Polkadot: solving problems that plagued blockchains for ages
Polkadot: a complete guide to the next step in evolution of blockchains
Polkadot: how it works, weighing all pros and cons
One of the main problems with popular traditional blockchains is scalability. The transactions are not fast enough (and expensive). The Polkadot platform and its experimental Kusama environment are addressing these blockchain needs and provide innovative solutions.
Polkadot
Polkadot is a decentralized Web3 platform with parachain functionality. It can integrate blockchains, oracles, and other crypto tools in one ecosystem.
Parachains are platforms that connect separate and full-fledged blockchains that are complex and not compatible. This integrability of different blockchains takes scaling to the next level.
The main advantage of this network protocol is that it helps different networks to share information and transactions through a single platform. The Polkadot ecosystem is designed to make the development of decentralized applications and services, as well as their connection and integration, much easier and faster.
Polkadot has its cryptocurrency: the DOT token. The platform itself consists of 4 components:
Relay Chain. This relay chain is the heart of the network. It provides cross-platform interoperability, consensus, and a high level of security. All the necessary conditions for the full development of any blockchain application in the Polkadot ecosystem are persisting, thanks to the features of the main network.
Parachains. The platform integrates the functions of various independent blockchains into one network. There can be many networks within the Polkadot ecosystem. This creates a single digital space in which there is complete synchronization of individual chains of blocks of different types. They are called parachains, and each of them can have its own tokens.
Parathreads. This is what parallel blockchains are called. They are similar to parachains but have a different usage format. To get access to a slot in the parachain, you need to put down a deposit in DOT tokens that covers at least 2 years of its operation. This keeps the network stable. Parathreads are practically the same as Parachains, but they can be rented. This means you do not have to put down a deposit, you only pay for the time you use them.
Bridges are a technology that connects the Polkadot ecosystem with other third-party blockchains - Ethereum, Bitcoin, Binance Chain, etc. The quality and integrity of operations of all network participants are controlled by special algorithms.
Kusama
This is Polkadot's experimental network. Within the company itself, it is called the "canary network". At its core, Kusama has the same capabilities, but it is a test environment. It has enough tools to allow developers to do rigorous testing with minimal risk.
Kusama is good for testing the performance of applications before they are launched in the Polkadot ecosystem. This allows different teams of programmers to fully test their product and identify vulnerabilities before launching it in Polkadot.
Kusama operations based on 2 components:
- A relay network similar to Polkadot's allows control network transactions.
2. Parachains for confirming the authenticity of the completed transactions.
Parachain auctions
Parachain auctions are already running on Kusama. They are used to select the best projects for the Polkadot ecosystem. The winners will get the opportunity to publish their crypto products on the Relay network.
To get extremely accurate auction results, a special analysis is used: the candlestick method. Users place bets on projects they are interested in for a limited period. Kusama tokens (KSM) are auctioned. The project that collects the most tokens wins.
The first auction at Kusama took place on July 22, 2021. The winner is the Karura project. This network was supported by over 1500 users. A total of 500,000 KSM tokens were bet on Karura. At the time of the auction, this amount was estimated at $90 million.
The peculiarity of the Karura network lies in the implementation of the Acala protocol, which aims to become a decentralized financial center. Acala will work in a DeFi system hosted on the Polkadot platform.
The auctions in Kusama differ from ordinary ICOs. KSM token holders do not give their digital assets to the project team. If a particular startup wins, all funds that were dedicated to it will be frozen.
While the development team tests its code in Kusama, users cannot withdraw their tokens. However, this option is available immediately after the end of the slot.
One of the main differences between the Kusama network and Polkadot is the speed of system management. While Polkadot takes a month to vote on a particular issue, Kusama makes all decisions within 7 days. Moreover, changes approved by Kusama users are implemented after 8 days.
In the experimental Kusama network, it is also much easier to obtain validator status, as the staking requirements are much lower than in Polkadot.
According to preliminary data, the first auctions in the Polkadot project will begin on November 11, 2021. And technically, the platform is totally ready for it. At this stage, this proposal is undergoing a public vote. If approved, the first series of 5 auctions will be held weekly (one auction per week). The second series of 6 auctions will be held every 2 weeks.
Next, the first batch of 5 parachains will be introduced to the Polkadot ecosystem around December 17, 2021. The second batch should be released around March 11, 2022. A separate slot will be allocated on Polkadot for each auction. The whole process will take 96 weeks: 8 lease periods of 12 weeks each.
Costs and capitalization
The current price of the Polkadot token (DOT) is $42.97. Market capitalization - $44.7 billion.
There are 1,042,258,235 DOT in circulation. Daily trading volume reaches $2.6 billion.
Kusama Token (KSM) is now worth $368.5. The market capitalization of this asset is $3.25 billion.
The number of tokens in circulation is 8.9 million. The daily trading volume of the KSM is $162.7 million.
