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2. Intermediate Course

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  1. 1. What is Layer 0 in Blockchain technology?
  2. 2. What is layer 1 in Blockchain?
  3. 3. Second layer (layer 2) - what is it? 
  4. 4. Blockchain and its layers - What is layer three in Blockchain (L3)?
  5. 5. Ethereum 2.0 - What is it? 
  6. 6. Ethereum Proof-of-Stake (PoS) - what should you know?
  7. 7. Ethereum London Hard Fork - what is it ? 
  8. 8. What is the Ethereum Name Service (ENS) and how does it work?
  9. 9. Arbitrum: Ethereum scaling solution - everything you need to know
  10. 10. Polygon 2.0 - the value layer for the Internet
  11. 11. Ethereum ERC-4337 - what is it and how does this standard work?
  12. 12. What is an ERC20 token and how is it created?
  13. 13. The ERC-721X VS ERC-721 Standard – Key Differences!
  14. 14. What is cryptocurrency burning?
  15. 15. Examples of the use of WEB3 on the blockchain
  16. 16. What is Web5? 
  17. 17. Blockchain Oracle - what are oracles? 
  18. 18. Polkadot - Decentralized blockchain and DOT cryptocurrency
  19. 19. Polkadot Parachain - Next-generation blockchain
  20. 20. Interoperability in the world of cryptocurrencies and blockchain
  21. 21. What is Blockchain sharding?
  22. 22. Mainnet versus Testnet on the Blockchain. The complete guide!
  23. 23. MINA Protocol: the lightest blockchain in the world!
  24. 24. Sustainable Blockchain - Proof of Useful Work & Flux
  25. 25. Cosmos SDK: Building the Blockchain Ecosystem
  26. 26. What is cross-chain interoperability in Blockchain technology?
  27. 27. Blockchain trilemma - explanation of the problem. What is the impact on cryptocurrency payments?
  28. 28. Non-fungible tokens and NFT exchanges
  29. 29. How to make money with NFT?
  30. 30. What is the NFT licence fee?
  31. 31. NFT Gas Fee - what is it? How can you reduce your gas fee?
  32. 32. The main differences between static NFT and dynamic NFT
  33. 33. What is minting an NFT?
  34. 34. What are NFT Ordinals? A guide to Bitcoin NFT.
  35. 35. What is KnowOrigin NFT, and how does it work?
  36. 36. ERC-6551 - the new NFT standard. What does it bring to the non-exchangeable token sector?
  37. 37. What is NFT Lending all about? An innovative solution in the world of cryptocurrencies!
  38. 38. The Metaverse – a new virtual world
  39. 39. Metaverse – TOP 15 virtual reality projects
  40. 40. Technical analysis – is it worth using?
  41. 41. Trading order types: stop loss, trailing stop loss, LIMIT
  42. 42. Market Cap versus Fully Diluted Market Cap - the most important differences you should know!
  43. 43. Set up of Stop Loss and Take Profit orders
  44. 44. What are DeFi liquidity pools?
  45. 45. Real Yield in DeFi - what is this trend? What does it consist of?
  46. 46. Vampire Attacks in Decentralized Finance (DeFi): Explanation and Examples
  47. 47. What are wrapped tokens 
  48. 48. What are security tokens?
  49. 49. What are Social Tokens? 
  50. 50. Liquidity Provider Tokens (LPs). What are they, and why are they so important?
  51. 51. What is the Lightning Network, and how does it work?
  52. 52. What is Play-to-Earn (P2E) and how does it work?
  53. 53. Cryptocurrency steps - What is move to earn M2E?
  54. 54. Segregated Witness - what is Segwit Bitcoin all about?
  55. 55. What are Decentralized Cryptocurrency DEX Exchanges?
  56. 56. What is Curve Finance?
  57. 57. What is GameFi and how does it work?
  58. 58. What is Proof of Reserves (PoR)? How does it work?
  59. 59. DAO Investment: A revolution in the world of finance and investment
  60. 60. What is MakerDAO and DAI Stablecoin?
  61. 61. What is the SubDAO protocol, and how does it work?
  62. 62. How to Create Your Own Decentralized Autonomous Organization (DAO)?
  63. 63. Atomic Swap: What is an atomic swap, and how does it work with cryptocurrencies?
  64. 64. What Is Cryptocurrency Vesting? What Are Its Advantages?
  65. 65. What Is the Metaplex Candy Machine Protocol? How Does It Work?
  66. 66. What Is the BNB Greenfield Ecosystem?
  67. 67. What Is Slashing in Cryptocurrencies?
  68. 68. Royalties – What Are They? How Does This Type of Licensing Fee Work?
  69. 69. What is TradFi? The importance for cryptocurrencies!
  70. 70. What is the Real World Asset (RWA) trend in cryptocurrencies? Explanation and examples!
  71. 71. Pyth Network: a powerful oracle harnessing the power of Solana!
  72. 72. What are stables in the world of cryptocurrencies?
  73. 73. What Is Binance Oracle?
  74. 74. Shibarium: A new era in the Shiba Inu ecosystem?
  75. 75. What is an ETF? How will an exchange-traded fund on bitcoin work?
  76. 76. Symmetric and asymmetric encryption - key cryptography techniques!
  77. 77. Hedging in cryptocurrencies - great portfolio protection against risk!
  78. 78. How to create your own cryptocurrency? 
  79. 79. What is a Dusting Attack in cryptocurrencies? How to protect against it?
  80. 80. What is a Black Swan?
Lesson 18 of 80
In Progress

