As the Blockchain industry continues to grow, the need for interoperability among different blockchains becomes increasingly important. This is because each blockchain has its own strengths and weaknesses and by allowing them to communicate with each other, we can create a more robust and flexible ecosystem, and Polkadot (DOT) is a prominent name to make this a reality. But what is Polkadot? What is DOT coin? How does it work? Is Polkadot (DOT coin) still a potential investment now? Let’s find out more in the article content below.
Review Polkadot (DOT coin) 2024 – Should You Invest?
What is Polkadot?
Polkadot (DOT) is a Blockchain platform, specifically a multi-chain technology, non-homogeneous and highly scalable. Polkadot allows Blockchains to connect with each other to share data and form a decentralized network.
The vision of Polkadot is to create a “Decentralized Web,” where our identity and data are controlled by ourselves, not by third parties such as organizations or governments.
Polkadot is considered one of the blockchains capable of competing with cryptocurrency ecosystems like Ethereum (ETH), Cosmos (ATOM)… Launched later than other cryptocurrencies (2020), Polkadot has more advanced technical features. Its goal is to overcome the weaknesses of previous cryptocurrencies.
Who is behind Polkadot (DOT coin)?
Polkadot was co-founded by a highly esteemed team. Many believe that just looking at this founding team is reason enough to invest in DOT coin.
- Robert Habermeier (has a background in research and development in blockchain, distributed systems, and cryptography).
- Dr. Gavin Wood (co-founder and CTO of Ethereum).
- Peter Czaban (Technology Director of Web3 Foundation).
Basically, Polkadot is an open-source project and anyone is free to contribute to the development of the platform. Besides the open-source community, behind Polkadot stands the Web3 Foundation – one of the leading organizations in the Crypto space. Web3 Foundation contributes both financially and technologically to Polkadot.
Organizations like Web3 Foundation, Parity Technologies, ChainSafe, Polkadot JS, Soramitsu, Acala Network, MoonBeam, Kusama, and Edgeware all support Polkadot Blockchain.
In October 2017, Polkadot co-founders Robert Habermeier and Peter Czaban raised about 144.3 million USD through an ICO. Around 2019, a subsequent private sale raised about 43 million USD.
How does Polkadot work?
Polkadot focuses on solving two main problems of Blockchain: Interoperability, Network Scalability, and Adoption. Specifically:
- Limited scalability: For example, Bitcoin and Ethereum – two leading single blockchains. However, the average transaction speed per second on the network is only in the two-digit range, while for VISA, it’s 24,000 – 40,000. Is it feasible for the majority of users to switch from VISA to using Bitcoin or Ethereum’s Blockchain?
- Adoption: Blockchain is still a novelty for the majority of users. Everything needs to be simplified so that everyone can use it like the Internet, as well as apply it in work and daily life.
- Low interoperability: For example: A owes B 1 Bitcoin, B wants A to repay in Bitcoin, but A only has ETH. The situation forces A to transfer ETH to an exchange, sell ETH and buy BTC, then transfer BTC to B… In reality, this process could be simpler but it is still quite complex, time-consuming, and expensive.
To solve this, the idea of Polkadot includes a Mainchain (Relay Chain), Layer 2 expansion solutions (Para Chain), and bridges to other Blockchains (Bridges Chain). Among them:
- Relaychain: The Central Chain of Polkadot, responsible for connecting and validating Parachains. Specifically, Validators (validators) will Stake DOT on the Relaychain to protect the network, transactions including network management. Transaction fees on the Relay Chain will be higher than on Parachain.
- Parachain: An expansion solution for Polkadot’s network. Parachain is not necessarily a Blockchain. It can be a Dapp (decentralized application) or a Data Structure, as long as it can provide proof that can be validated by Validators assigned to that Parachain. Most of the calculations across the entire Polkadot network will occur on Parachain.
- Parathread: Similar to Parachain but with a pay-as-you-go model. More economical for blockchains that do not need continuous connection to the network.
- Bridges Chain: Can be imagined as a bridge between the Polkadot Network and other Blockchains, providing the ability to interact between networks.
You can see an overview of Polkadot’s (DOT coin) design in the image below:
Polkadot Use Case
The blockchain architecture of Polkadot is designed to enable interoperability between different blockchains, allowing them to communicate and share information securely and scalably. This interoperability is achieved through the use of a relay chain, which acts as the main chain in the Polkadot network and connects to several parallel chains called parachains. Polkadot’s blockchain architecture facilitates secure and scalable communication and data sharing between these chains.
Use Cases of Polkadot:
- Decentralized Finance (DeFi): Polkadot’s interoperability and scalability make it well-suited for DeFi applications. It allows for the creation of decentralized exchanges, lending platforms, stablecoins, and other financial services that can interact with multiple blockchains and assets.
- Cross-Chain Communication: Polkadot’s cross-chain interoperability enables seamless communication and data transfer between different blockchain networks. This feature is particularly useful for asset transfers, cross-chain transactions, and building bridges between incompatible blockchains.
- Supply Chain Management: Polkadot can enhance supply chain management by allowing transparent and secure tracking of goods and transactions through various stages of the supply chain. It facilitates data sharing and coordination among different stakeholders, improving transparency, efficiency, and traceability.
- Gaming and NFTs: Polkadot’s scalability and upgradability make it suitable for gaming applications and Non-Fungible Tokens (NFTs). Developers can create decentralized games, virtual worlds, and digital collections leveraging Polkadot’s interoperability and security features.
- Identity and Authentication: Polkadot’s architecture can be used to build decentralized identity systems and authentication protocols. It allows users to control their digital identity and enables secure and private interactions across various platforms and applications.
