I have been fascinated with Crypto for a long time now and want to share some things I have learned about it.
What is Polkadot?
Many people call Polkadot an “Ethereum Killer” because they believe DOT has a chance to topple ETH as the main crypto network.
Polkadot is a heterogeneous multi-blockchain with an exchange and translation architecture that allows side chains to connect to blockchains. Simple, right? In English, this means that Polkadot has a main blockchain, called the relay chain, which can currently support 100 so-called parachaines that can communicate with each other, the main chain and other public chains like BTC and ETH for example. .
The advantage of having more than one blockchain is that you can process multiple transactions simultaneously. In a traditional blockchain, transactions are done one by one, but Polkadot processes them in each individual parachaine so that they can be done in parallel. This makes the network structure very efficient.
Another advantage is that updates can be tested on a single parachain before implementing it on the rest of the relay chain, there is even a chain just for the one called “Kusama”.
Each parachain, or fragment, is maintained by its own collators, which collect transactions on the fragment and use them to create evidence, which is being validated by the validators, who manage the chain of relays. This is how the fragments communicate with the chain of relays.
Why is Polkadot a thing?
Polkadot is unique in that it allows projects to create their own blockchains instead of using an existing platform like with Ethereum for example. At the moment, only 100 chains can work around the relay chain. The community behind Polkadot selects which projects get a niche, they do so by “loaning” their DOT tokens to potential projects.
Polkadot can be a bet against tribalism in the crypto world. Whenever a hardfork is created for a cryptocurrency, it divides not only the chain but also the community, both developers and users. When the ETH fork happened, it split the entire community into Ethereum and Ethereum Classic. Polkadot says updates and improvements can be done without hardforking, which should keep the community together.
According to founder Gavin Wood, who is also a co-founder of Ethereum, DOT is not meant to be a competitor to ETH but rather a complementary tool for everyone in crypto, which means the goal is to coexist with and improve further. existing platforms.
The DOT token
The DOT token is Polkadot’s native cryptocurrency. It was launched last year for an initial price of $ 2.94 which is also its all-time low as it has grown aggressively since then and its current value is around $ 37.91.
Polkadot uses proof of stake consensus, so the network is kept alive by staking DOT tokens. HODLers can stake their DOTs to vote on protocol changes and vote on projects that should get a slot from the parachains, projects will only be implemented if they can get enough DOT tokens for it.
Currently, approximately 1 billion DOT tokens are in circulation. Unlike Bitcoin, the DOT token does not have a maximum supply and there is currently 10% annual inflation. Most of these new tokens that are created each year are given to stakeholders, which is supposed to encourage the community to use their tokens to vote and secure the network. So, as long as you keep your holdings staked, you won’t be negatively affected by inflation.
This could be very good for the DOT price, as it forces people to lock their coins and withdraw them from exchanges, so panic selling won’t happen so easily.
Now there aren’t many projects on the network, but if it continues to grow and gain attention, the demand for its native token could increase dramatically.
At the moment, Polkadot is a small network without a lot of plans, but it already has its place in the crypto world thanks to its innovative feature of connecting to external blockchains.
No one can say for sure that it will continue to grow aggressively, but we can say that platforms like this are in demand, especially now with ridiculous transaction fees on Ethereum Polkadot, might offer a solution. much needed.
The more projects Polkadot has, the higher the demand for DOT token, so it could be a good investment in the long run i.e. if you stake your investment.
This article is accurate and true to the best of the author’s knowledge. The content is for informational or entertainment purposes only and is not a substitute for personal advice or professional advice on business, financial, legal or technical matters.
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