With so many blockchain networks, like Polkadot, it might become challenging to understand how each one differs from the other! Especially when you hear that there's another "Ethereum killer" making its way up in market cap.
The benefits of blockchain lie in its security, immutability, the confidentiality of your personal data, and ability to transact between individuals in a trustless way. But blockchain technology currently operates in silos. For example, data on Ethereum is not transferable to Bitcoin. To an extent, the independence of blockchains helps eliminate centralization and allows for secure transactions, but it has also stifled innovation and growth.
Polkadot wants to eliminate self-sufficiency. It serves as a framework that ensures secure and efficient interoperability between blockchains. So what is the Polkadot network? How does it work? What makes it different from other blockchains? This article will answer these questions, so read on!
Polkadot is a decentralized multi-chain application environment that aims to connect all blockchains through a single secure channel to share data in a trustless manner. It achieves cross-chain interoperability through the use of a heterogeneous sharding model that connects specialized chains, called Parachains.
By creating a network where all blockchains (private, public and enterprise) could complement each other, chain maximalism is alleviated since data and transactions can easily flow from one blockchain to another. This interconnection leads to Polkadot's wider goal as becoming the internet of blockchains.
Gavin Wood, the co-founder of Ethereum; Robert Habermeier, a cryptographer and blockchain researcher; and Peter Czaban, the Technology Director of Web3 Foundation, co-founded and created Polkadot.
Although the white paper was published in 2016, the project was launched in 2020. This article's completion is currently one of the top 10 cryptocurrencies in the world by market cap.
The DOT tokens are the native token of Polkadot. Apart from serving as an electronic payment system and a store of value, the DOT token also acts as a ticket to decision-making, and DOT holders may participate in voting, bonding, and submitting proposals.
Polkadot is the flagship project of Web3 Foundation, a Swiss firm founded in 2017 by Gavin Wood. This company focuses on the development of decentralized web protocols and the facilitation of secure calligraphic messaging protocols. Web3's primary goal is the nurturing and stability of Web 3.0.
This company also facilitates the development of Kusama and XCMP (Cross-chain message passing).
Although Polkadot was the flagship project of the Web3 Foundation, Parity Technologies oversees the development of the blockchain. Parity Technologies is a decentralized software development firm co-founded by Gavin Wood and Jutta Steiner, the former security chief of Ethereum.
Parity Technologies is also the brain behind the most successful Ethereum client, Parity Ethereum.
Polkadot, like Ethereum, is a platform for decentralized applications (DApps) and smart contract protocols. Although this blockchain has the same underlying principles as others, it still has a unique selling point that differentiates it from other projects. This section will discuss Polkadot's unique features, so with little ado, let's dive in!
Although blockchain technology is secure, transparent, and immutable, it still has downsides—one of which is interoperability.
Blockchains are independent of one another—data or values on a blockchain are not transferable to another blockchain, which makes them difficult to scale and upgrade.
However, Polkadot features sharding protocols that allow smaller blockchains to be developed on the main chain. This creates an interdependency framework, a structure that connects different, specialized blockchains.
Just as the internet connects web servers, computers, and websites; Polkadot blockchain is a network that connects different blockchains.
As discussed above, Polkadot comes with sharding protocols that make it easier for a cross-chain transfers to take place between parachains. This system can process multiple transactions simultaneously instead of a single, specialized blockchain doing all the processing. This removes the bottleneck and improves processing time. Currently, Polkadot has a TPS of around 166,666.
Just like in other technologies, upgrades are essential for the relevancy of blockchain. But unfortunately, the decentralized nature of blockchain technology makes it impossible to perform necessary updates without forking the existing network. As a result, successful upgrades are also time-consuming.
Polkadot has revolutionized blockchain upgrades. The blockchain protocol can now automatically update the network with no fork.
Upgrades are securely performed through Polkadot's well-organized and transparent governance system. That means it has reduced the risk and stress associated with Blockchain upgrades, which opens the technology to new enterprises.
Apart from featuring a heterogeneous sharding protocol, the Polkadot network can also perform cross-chain value transfers. Instead of operating in silos, it serves as a bridge that connects shards to external blockchain networks so communication can be securely established and valuable information is transferable between blockchains.
Although decentralized, early blockchains don't have transparent and organized governance, i.e., only selected individuals can propose and impose changes on these networks. Polkadot, on the other hand, puts the community in control of the network.
However, if you want to participate in Polkadot's governance, you're only required to stake DOT, Polkadot's native token, in a smart contract protocol. Doing so qualifies you to propose changes, elect new council members, and vote on protocol upgrades.
