The Polkadot crypto network is a next-generation blockchain protocol that strives to promote a heterogeneous multi-chain framework. It’s built to offer scalability and interoperability for the blockchains built on top of it, allowing them to operate seamlessly together.
Because Polkadot is built using the substrate blockchain development framework, Polkadot-based applications and chains are also compatible with other substrate-based chains. The network was designed to connect several blockchains (shards) to one primary chain. And unlike other platforms that offer interoperability, the shards on Polkadot are not just able to share tokens, and they exchange messages and data too.
Three Major Elements on Polkadot’s Network
- The Relay Chain – this is the central element of the Polkadot network that’s in charge of its consensus mechanism, security, and shard interoperability.
- The Parachains – these are autonomous blockchains in the network that will be optimized for their use and have their tokens.
- The Bridges – these are unique blockchains through which Parachains in the Polkadot network are able to communicate with external networks like Ethereum and Bitcoin.
The Polkadot system can remove a huge amount of scalability bottlenecks that plague other networks. This is because transactions run parallel with each other, without fear of collision in the Polkadot system. Unlike other blockchains in which the transactions are in a chain of sequence.
Polkadot’s Consensus Mechanism
Governance in a blockchain is accomplished through consensus, a system for consenting to a shared state of affairs. Therefore, for blockchain to continue developing and moving forward, all network nodes must arrive at a consensus.
GRANDPA ( GHOST- based Recursive Ancestor Deriving Prefix Agreement) is the consensus mechanism adopted by Polkadot. It’s different from the norm in that it provides Polkadot with a more scalable, secure, and resilient network. It pulls the security of several networks and combines it into one for all.
Nominators – nominators bear the responsibility of securing the relay chain. They are charged with appointing trustworthy validators and staking DOTs in the network.
Validators – validators are nodes that also secure the relay chain. They do so by validating proofs from the collators, participating in consensus with other validators, and staking DOTs.
Collators – collators are charged with the responsibility of maintaining shards or parachains by collecting shard transactions from participants and producing proofs to the validators.
Fishermen – fishermen are either collators or any parachain full node tasked to supervise the network and report any nasty business to the validators.
The DOT token is Polkadot’s native coin, and it is what powers the network. It is used for interoperability, validating rights, payment of network fees, and governance voting.
DOTs are used to pay transaction fees when messaging or exchanging data between two blockchains in the network. DOTs are also used for voting on protocol updates or fixes.
Nominators could support a specific validator by bonding their DOTs to them. Bonding tokens allow DOT holders to earn newly minted tokens as staking rewards and help to increase the network’s attack cost.
What is a Polkadot Parachain
Parachains are custom and project-specific blockchains that are incorporated within the Polkadot network. Parachains can be customized for a different variety of use cases and thrive within the main blockchain.
Parachains benefit from the base features of the Relay Chain much as networks integrated security, transaction settlement, and consensus.
Ethereum and Polkadot are both similar in that they’re projects geared towards encouraging developers to design various tools and products on their blockchains. But they are also different in that developers on Ethereum can only create dApps (decentralized applications) within the bounds set by the blockchain itself.
While Polkadot permits developers to create independent blockchains sustained by collator nodes, storing the complete history of every parachain and aggregating the parachain transaction data in blocks, which are then added to the relay chain.
Data from DotMatketCap indicates that just a little below 100,000 Polkadot investors have combined to contribute 1.108 billion in DOT tokens toward the top 13 parachain candidates for the first round of the parachain auctions.
Amongst these top 13 are Acala and Moonbeam, two of the most prominent projects in the Polkadot ecosystem. Acala and Moonbeam will both be compatible with Ethereum Virtual Machine.
Moonbeam brings smart contracts and interoperability with Ethereum to the table. Moonbeam broadens Ethereum’s potentials to include features like staking, on-chain governance, and cross-chain integration.
Moonbean native utility token is known as Glimmer (GLMR). Glimmer staking is essential to the parachain’s design as it facilitates the network’s security, promotes App performance, and powers the smart contracts.
Acala Network is the financial hub of Polkadot, and it strives to focus on decentralized finance protocol, parachain economic modeling, governance, and mechanism. This project supplies participants with vital financial primitives, including staking derivatives, decentralized stable coins, and DeX. Acala Network powers Defi applications on Polkadot and beyond.
ACA is the native token of Acala Network. ACA token is used to pay for stability fees, transaction fees, penalty fees in case of liquidation. Also, holders of ACA tokens will have the right to propose parameter adjustment and network upgrades.
How do Parachain Auctions Work
- Bonding: this is the process of Staking a specific amount of DOT tokens for the entire duration of the lease. It’s a prerequisite for auction bidding and cannot be utilized for any other activities.
- Auction Duration: the auction period is usually open for around a week. The precise moment the bidding ends is determined retroactively to prevent sniping.
- Slot Durations: each slot on Polkadot’s relay chain can be leased for a maximum of 96 weeks. Projects can start with 12 weeks and then increase to their desired lease period incrementally.
- Crowdloans: in the case where teams are unable to fund the auction themselves, they accept contributions from various DOT holders. This process is known as a crowd loan campaign. These DOT holders will be rewarded in a plethora of ways, including through the distribution of the parachain’s native token.
An overview of what’s been discussed is to provide you with enough information to understand what the Polkadot network is and how it works. Now you should be familiar with terms like Polkadot’s parachains, tokens, major elements, and so much more.