Know Your Crypto: Polkadot (DOT)

POLKADOT (DOT)
  • Polkadot is a scalable, secure decentralized multi-chain network
  • Polkadot protocol is a system created to allow unrelated blockchains to securely communicate to allow the flow of data and value 

Polkadot is a blockchain designed to support other blockchains. Think of Polkadot as a network made up of other blockchains. If you imagine every blockchain as a dot then many blockchains (dots) make up  Polkadot.

The Polkadot network includes a main chain called the “relay chain” and many user created parallel chains (or “parachains”). It also has a connecting layer, or “bridge,” that allows value and data to be transferred between most blockchains and can even be used to connect nonblockchain databases.

Polkadot was launched in 2020 and the platform is now run by the Web3 foundation. Polkadot is mostly envisioned as a simplified version of Ethereum but operates on a deeper level than a blockchain like Ethereum. Polkadot is the brainchild of Ethereum (ETH) with Gavin Wood as the co-founder.

The founder Gavin wood saw the need to create a system that would allow interaction between different blockchain networks. Wood developed a new blockchain-based on a proof of stake validation system.

Proof of stake (POS) is a type of consensus mechanism used to validate cryptocurrency transactions. With this system, owners of the cryptocurrency can stake their coins, which gives them the right to check new blocks of transactions and add them to the blockchain.

Related: Know Your Crypto: Ethereum (ETH)

The main issue that Wood wanted to address with Polkadot was the amount of computing power Ethereum required for its original proof-of-work validation system. Polkadot is referred to as a heterogeneous multichain system that allows programmers to build their own blockchains with cross-chain interoperability.

Polkadot has simplified the programmers’ work because it has the base layer built already. All that the layer 1 programmer has to do is focus on optimizing their own project. Layer systems are siloed and don’t have enough interactions between them but Polkadot allows both public and private blockchains to interact.

Polkadot native token is DOT. DOT is the token put up by validators as collateral to approve the next block in Polkadots blockchain. DOT functions as Polkadots proof of stake mechanism. DOT can be bought and sold on exchanges like Coinbase as part of your investment strategy.

Investing in Polkadot is a good idea but you should first consult a financial advisor. Afterward how much you will invest is on you and in case you count losses nobody is to blame except you.

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