Polkadot and Kusama have an almost identical code base, so the Kusama token is fully compatible with the main network.
What are DOT and KSM tokens used for?
Considering the similarity of the Polkadot and Kusama projects, their tokens perform almost identical functions.
The native coin of the Kusama network helps maintain the stability of its operation. The KSM token has the following functions:
Staking. Staking is needed to encourage network participants to validate the quality of work. Users become nominators and validators by pledging their tokens. The project pays them a reward for doing so.
Protocol Control. Users can vote with tokens for updates, corrections and suggestions for improvement.
Gluing. Support for newly created parachains.
Commissions. Users who transfer messages between Parachains pay a fee.
The DOT token runs on its blockchain: Polkadot. In the ecosystem, it is needed to perform the following functions:
Network management. Token holders can control changes to the platform. This includes bug fixes, updates, event scheduling, and setting network fees.
Adding new Parachains. Once a chain is added to the Polkadot ecosystem, a certain number of tokens are locked. When the chain is removed from the network, the coins become available again.
Consensus Help. The active participation of token holders (staking) is required for the stable operation of the platform.
It is not possible to hold your Polkadot platform token in all cryptocurrency wallets. A suitable option for smartphones is Polkawallet, a suitable browser wallet is KodaDot and a suitable hardware wallet is Ledger. DOT tokens can also be used in Polkadot auctions.
Advantages and disadvantages
The Polkadot platform attracts the attention of users for the following reasons:
- This is one of the most successful projects aimed at developing web protocols;
- The ecosystem provides global, fast and secure exchange of transactions between different blockchains;
- Full decentralization of information and crypto assets;
- The ability to leverage sidechains to maximize bandwidth;
- Simplified integration into the ecosystem of different applications;
- Rapid creation of a secure blockchain that is compatible with other blockchains;
- Efficient scalability of a decentralized environment;
- Open control system that allows voting by the owners of DOT;
- It's easy to adapt to any changes as new technologies are introduced;
- Impressive functionality of the token;
- The ability to create time windows for connections between blockchains;
- Participation of an experienced team of professionals in the project: Web3 Foundation.
The disadvantages include the fact that most solutions are still in the development phase. In addition, it may be impractical for blockchains to keep tokens under lock for the entire duration of the Polkadot time window.
The advantages of Kusama include:
Low entry threshold. Blockchain projects can start working on the Kusama network after winning the auction. No need to pay large sums for the use of testing technology.
Accelerated iteration. Developers can quickly test the effectiveness and stability of their products. A high-quality testing environment allows you to quickly prepare the updates necessary for the project.
Open management. As with Polkadot, key decisions are made by collecting votes from KSM token holders.
Hi-tech. Kusama is a state-of-the-art network that can be used for a variety of tasks. It allows you to launch a project and then deploy it in the Polkadot ecosystem.
Powerful community. The Polkadot project and the Kusama network have already attracted the attention of a large number of experienced programmers. This allows new projects to get competent help from loyal developers.
Support for new blockchains. The functionality of Kusama makes it possible to quickly develop the brand, forming a community of professional developers around the newly created blockchain. In the blockchain race, this factor is of great importance.
The disadvantage here is the same as that of Polkadot: locking tokens while the project is using the network slot.
Consensus protocol
In Polkadot, responsibilities for the functioning of the ecosystem are divided among several groups of participants:
Nominators. These users pledge a share of DOT tokens. Thus, you can decide who will perform the function of the validator. The selection is carried out carefully, with a focus on the professionalism of the candidate. If the validator cannot perform his duties correctly and is rejected, the nominator who effected the approval will lose the pledged tokens.
Validators. Members who maintain network security. They, too, pledge their DOTs and run applications. Also, these users check, approve, and add blocks received from collators to the main Polkadot network. Validators are highly rewarded as they allow large amounts of tokens to be blocked.
Collators. Their main task is to support the exchange of transactions between independent blockchains. They collect transactions from parachains, create blocks from them and send them to validators for confirmation. Collators also serve as a connecting link between individual blockchains.
Fishermen. These network members control the quality of the blocks created. They monitor user behavior in the Polkadot ecosystem. They receive a reward for each detected violation. Fishermen pledge their tokens. In the event of a false alarm, these DOTs are withdrawn.
Members of the Kusama network can choose one of 3 roles:
Creators. They launch various network elements: parachains, bridges, parathreads, etc. They can work independently or in a team.
Accompanying. This group includes everyone who controls the quality of the network - nominators, sorters, and validators. The principle is the same as for Polkadot.
Managers. Users who, being the holders of KSM tokens, determine the main direction of the development of the network.
The crypto segment is constantly evolving and for this reason, the demand for high-quality blockchain scaling solutions will grow.
Polkadot and Kusama are some of the best networks for building, testing, launching blockchains, and combining ready-made decentralized systems. Kusama ensures that the code is fully working before deployment, the mainnet allows the project to run in a fast and secure environment.
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