Created in 2016 and launched in 2020, Polkadot is run by the Web 3.0 Foundation, aimed to build a free and decentralised online network and solve some of the issues faced by Ethereum.
Polkadot is one of the new generation of cryptocurrencies that looks to usher the crypto world into a new form of functionality and interoperability. Here is all you need to know about Polkadot.
What is Polkadot?
Polkadot is a multichain protocol that allows for cross-chain interoperability on some of the highest levels ever. The protocol allows different blockchains to maintain communication, transfer value and use the security of the Polkadot layer.
Polkadot is all about developers supporting other developers. It allows the transfer of actual data through public and private chains, decentralised applications (Dapps), oracles and other blockchain-based services.
Polkadot solves one of the major concerns in the blockchain world, interoperability.
How does Polkadot work?
Polkadot comes with various components that allow it to connect with both on-chain and the off-chain networks. All these components work independently to allow for flexibility. The components are:
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Relay chain
This is the main functional component of Polkadot. It ensures the network’s consensus, cross-chain and security. There are two consensus mechanisms on the relay chain; one is to accomplish finality while the other is for block production.
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Parachains
These are independent blockchains within the Polkadot network that are able to use the security of the relay chain. They are optimised for specific use cases and have their own tokens. They can also design their own governance system and operate without affecting the other parachains.
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Parathreads
These operate like parachains however on a pay-as-you-go model. They are ideal for short-term network needs.
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Bridges
These are the platforms that connect the various parachains and parathreads to the other networks for communication.
Polkadot token
Polkadot network has a native token called DOT ($DOT). It serves a number of functions in the system such as; staking, governance and bonding. It can also be used as an electronic payment system. DOT does not have a fixed supply but is capped at 10% inflation. There are currently around 10.8 billion Dot minted.
Polkadot Governance
Polkadot comes with a multi-layered governance model that allows DOT holders to manage the platform. The platform provides for an on-chain voting system that allows for changes to be introduced without the risk of a hard fork.
The various governance layers in the system include; council members who represent passive stakeholders. They propose different projects in the network and decline ones that are non-viable. The other part is the technical committee, which is charged with actively building the Polkadot network.
Investing in DOT
DOT is one of the popular tokens and is a viable investment option. The token currently is on a bullish run, like the general crypto market. It is an ideal long-term investment given that the future of blockchains will be multichain.
Some popular crypto exchanges to buy DOT include CoinSpot, Binance, Coinbase, BTC Markets, and Crypto.com. Many users review CoinSpot com au as the best place to trade DOT because it supports an attractive trading fee scheme, responsive 24/7 customer support and the highest-level security. Since opening its door in 2013, there have been no reported breaches or security problems with this exchange; thus, you can safely trade DOT on CoinSpot.
Bottom Line
Polkadot is one of the most functional cryptocurrencies as it connects different networks. It is an ideal investment both for short and long-term trading.
