Polkadot is a blockchain protocol that connects multiple specialized chains into a single universal network.
Blockchain is undoubtedly a ground-breaking technology that powers the entire cryptocurrency ecosystem, including Decentralized Finance.
Despite it being such a driving force behind the future of finance in the form of a distributed ledger technology, Blockchain has certain drawbacks that we cannot possibly ignore: The lack of interoperability between different blockchains.
Meaning, individual blockchains cannot easily communicate with one another.
This lack of interoperability between different blockchains limits the exchange of data, something that Polkadot can address.
Introduction to Polkadot
Polkadot is a decentralized, open-source blockchain protocol aiming to enhance security and scalability by ensuring interoperability between different blockchains.
Since multiple blockchains can work parallel in the Polkadot ecosystem, they are called parachain or Parallel Chain.
Parachains rely on the Polkadot network’s security and transaction validation based on the proof-of-stake mechanism.
Meanwhile, the Polkadot network’s main chain is called the Relay Chain, where transaction addresses are validated.
The idea is that the Parallel Chain (Parachains) and the Relay Chain are supposed to work in tandem and exchange information at all times.
Why do we need Polkadot?
Polkadot aims to solve the two most important issues blockchain-based systems face today: Scalability and governance.
It can improve the network’s ability to handle more transactions per second while ensuring proper management of protocol upgrades and changes by the community.
It can also help the community gather valuable insights to improve and evolve.
Developers can choose to connect their custom parachain to the Polkadot network, enabling interoperability between all other parachains on the network.
In a nutshell, Polkadot enables developers to create solutions on top of all blockchains, rather than just one.
Developers can create cross-chain applications, products, and services through infrastructure-building solutions offered by the Polkadot network.
The security and validation of data across different parachains are taken care of by network validators.
These network validators further improve scalability by spreading transactions across multiple parachains.
Advantages of Polkadot
In addition to improved scalability and governance, Polkadot aims to solve a few more issues related to customization, interoperability, and upgradeability.
Slow transaction speeds remain a significant concern in the blockchain ecosystem. Since Polkadot acts as a multichain network allowing parallel process transfers across different individual chains, paving the way for mainstream global blockchain adoption. It can speed up the number of transactions taking place.
Different projects have different needs and requirements. Therefore, the need for customizability is of paramount importance. Polkadot offers some customization features that allow design optimization for individual chains to better suit the project’s needs.
By addressing the lack of interoperability between multiple chains, Polkadot can pave the way for an entirely new financial ecosystem, enabling seamless data transfers between different projects and applications.
Polkadot has its network token known as DOT.
There are several use cases of the DOT token. First, it grants token holders the right to vote on potential code changes and governance of the entire platform.
The DOT token holders can also determine network fees and decide the deployment or removal of parachains.
The Polkadot network involves staking in which DOT holders receive incentives for playing by the rule and stand a risk of losing their stake if they don’t.
DOT tokens are also used for bonding. When new parachains become a part of the network, the bonded DOT tokens remain locked during a bonding period. These locked DOT tokens can be released after the bond duration has expired and the parachain is no longer a part of the network.
How to buy DOT on Liquid
DOT is available for instant purchase via trading or Liquid Buy and Swap. Currently, available trading pairs are DOT/BTC, DOT/USDT.
Polkadot is a reasonably young ecosystem, and developers create new solutions all the time. Although it seems very promising, it will take some time to see some actual, practical use cases of the Polkadot network in action.
That said, the future of Polkadot is bright and full of possibilities.