For efficiency, Polkadot is subdivided into three chains—the Relay chain, Parachains, and bridges.
The Polkadot Relay Chain is the primary mechanism that handles transactions and security operations. Parachains are custom chains that use the computing power and security of the Relay chain to transfer value. Bridges connect the parachain to external blockchains.
As the main blockchain on Polkadot, the Relay chain uses a variation of the Proof of Stake (PoS) consensus, Nominated Proof of Stake (NPoS), for validating transactions on the blockchain. NPoS allows anyone who staked the DOT in a smart contract to be a validator, nominator, collator, or fisherman.
After a thorough explanation of Polkadot and its uses, comparing it with other popular blockchain platforms will enable us to understand its unique features. Finally, this section will explore more similarities and differences between Polkadot and Bitcoin, Ethereum, and Solana.
Although Bitcoin is the first in the space and the largest in terms of market cap, it has limitations. For example, it uses the Proof of Work (PoW) consensus, which is energy-intensive and harmful to the environment.
Also, because Bitcoin is vertically scaled, it's less scalable and has slow transaction processing time. For example, it can only process a maximum of seven transactions per second (TPS) and can only verify one block every ten minutes. In contrast, Polkadot can process up to 166,666 TPS and has a block verification time of six seconds.
Polkadot uses the Nominated Proof of Stake (NPoS), which is also energy efficient. It puts the community in control of governance decision-making within the Polkadot ecosystem.
NPoS also ensure that DOT holders are qualified to nominate actors.
Ethereum is a legacy blockchain similar to Polkadot. Popularly referred to as the World Computer, this blockchain protocol allows for implementing DApps and smart contracts. Because it was the first to integrate smart contracts on the blockchain, it has an extensive infrastructure and developer's ecosystem.
Although the Ethereum blockchain is currently planning to upgrade to the PoS consensus, it still uses the proof-of-work (PoW) consensus. So, like Bitcoin, it can only process 15 TPS and has a higher transaction fee. Ethereum is also independent.
Polkadot is a parallel cross-chain protocol with two layers—the Relay chain and the Parachain/Parathread. The Relay chain processes transactions and handles the security of the blockchain, while the Parachain/Parathread are custom blockchains on the relay chain. Parachains process and validate blocks using the relay chain's computing power.
This method enhances transaction processing time and reduces the stress on DApps on the para-chains.
Another advantage of the Polkadot network is sending value to external blockchains through a shared secured channel.
These two have a lot in common—fast block time, faster TPS, and smart contracts/DApp compatibility. However, although similar, there are still some differences.
Solana employs the Proof of History (PoH) consensus, which uses an internal clock to validate blocks. And Polkadot uses the NPoS that requires community members to nominate actors. NPoS prevents the nomination of awful actors by implementing a loss of stake when poor actors are nominated.
Another difference between Polkadot and Solana is the block time. Solana has a block creation time of 400 milliseconds, while it takes Polkadot six seconds to create a block.
Moonbeam is a smart contract/DApp parachain on the Polkadot blockchain. It was created by Derek Yoo, CEO of PureStake, and launched in 2020. This parachain is an Ethereum compatible smart contract, so it's easier for developers to migrate their app to Polkadot without rewriting codes.
Although Ethereum was the first to implement smart contract protocols, limitations—like higher transaction fees and inaccessibility—have plagued the blockchain. Moonbeam solves this problem using the Relay chain.
This parachain comes with a cross-chain integrated interoperability model that makes it easier for developers to move existing DApps and smart contracts on Ethereum to Polkadot using the existing codes. In addition, Moonbeam is scalable and accessible.
Like every blockchain user, we believe the future is multi-chain. As a multi-chain derivative DApp, launching MatrixSwap on Polkadot through Moonbeam is how we plan to make this happen.
Polkadot is an ecosystem with high TPS, low transaction fees, scalability, and an organized governance. These make this platform more attractive, efficient, and in line with the goals of MatrixSwap.
The cross-chain capability and the ability to communicate with parallel blockchains through a shared secure channel eliminate isolation, which is the major problem with blockchain. Now, blockchain developers can easily communicate with other networks using cross-chain bridges.
Also, the NPoS consensus ensures transparent governance. It enables users within the community to be the decision-makers of the blockchain, which is something Matrixswap fully aims to transition to through its ZionDAO.
Polkadot provides many benefits when it comes to infrastructure, security, speed, and decentralization. So it's no surprise that they are plenty of teams actively building Polkadot and its broader ecosystem!
We, at Matrixswap, are excited to be one of those teams contributing to one of these great networks and look forward to going live with our perpetual swaps trading platform soon.