18. Polkadot – Decentralized blockchain and DOT cryptocurrency

Polkadot is a super protocol. It allows users to make transactions and transfer data more efficiently than previous, incompatible networks, which include even Bitcoin or Ethereum.

It is fast and highly scalable. In addition, it has its native cryptocurrency – token DOT. It is used for staking and managing the ecosystem Polkadot. In today’s lesson, we will discuss in detail how the project works and what are its advantages. Undoubtedly, Polkadot stands out in the cryptocurrency market.

Polkadot – how did it start?

It all starts in 2016 when Gavin Wood, co-founder of Ethereum, published the white paper Polkadot. In 2017, Wood and his collaborator Peter Czaban founded Web3 Foundation – a non-profit organization dedicated to development of Polkadot. The co-founder of the project is also Robert Habermeier, who has experience in research and development of blockchains.

Polkadot network developed in many phases. The initial version of the ecosystem was launched on May 26, 2020.

Polkadot is a multichain network that generates arrangements of interoperable blockchains that collaborate and communicate with each other. It allows users to transfer any data – not just cryptocurrencies – between blockchains. It’s a developed multi-chain environment where we can do cross-chain registers and calculations.

Polkadot can connect private, public, and oracle chains. We get a new form of network in which blockchains that are independent of each other exchange data and make transactions without unnecessary control. As a result, we can build an application that takes data from a private blockchain and uploads it to a public one. For example, a private school blockchain could send evidence to a smart contract verifying the previous work experience of the applying teacher.

The project is unique in the cryptocurrency industry. Why? We’re rushing to explain. As you know, most blockchain, it works completely on their own and are 100% self-dependent. They do not communicate with each other, and the dApps created on them do not interact with the main chain.

In the case of Polkadot, it’s the other way around. As a multichain network, it connects other blockchains with each other. Users and developers who use this ecosystem have the opportunity to build their own blockchain that can easily interact with others. All thanks to the interoperability of the project. For example – as a network explorer on one blockchain, you invest in Cardano shares, and from a separate blockchain, you get information about its current prices.

What’s more – Polkadot takes care of transaction validation and security in such an extensive network. This is another benefit for developers. All contracts take place in the relay chain of the network. As a result, you can focus on your blockchain and project. You do not need to build the entire transaction validation system. Doesn’t that sound beautiful?

Benefits of building blockchains in Polkadot

The design exists to connect many together at the same time blockchains (parachains). Here are some basic benefits we will get by building our blockchain on a layer one blockchain:

  • Primarily scalability. Thanks to the fact that the Polkadot ecosystem allows you to process transactions in several chains at the same time, each “side chain” receives more computing power.
  • High security in economic and network terms. Each of the blockchains is copied to a secure infrastructure.
  • Tall cooperation with the others parachains. All of them are in the same language.
  • Any online updates, no forks required. Polkadot owes this to its multichain architecture and on-chain management mechanism. This means that management decisions are made publicly on the blockchain.

Polkadot – action

The network operates on two types of blockchains:

  • Relay chain – the central chain of Polkadot. Transactions are processed in it. It is designed to provide minimal functionality. Its main and basically only purpose is to manage the system as a whole.
  • Parachains – we will devote a separate lesson to them, so today we will focus on the basic explanation. These are parallel blockchains that run on the Polkadot framework. They can communicate with each other.Parachains are their blockchains and are designed specifically for their use. If you are curious, how parachains work, you can take a look here.

The ecosystem is based on a Nominee Proof-of-Stake consensus mechanism. Nominated Proof-of-Stake is developed by Polkadot. How does it work? The user who contributes value to the string can choose either a nominator or a validator.

