Polkadot (DOT)

Polkadot (DOT) is an open-source blockchain protocol for cryptocurrencies, often referred to as the “blockchain of blockchains.” It enables various incompatible networks to communicate and share data with one another. This capability is commonly known as “multichain.”

As a next-generation blockchain, Polkadot allows anyone to launch and manage their own blockchain on top of its infrastructure while ensuring that these different blockchains can be customized and remain unique.

Polkadot achieves this multichain environment by utilizing two types of blockchains. The primary blockchain is called the relay chain, while user-created blockchains are referred to as parachains (or parallel blockchains). The relay chain is responsible for maintaining consensus, providing a shared security environment, and ensuring interoperability among all the various chains. Independent parachains can have their own tokens and specific use cases.

A third type of blockchain, known as a bridge, establishes the network information pathways that allow the Polkadot network to interact with other blockchains. Bridges must be constructed for each individual blockchain.

Since the relay chain handles the critical tasks of maintaining consensus, security, interoperability, and processing transactions for multiple chains simultaneously, it simplifies the process for developers to create custom blockchains.

Polkadot employs a variation of proof-of-stake (PoS) consensus called nominated-proof-of-stake (NPoS). With NPoS, if you lock up any amount of DOT in a special contract known as staking, you can participate in the Polkadot network in one of several roles:

• Validators: The workhorses that validate network transactions in parachain blocks.
• Nominators: Secure the relay chain by delegating their staked DOT to trusted validators in exchange for a portion of the DOT earned by those validators.
• Collators: A specialized role that tracks valid parachain transactions by maintaining a complete history of each parachain and adding this data to the relay chain.
• Fisherman: This role, now being replaced by Secondary Checkers, acts as bounty hunters of the network, seeking out validators that validate faulty or compromised blocks.
• Secondary Checkers: A new role that takes over the responsibilities of Fisherman.

In addition to their roles, DOT stakes also earn rewards in the form of additional DOT.

Polkadot was founded in 2016 by Gavin Wood, co-founder of Ethereum, along with Peter Czaban and Robert Habermeier. Gavin Wood is also the creator of Solidity, the programming language used for developing decentralized applications on Ethereum. In 2015, he established a company called Parity Technologies to assist in building projects on Ethereum. Parity Technologies currently maintains Substrate, a development framework that enables developers to easily create new parachains.

DOT serves as the native cryptocurrency of Polkadot and plays a crucial role in the network's operation. It can be bought or sold on cryptocurrency exchanges, or held and transferred using wallets. In addition to ownership, DOT can be staked, which involves locking up your DOT tokens with the protocol in exchange for staking rewards in the form of newly minted DOT, as well as the ability to vote on network upgrades and changes.

Thanks to the relay chain managing the workload of the parachains, DOT can process over 1,000 transactions per second. It is anticipated that as the Polkadot network expands and more parachains are integrated, it could potentially support millions of transactions per second.

As of August 2022, DOT ranks among the top 15 cryptocurrencies by market capitalization, boasting an $8 billion market cap. The total supply of DOT is 1.2 billion, with a circulating supply of 1.12 billion DOT.