- Internet of Things (IoT): Polkadot’s ability to connect and integrate multiple blockchains can be leveraged in IoT applications. It enables secure data and value exchange between IoT devices, enhances interoperability among different IoT networks, and facilitates automation and reliable smart contract execution.
These are just a few examples among many potential use cases of Polkadot. Its flexibility and interoperability make it a versatile platform that can be applied in various industries to address specific needs and open up new possibilities in the decentralized ecosystem.
Basic Information About the DOT Token
- Token Name: Polkadot
- Ticker: DOT.
- Blockchain: Polkadot.
- Token Type: Utility, Governance.
- Total Supply: 1,095,100,722 DOT
- Circulating Supply: 1,014,151,589 DOT.
DOT Allocation
- Polkadot Auction: 50%.
- Web3 Foundation: 30%.
- Further Pre-Launch Distributions: 20%.
The DOT coin will be used for:
- Governance.
- Staking to become a Validator.
- Parachain Auctions, where the DOT will be locked when the auction is successful.
Some Notable Milestones of Polkadot in 2023
- Launch of OpenGov Model: In Q2 of 2023, Polkadot launched its new governance model called OpenGov. This model introduces several improvements over the previous system, including simultaneous referendums, a community-centered governance body, and enhanced delegation flexibility.
- Release of XCM V3: In Q3 of 2023, Polkadot released XCM V3, a major upgrade to its cross-chain communication protocol. This upgrade enables more efficient and secure communication between parachains, essential for Polkadot’s vision of a fully interoperable Web3.
- Launch of Parachains: In Q4 of 2023, Polkadot launched parachains, a new type of parachain that allows projects to access Polkadot’s security and scalability without having to win a parachain auction. This has made it easier for new projects to launch on Polkadot and bolstered the overall activity of the network.
- Growing Developer Community: The developer community at Polkadot significantly grew in 2023. Santiment, a renowned analyst in this field, declared that Polkadot has the most active developer community in Web3 to date. This is evidence of Polkadot’s potential as an innovation platform and is encouraging for the future of the network.
The Most Notable Advantages of Polkadot
- Scalability: Polkadot uses a unique architecture called “parachains” to achieve scalability. Parachains are independent blockchains that can be connected to the Polkadot relay chain. This allows Polkadot to scale horizontally, meaning it can handle more transactions per second as more parachains are added to the network.
- Interoperability: Polkadot is designed to work with different blockchains. This means that data and tokens can be moved between blockchains connected to Polkadot. This enables the development of decentralized applications that can access data and assets from multiple blockchains.
- Security: To protect the network, Polkadot uses a new consensus technique called “Nominated Proof of Stake” (NPoS). NPoS is a more efficient and secure consensus process compared to Bitcoin and Ethereum’s Proof of Work (PoW).
- Flexibility: Polkadot is a flexible platform that can be used to build various decentralized applications. The parachain model allows developers to create custom blockchains tailored to their specific needs.
- Governance: Polkadot has a transparent and democratic governance system. This means that all DOT holders can participate in the decision-making process for the network.
- Staking: DOT holders can stake their tokens to earn rewards and help secure the network.
- Community: Polkadot has a large and active developer and support community. This is crucial for the long-term success of the project.
Challenges Faced by Polkadot
Since Polkadot has a very limited history of being a live project with active users/parachains and is still a work in progress, much of the criticism surrounding the project stems from these issues. Polkadot is competing in a crowded space of general-purpose smart contracting Proof of Stake blockchains like Tezos, Cosmos, Cardano, NEAR, Solana, soon-to-be Ethereum 2.0, and many others. It remains to be seen which project(s) the market will adopt, but for now, all are playing catch up to Ethereum, which has the industry’s only meaningful adoption. Fortunately for Polkadot, it has plenty of funds for development and a highly respectable team, but as for now, VC-funded, Ethereum-competitor chains have yet to gain meaningful adoption. If Polkadot is unable to foster a thriving community of developers, users, and parachains eager to tap into its multi-chain network of networks, it may be too far behind Ethereum’s headstart and entrenched network effects.
In a crowded smart contract space, every project is competing for developers. In Polkadot’s case, there are a couple of obstacles in attracting developers and projects to build on a parachain architecture.
Overall Assessment of Polkadot (DOT Coin)
Polkadot is a powerful new blockchain protocol with the potential to revolutionize how we think about interoperability. Polkadot uses a unique architecture called parachains to achieve scalability. Additionally, Polkadot employs a unique consensus mechanism called Nominated Proof of Stake (NPoS) to secure the network. NPoS is a more efficient and secure consensus mechanism than Proof of Work (PoW), used by Bitcoin and Ethereum.
Although Polkadot offers a promising vision for the decentralized web, it faces challenges, including competition from other interoperability projects and the need to attract developers and users to its ecosystem. Overall, the successful deployment of parachains and effective network governance will be pivotal for its long-term success.
Looking ahead, Polkadot continues to evolve, with ongoing developments like parachain deployment, bridges to other networks, and implementation of upgrade proposals. Therefore, at this point, Polkadot remains a hopeful prospect for the future.
Polkadot’s ambitious goal of creating a decentralized web of interoperable blockchains has positioned it as a pioneering force in the blockchain space. By offering a scalable, secure, and modular infrastructure, Polkadot has attracted the attention of developers, enterprises, and the broader crypto community.
As the decentralized web continues to evolve, Polkadot’s impact is expected to be transformative, paving the way for a future where blockchain networks collaborate seamlessly, ushering in a new era of decentralized innovation and collaboration.