If you decide to be a nominator, you nominate your trusted validator to verify transactions. However, if the nominated delegate is staking behind a malicious validator, they may lose their cryptocurrencies. Each nominee can select up to 16 validators to stake behind. Then Polkadot will distribute their staking equally between the validators selected by it. Nominators and validators receive a block reward when the validator adds transactions to the blockchain. Complicated? Let’s summarize:

  • Validator – validates data in parachain blocks. Participates in consensus and votes on changes to the network.
  • Nominee – takes care of the security of the Relay Chain by selecting trusted validators. He is responsible for delegating the DOT to the validators, thus giving them their votes.
  • Collators – nodes, containing the history of each parachain. They aggregate transaction data into a block and add it to the Relay Chain.
  • Fisherman – “protection” of the Polkadot network. They report inappropriate behaviour of validators. They also wager their DOTs and are eligible to receive rewards in the project’s native cryptocurrency.

Projects at Polkadot

Polkadot is made to connect with other projects. Its ecosystem includes:

  • Oracles. The main provider of information for Polkadot is Chainlink. It connects the Polkadot blockchain with an external system. This allows smart contracts to use data from the outside world.
  • DeFi, i.e. decentralized financial services. The main project on the network that offers a stablecoin integrated with dApps is Acala.
  • Bridges. From previous lessons – connections between two blockchains. This allows users of the system to transfer their assets between them. Bridges on Polkadot include both Interlay and Snowfork.

DOT cryptocurrency

DOT is the native cryptocurrency of the project. It is used to manage the protocol, but at the same time it can be used for staking. It is also supposed to secure the network and connect new chains.

At the beginning of the project, just four months after the launch of DOT, it was the seventh largest cryptocurrency with a market capitalization of USD 3.7 billion.

You can get DOT cryptocurrency on most popular cryptocurrency exchanges. Polkadot has an inflationary monetary policy. As a result, the number of DOTs is expected to increase by 10% annually. Some interesting facts about this cryptocurrency:

  • By staking DOT, you balance the rate of inflation.
  • You can get an annual ROI without maximizing your capital.
  • With DOT, as we mentioned, you can vote to upgrade the network.
  • Polkadot, as a leading staking platform, offers a profit of over 13% per year.
  • DOT is an alternative to expensive and slow international transfers.
  • Most of the available wallets support this cryptocurrency.

Writing about Polkadot, it is impossible to mention, at least in a few words about Kusama. He is the younger brother of Polkadot. To put it simply – a testnet for the web. Before any new feature appears in Polkadot, it is tested on Kusama’s blockchain. Thanks to the tests carried out on this network, Polkadot has a 100% reliability guarantee.

Polkadot vs. Cardano vs. Ethereum

Cardano and Ethereum are also blockchain platforms on which we can build our own projects. Let’s compare them and take a look at the differences:

Polka dotCardanoEthereum
Native cryptocurrency – DOT.Native cryptocurrency – ADA.Native cryptocurrency – ETH.
Use of NPoS as a consensus mechanism.PoS as a consensus mechanism.PoW as a consensus mechanism.
Multi blockchain system architecture.A single blockchain.The first blockchain where developers could create their projects.
High level of scalability and speed, thanks to the ability to connect to 100 parachain.Not a highly scalable project, and its development is based on long-term research.Low scalability, slow transactions and high gas fees.

Based on such a short table, you can already see how Polkadot stands out from other projects and how unique it is.

Polkadot – flaws and problems

All that glitters is not gold. Such an ideal design also has several disadvantages. The first one is the limited number of parachains. It is estimated that the Polkadot network will serve about 100 of them. Of course, it will take a few weeks or even years. Currently, parachain slots are auctioned or leased for up to 96 weeks. So we can see that Polkadot is designed for projects with large capital.

To manage the ecosystem, you need a little more money. As we said, DOT is a management token. They want a stake in management, you block DOT, make a proposal or vote. However, you are not 100% guaranteed that your tokens will be returned to you.

It is the companies and people who have the most DOT, i.e. invested a lot of capital, that have a significant impact on the project.

Investing in Polkadot – is it worth it?

We’ll tell you what we always say. Before any investment decision, do your research. We would like to add that despite its intriguing character, Polkadot is still in the early stages of development. If you are focused on profit, treat it as a long-term investment, which we recommend you count in years, not months.

The future of the project

Polkadot will be a very attractive ecosystem for developers. Its benefits will be available to individual programmers, as well as small companies and large corporations. An innovative approach, as well as many advantages, is an intriguing and even ideal solution for the entire cryptocurrency market.

It is worth mentioning that Polkadot is still a young system. It will be a long time before developers launch all its features and show its potential. Will Polkadot be a dangerous rival for Ethereum, as some crypto industry experts speculate? We are not to judge, but we will follow its development with commitment.

Polkadot is a revolutionary project. Implementing a multi-chain network solves many problems (scalability, high fees) that e.g. Ethereum cannot handle. The ecosystem has next-generation blockchain, which provides us, the users, with the ability to use a fully decentralized network.We will mention here that Polkadot is not an enemy of Ethereum. He is also not his executioner, as some claim. This is a modernization that will bring a lot of good to the entire cryptocurrency industry. We look forward to further development of the project.