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What is polkadot? An Introductory Overview of the Decentralised Web3 Ecosystem

10 minutes 2 months ago

Introduction to Polkadot: Web 1.0, Web 2.0, and Web 3.0

Web 1.0 was the first generation of the World Wide Web, usually called the read-only Web. While this original www came to fruition in the early 1990s, Web 2.0 began about ten years later, with platforms such as Amazon, Facebook, Airbnb, LinkedIn, Alibaba, and Twitter – which offer dynamic and multi-functional application experiences across all our devices. Still, Web 2.0 has been criticised for its centralised trait, citing that this attribute has made way for excessive focus on profit, unreasonable advertising, frequent mass surveillance, increased security breaches, decreased privacy, and widespread data theft. To tackle these issues, Web 3.0 seeks to leverage blockchain technology to revolutionise the current Web 2.0 model, connecting programs directly and transforming centralised applications into decentralised applications (DApps).

What is the Polkadot network in crypto?

Polkadot is a blockchain ecosystem centred around the Relay Chain, a core network where diverse blockchains and their associated DApps connect and interact. In essence, it is a network of networks, allowing even vastly different blockchain architectures to interact. The Relay Chain manages the security and transactions of hosted blockchains, enabling seamless cross-chain composability or modular communication between other blockchains. Polkadot addresses a fundamental blockchain limitation through interoperability, transforming independent blockchains into components of a unified ecosystem. This approach allows secure exchange of information and currency and computer programs in a scalable manner. Polkadot extends its interoperability to resolve communication challenges between private and public blockchains.

The adaptable architecture of Polkadot streamlines onboarding for new Web3 enterprises, offering developers scalability, interoperability, and security. This breakthrough facilitates a swift time-to-market for developers and entrepreneurs embarking on various Web3 projects. Unlike the traditional process of creating a new blockchain, which involves constructing a unique state machine and consensus algorithm, Polkadot eliminates the need to build standard blockchain components from scratch. Polkadot's architecture employs the Substrate modular framework, allowing users to plug in required features and modify them as necessary. This flexibility empowers developers to tailor the chain architecture, select specific components, and connect to other ecosystems like Ethereum and Bitcoin through cross-ecosystem bridges.

The history of the Polkadot network

Polkadot's genesis is intertwined with Ethereum, as its creator, Gavin Wood, former CTO and core developer of Ethereum, departed in 2016 to establish Polkadot. Initially conceived as a sharded blockchain, Polkadot's white paper was published by Wood in October of the same year.

During his tenure at Ethereum, Wood co-founded EthCore Blockchain Technology Company, which later evolved into Parity Technologies. The company played a pivotal role in developing essential blockchain infrastructure technologies, including the Parity Ethereum client, the Substrate development framework, and the Polkadot network.

Wood co-founded the Web3 Foundation 2017, a non-profit entity supporting Polkadot's research, development, and fundraising. The foundation conducted a successful initial coin offering (ICO) in October, raising $145 million in under two weeks, ranking among the largest ICOs at the time. Subsequently, through a private sale, the Web3 Foundation team continued securing funding to achieve their development objectives.

How does Polkadot work?

As outlined in the article, Polkadot comprises a fundamental network structure consisting of the Relay Chain and parallel blockchains known as parachains. The Relay Chain's protocol is crucial in establishing shared security, consensus, and cross-chain interoperability. This protocol acts as the central engine, unifying the entire infrastructure, connecting various network participants, and ensuring transaction finality.

The intentional design of the Relay Chain involves minimal functionality support, excluding direct smart contract capabilities. Instead, the primary role of the chain lies in orchestrating the entire system, including the coordination of parachains. This strategic approach optimises capacity by delegating specific functionalities to relevant parachains.

Parachains

"parachain" is derived from "parallelised chains," where each parachain operates as an independent blockchain with its governance, tokens, and specific use cases. Despite their sovereignty, parachains leverage the security and interoperability of the Relay Chain for transaction finality. This approach allows developers and users to concentrate on specific goals, such as privacy or scalability, focusing on their unique applications.

Parachains benefit significantly from Polkadot's established security, ensuring fast and scalable transaction speeds. Currently, parachains acquire slots on Polkadot to participate, with plans to increase capacity up to 1,000 parachains. The network envisions a future where Polkadot supports general blockspace beyond parachains, providing more flexible and capital-efficient mechanisms for DApp developers. Currently, there are three ways to gain a slot allocation:
Polkadot blockspace
Polkadot's blockspace, adaptable to project needs, will offer expanded bandwidth, even during congestion. Pricing will be demand-based, and projects can communicate with external networks through bridges, enhancing interoperability.
Governance
Governance is facilitated through OpenGov, introduced in June 2023, granting full voting powers to the community. The governance model ensures seamless protocol updates without hard forks. The Polkadot Fellowship, part of OpenGov, comprises technical experts elected by DOT holders to facilitate swift bug fixes or identify malicious proposals.
Consensus
For consensus, Polkadot employs nominated proof-of-stake (NPoS) as its validator set selection mechanism, enhancing chain security. This approach ensures a unanimous agreement among network nodes for continuous blockchain state progression.

