations of layer 1. So, layers 1 and 2 are in constant communication. An example of this communication is Bitcoin’s Lightning Network.

Since we explained the first layers, all that remains is the icing on the cake, layer 3. This layer allows ordinary users to interact with blockchains. With this, we are talking about all projects that have graphical interfaces.

How Polkadot Works

Polkadot is a token with auditors and validators, so it is considered a Proof-of-Stake (PoS) token, unlike its Proof-of-Work (PoW) counterpart. Instead of generating rewards proportional to the energy spent as in Bitcoin, Polkadot uses an election process for the validators of the following block to be mined that uses the tokens voted and the age of the vote. 

Currently, of all the tokens using PoS (Cardano, ETH2.0, Tezos, etc.), Polkadot is the highest valued implementation, with over $10 billion wagered. Last year it presented a profit of approximately 13.87% on the amount wagered. If you are interested in buying and putting your tokens to vote, you can do it from Binance, Kraken, or any reputable exchange.

Parachains and Auctions

In this protocol, there are two types of chains. The main Relay Chain is where all transactions finalize. However, Parachains do the heavy lifting by connecting to the Relay Chain to optimize the transactions. Thanks to this method, Polkadot can support up to one thousand transactions per second (T.P.S.). 

Interestingly, in this protocol, third parties develop the parachains. This method consists of an auction system where users can put their tokens to vote for a technology. Some examples are Efinity, Centrifuge, and more. This process can also be seen similarly in Decentralized Autonomous Organizations (DAOs).

DOT, Polkadot token

Polkadot was launched in October 2017, with 10 million DOT tokens released through an Initial Coin Offering (ICO) that raised 485,331 ETH.

Initial investors, including Web3 Foundation, hold 58.4% of the tokens, and the remaining 41.6% are available for purchase by the general public. An interesting thing about this coin is that it does not have a token limit. Instead, new DOT tokens are constantly generated at a predetermined inflation rate of 10% per year. 

The all-time high was $55 on November 4 last year, while the all-time low was $2.69 on August 20, 2020.

«DOT» Market Behaviour During 2022

Overall, market behavior dictates the value of the tokens. We are now at a Key Support Level of $23 and a Key Resistance Level of $32. Technical indicators pointed to the trend being bullish.

Recently, however, the market collapsed globally, and Polkadot also suffered. DOT began the year with a value of $29.73, a figure it has not matched since. On March 4, it reached its highest price, $23.21. Since then, it went down to $10.03 on March 18, 2022, and has remained so.

The founders of Polkadot continue to bet on their project, they know that the cryptocurrency environment is volatile, and so far, this year has not been easy.

Therefore, Polkadot Decoded 2022 will be held at the end of June, an event that aims to address the needs of the global ecosystem and explain everything that encompasses Polkadot. This year there will be simultaneous live broadcasts from New York, Berlin, Mexico City, and Shanghai, where viewers can interact with members of the project.

Polkadot’s influence on Web 3.0

Now that we have understood what Polkadot is, the problem to be solved, and its mechanisms, we can discuss how it influences Web 3.0. As we know, Web 1.0 (originally The World Wide Web) emerged in the 1990s. 

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After ten years, it evolved into Web 2.0 with Facebook, LinkedIn, and Twitter applications. However, this latest version is objectionable because it is centralized, has massive surveillance, poor security, lack of privacy, and even data theft. 

As a result, Web 3.0 is an improvement to have the power of blockchains and turn centralized applications into decentralized protocols. 

Polkadot: for a decentralized web

Polkadot is the most widely used and most sounded protocol for solving the interoperability problem, so it is considered the foundation for the future of Web 3.0. It can be used to meet the needs of numerous real-world use cases and continues to be at the forefront of blockchain innovation. 

The Polkadot team, Web3 Foundation, and Parity Technologies have taken significant steps in their radical vision to build a more decentralized, inclusive, and accessible internet for all. 

Finally, if you wish to learn more about the philosophy of the product and understand its mechanisms in more detail, the White Book of this protocol is available.

Updated on May 18, 2022 by Sarahy Uribe.

Translated on 25 May 2022 by Shebatt Quiñones.

F.A.Q. Polkadot