What is Polkadot ? – PART 2
Polkadot is an open-source, decentralized blockchain platform designed to enable cross-chain communication and interoperability between various blockchain networks. Launched in 2020 by Dr. Gavin Wood, co-founder of Ethereum and founder of Parity Technologies, Polkadot aims to address the scalability, security, and interoperability issues that have plagued existing blockchain platforms like Bitcoin, Ethereum, and Cardano.
What is Consensus mechanism in Polkadot ?
Polkadot employs a hybrid consensus mechanism called Nominated Proof-of-Stake (NPoS) to secure the network, validate transactions, and produce new blocks. NPoS is a variation of the Proof-of-Stake (PoS) mechanism, which is energy-efficient and less susceptible to centralization compared to the Proof-of-Work (PoW) model used by networks like Bitcoin.
In the Nominated Proof-of-Stake consensus mechanism, there are two main roles: nominators and validators.
- Validators: Validators are responsible for creating new blocks, validating parachain transactions, and participating in the consensus process. They must lock up a certain amount of DOT, the native token of Polkadot, as collateral or “stake” to ensure good behavior. If a validator behaves maliciously or fails to fulfill their duties, a portion of their stake can be forfeited or “slashed.”
- Nominators: Nominators are DOT holders who do not participate directly in the validation process but instead delegate their stake to validators. By nominating one or more validators, they contribute to the overall security of the network and share the rewards (or penalties) generated by the validators they back. Nominators also play a crucial role in selecting trustworthy validators, as they are incentivized to choose those who are most likely to act honestly and efficiently.
The NPoS consensus mechanism works in the following way:
- Validators are elected: DOT holders nominate validators, and the network selects a set of active validators based on the amount of stake delegated to them. The more stake a validator has, the higher the likelihood of being selected to participate in the consensus process.
- Validators create and validate blocks: The elected validators are responsible for producing new blocks, validating transactions from parachains, and ensuring the overall security of the network.
- Validators participate in the consensus process: Polkadot uses a variant of the Practical Byzantine Fault Tolerance (PBFT) consensus algorithm called GRANDPA (GHOST-based Recursive Ancestor Deriving Prefix Agreement) for finality. Validators participate in this process by voting on the validity of blocks and reaching agreement on the finalized state of the blockchain.
- Rewards and penalties: Validators and nominators share the rewards generated from transaction fees and block rewards. However, if a validator behaves dishonestly or fails to perform their duties, a portion of their stake, as well as that of their nominators, can be slashed as a penalty.
The Nominated Proof-of-Stake consensus mechanism in Polkadot ensures a more decentralized, secure, and energy-efficient network compared to Proof-of-Work-based systems. It promotes active participation from the community in maintaining the network’s security and performance.
What are Parachains in Polkadot ?
A parachain in the Polkadot ecosystem is a standalone, independent blockchain that runs in parallel with other blockchains connected to the Polkadot network. The term “parachain” is derived from “parallelized chain,” which highlights the ability of multiple blockchains to operate simultaneously while being connected to the central relay chain of Polkadot.
Parachains are designed to be customizable, allowing developers to create blockchains with specific functionality tailored to their use cases. They can host decentralized applications (dApps), smart contracts, or other blockchain-based solutions. Each parachain can have its own consensus mechanism, token system, and governance model, offering flexibility to developers.
The primary purpose of parachains is to overcome the limitations of traditional single-chain architectures, such as scalability issues, by enabling multiple blockchains to process transactions and share resources concurrently. Parachains are connected to Polkadot’s relay chain, which is responsible for providing network security, facilitating cross-chain communication, and ensuring consensus among parachains.
To become a parachain, projects must secure a parachain slot through a leasing process that involves bidding in an auction using Polkadot’s native token, DOT. The winner of the auction earns the right to lease the parachain slot for a predefined period. Once the lease period ends, the slot is returned to the auction pool, and the process repeats.
In summary, parachains are an essential component of Polkadot’s architecture, enabling scalability, customizability, and cross-chain interoperability. They allow multiple blockchains to operate in parallel while remaining connected to the Polkadot network through the central relay chain.
In Depth Analysis of Polkadot. How is Polkadot differs from Others ?
Polkadot’s unique features and design principles differentiate it from other blockchain networks, and understanding these differences requires an in-depth analysis of its architecture, consensus mechanism, and ecosystem.
- Architecture:
Polkadot’s architecture consists of a central relay chain and multiple parachains connected to it. The relay chain is responsible for the overall network security, consensus, and cross-chain communication, while parachains are individual, independent blockchains that can host various applications and smart contracts.
This hierarchical structure enables Polkadot to scale horizontally by adding more parachains as needed, addressing the scalability concerns faced by networks like Bitcoin and Ethereum. Moreover, Polkadot supports both public and permissioned blockchains, offering greater flexibility compared to Cardano, which primarily focuses on decentralized applications and smart contracts.
- Consensus Mechanism:
Polkadot employs a hybrid consensus mechanism called Nominated Proof-of-Stake (NPoS). NPoS combines aspects of Proof-of-Stake (used by Cardano) and a nomination process, where DOT token holders can nominate validators to secure the network. Validators are responsible for producing new blocks, validating parachain transactions, and participating in the consensus process.
This hybrid approach ensures a more decentralized and secure network compared to Bitcoin’s Proof-of-Work, which is resource-intensive and has led to mining centralization. Additionally, Polkadot’s NPoS offers better scalability than Ethereum’s current Proof-of-Work system, although Ethereum is working towards adopting a Proof-of-Stake mechanism with Ethereum 2.0.
- Interoperability:
One of Polkadot’s core goals is to facilitate cross-chain communication, allowing different blockchains to interact and transfer data seamlessly. This is achieved through bridges, which are specialized connections between Polkadot’s relay chain and other networks like Bitcoin, Ethereum, or Cardano.
This interoperability feature sets Polkadot apart, as it enables developers to create applications that utilize the strengths of multiple blockchain networks simultaneously, resulting in more efficient and versatile solutions. In comparison, Bitcoin, Ethereum, and Cardano operate independently, making cross-chain interactions challenging.
- Governance:
Polkadot’s governance model is more decentralized and inclusive than those of Bitcoin, Ethereum, and Cardano. The network’s governance is based on the on-chain voting of DOT token holders, who can submit and vote on proposals to upgrade the network, change parameters, or allocate funds from the treasury. Elected council members and technical committees can also make proposals and guide the network’s development.
In contrast, Bitcoin and Ethereum rely on off-chain governance through community consensus and development teams, which can sometimes lead to slow decision-making or network forks. Cardano’s governance is a mix of on-chain and off-chain systems, but it is still evolving and not as mature as Polkadot’s.
- Ecosystem and Development:
Polkadot’s ecosystem includes the Substrate framework, a development toolkit that simplifies the process of building and deploying custom blockchains and decentralized applications. Substrate provides flexibility in choosing programming languages, consensus mechanisms, and other blockchain components, making it easier for developers to create solutions tailored to their specific needs.
While Ethereum has a well-established developer community and a vast array of decentralized applications, it is limited by its current scalability and high gas fees. Cardano’s ecosystem is growing, but it still lags behind Polkadot and Ethereum in terms of developer adoption and ecosystem maturity. Bitcoin