Features of the Polkadot network

Polkadot's value and potential stem from several key characteristics:
1. Interoperability:
- Polkadot facilitates seamless cross-blockchain transfers, supporting a broad range of data and asset transfers between blockchains. Its cross-chain system enhances interoperability, allowing various blockchains to connect and interact on the Polkadot crypto network.
2. Economic and Transactional Scalability:
- The platform employs an economically scalable model, ensuring the security and consensus of multiple blockchains through interconnected network validators. Polkadot achieves transactional scalability by distributing network transactions across multiple parallel blockchains, enhancing transaction times.
3. Innovative Blockchain Development:
- Polkadot's blockchain development framework, Substrate, empowers engineers to create custom blockchains swiftly. Integration with Polkadot provides true interoperability and advanced security architecture, streamlining application development.
4. Forkless, Upgradeable Platform:
- Polkadot can automatically upgrade itself without requiring forks, seamlessly integrating new features and swiftly addressing bugs. This upgraded capability ensures continuous advancement and increased efficiency as blockchain technology evolves.
5. Flexible, Security-Focused Ecosystem:
- Polkadot's blockchain protocol enhances data availability and transparency, fostering democratic interactions between blockchains. This independent governance structure contributes to the security and integrity of interconnected networks.
6. Decentralised Governance Model:
- Polkadot employs an advanced governance model involving all stakeholders in crucial decisions. Network upgrades occur autonomously on-chain, reflecting the community's values and advancing democratically. This decentralised governance model ensures inclusivity and responsiveness to the community's needs.

Tokenomics

The DOT token is Polkadot's native coin. It is utilised for paying network fees, connecting parachains to the network, governance voting, validating rights, and staking. Let's have a closer look at each utilisation:
1. Network Incentives:
- DOT is utilised to reward nodes participating in the network's consensus mechanism, promoting their active involvement. Additionally, DOT is allocated to fund the ecosystem's treasury, ensure financial support for development, and regulate the asset's inflation rate.
2. Governance Participation:
- DOT coin holders contribute to the protocol's on-chain decision-making process through the Relay Chain, Polkadot's primary blockchain network. This involvement helps maintain the integrity of governance within the ecosystem.
3. Security:
- Using DOT as collateral in staking is an integral part of the ecosystem, and aims to ensure honest behaviour among coin holders. Validators, in turn, earn rewards for their role in upholding network security and consensus. Which creates a mechanism that aligns interests toward the network's stability.
4. Parachain Allocation via Bonding:
- DOT coins play a crucial role in determining the allocation of parachain slots through a rent-like mechanism. This process involves an auction and staking/deposit system, where DOT is used to decide which parachains connect to the Relay Chain, enhancing the overall functionality and interoperability of the ecosystem.
5. Slashing Mechanism:
- DOT is instrumental in the slashing mechanism, which imposes penalties on validators and nominators in the event of malicious actions, such as attacks on other nodes or engaging in unwarranted behaviour. This ensures the security and trustworthiness of the Polkadot blockchain network.

Substrate, the blockchain development framework

Substrate, Polkadot's robust blockchain framework, streamlines the process of creating a new blockchain, significantly reducing the complexity for developers. Its primary goal is to assist developers in constructing bespoke blockchains that seamlessly connect to the Relay Chain, benefiting from its security, speed, and efficiency. This design empowers developers to concentrate on enhancing the value of their projects without the need to allocate resources and funds to construct every aspect of the infrastructure from the ground up. Any blockchain built with Substrate is inherently compatible with Polkadot, gaining access to the interconnected parachains, applications, and resources ecosystem. The creators of Substrate aimed to address the limitations of previous-generation networks, providing developers with a software development kit that eliminates the necessity of developing and optimising a blockchain entirely from scratch. While Polkadot and Substrate synergise effectively, they are not mutually dependent. Polkadot parachains have the flexibility to be built and maintained using alternative software options other than Substrate. Similarly, chains developed with Substrate are not obligated to be connected to Polkadot or Kusama, offering versatility and independence to blockchain developers.

Kusama, the experimental development framework

Kusama serves as Polkadot's canary network, functioning as an early-stage deployment platform, a live pre-production environment, and an experimental network. It allows developers to deploy their chains or DApps after initial testing on other networks, allowing for risk mitigation and thorough testing under real-world conditions before transitioning to production on Polkadot.

Kusama has a lower economic barrier to entry compared to Polkadot, making it more accessible for launching parachains or becoming a validator, requiring fewer DOT.

Governance processes on Kusama move at an accelerated pace compared to Polkadot, facilitating the testing of new features before deployment to the latter. Kusama operates up to four times faster than Polkadot, with a seven-day voting period for tokenholders to participate in a referendum, followed by an eight-day validation period, ultimately leading to the ratification of the referendum on the chain.

With its motto "expect chaos," Kusama acknowledges its faster upgrade rate, which may come at the cost of stability. Stakeholders must stay vigilant in tracking proposals, referenda, and upgrades, while validators on Kusama often need to adapt quickly to short-notice updates.

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