Polkadot is a next-generation blockchain protocol designed to enable a fully decentralized web where users are in control. It facilitates an internet where independent blockchains can exchange information and transactions in a trustless way via the Polkadot relay chain.
Core Team and Development
The primary organization behind Polkadot is the Web3 Foundation, which focuses on developing, deploying, and maintaining Web3.0 technologies and communities. It was also founded by Gavin Wood. The foundation provides grants in fiat or tokens to high-quality projects within the Polkadot ecosystem to foster its growth.
The main technical team is Parity Technologies, a leading blockchain infrastructure company. The Substrate blockchain framework, which is used to build Polkadot and its parachains, was developed by Parity.
Gavin Wood, one of the early developers of Ethereum, leveraged his deep understanding of Ethereum's strengths and weaknesses to design Polkadot with a innovative architecture that addresses scalability and other limitations.
DOT Token and Mechanism
The native token of the Polkadot network is DOT. Its initial total supply was 10 million. Polkadot utilizes a unique Nominated Proof-of-Stake (NPoS) consensus mechanism. In this system, nominators stake their DOT tokens and elect one or more validators they trust. These validators are responsible for producing new blocks, achieving consensus, and validating parachains.
Both validators and nominators receive rewards proportional to their staked amount. Validators, who undertake more responsibilities, have the right to adjust the reward distribution or charge a commission.
The DOT token underwent a 100:1 split on August 21, 2020, which also coincided with the activation of its transfer functionality. Consequently, the total supply of DOT is now 10 billion tokens. The split made the token price more accessible, and its value has seen significant growth during subsequent market cycles, particularly driven by the Kusama and Polkadot parachain slot auctions.
Polkadot is primarily built using the Rust programming language and is one of the largest Rust codebases in the world. The Substrate framework allows developers to create custom blockchains with minimal coding and testing. These blockchains are natively compatible with the Polkadot network. A key feature of Substrate is its enablement of forkless runtime upgrades, allowing networks to upgrade without requiring a hard fork.
The Kusama Test Network
Before Polkadot's mainnet launch, its functionalities were tested on Kusama, its canary network. The term "canary" originates from the phrase "canary in a coal mine," where the bird served as an early warning system for dangerous conditions. In software development, a canary network acts as a real-world testing ground for new features and upgrades before they are deployed on the mainnet.
Kusama's code is very similar to Polkadot's, as it is also built with Substrate. It has its own native token, KSM. While Kusama sacrifices some security compared to Polkadot, it offers higher transaction throughput and performance. Even after Polkadot's launch, the Kusama network continues to operate as a standalone ecosystem, providing a testing environment for new projects and features. It has developed its own independent economy and offers differentiated services.
Polkadot's Value Proposition
Polkadot aims to solve two critical issues in blockchain technology: scalability and isolation. Ethereum, for instance, operates on a single chain where all applications run, leading to congestion and low throughput (around 15 TPS). During the peak of the CryptoKitties craze, that single application consumed over 20% of Ethereum's network capacity, causing widespread congestion.
Polkadot's architecture ditches the single-chain model. Instead, it uses a relay chain coupled with multiple parallel chains (parachains). The relay chain is considered Layer 0, while the parachains are Layer 1. Parachains connect to the relay chain via slots. Once the relay chain's capacity is reached, new relay chains can be created, enabling infinite sharding and near-limitless scalability.
Furthermore, by allowing different parachains to serve various functions and connect to other major public and consortium blockchains, Polkadot has the potential to interconnect the entire blockchain industry. It aims to break down the current siloed nature of blockchain projects and become a central hub for the next generation of the internet.
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Understanding Parachain Slots
A Polkadot parachain slot is an interface on the relay chain that allows a parallel chain to connect. Technically, the Polkadot network increases its transaction throughput by connecting multiple parachains to other blockchain projects. The relay chain provides shared security, consensus, and validation for these connected parachains.
These slots are a core feature and a primary source of value for the Polkadot network. However, network resources are finite. The relay chain cannot support an unlimited number of parachains without compromising shared security. In July 2020, Gavin Wood stated that Polkadot could support around 100 parachains, meaning the initial slot上限 is approximately 100. Future optimizations, like secondary relay chains, could potentially increase this number.
To allocate these scarce resources fairly, parachain slots are distributed through auctions. Projects participate by initiating crowdloans, where users lock their DOT tokens to support a specific project. The auction winner is determined by a modified candle auction format based on the total amount of DOT contributed.
In the crowdloan mechanism, projects gather and stake DOT tokens on the relay chain. If a project loses the auction, the contributed DOT is returned to users immediately. If it wins, the DOT remains locked for the entire lease period. To compensate users for this opportunity cost, projects typically reward them with their own native tokens.
The Parachain Slot Auction Process
The auctions on Kusama and Polkadot are for the right to lease a slot for a specific period, typically ranging from six months to two years. Bidders must lock their KSM or DOT tokens, and the amount locked serves as their bid. The combination of bids that offers the best value for a full lease period wins the auction.
The winning project's staked tokens remain locked for the entire lease duration and are unreachable. Tokens staked by unsuccessful bidders are unlocked and returned after the auction concludes. Therefore, the "bid" is essentially the opportunity cost of locking up the tokens.
The auction uses an optimized "candle auction" format. This historical method involved a burning candle, and the bid placed just before the candle flame extinguished won, making the exact end time unpredictable to prevent last-second bid sniping.
In Polkadot's version, the auction period is split into a two-day initial bidding period and a five-day ending period. The system randomly selects a moment within that five-day window, and the bids at that exact moment determine the winner.
The first round of five Polkadot slot auctions concluded on December 16, 2021. The five winning projects were Acala Network, Moonbeam Network, Astar Network, Parallel Finance, and Clover Finance. These first five parachains went live on the Polkadot network on December 18, 2021, with their leases lasting until October 20, 2023.
As of late 2022, the fourth round of auctions had concluded successfully, with the fifth round for slots #26 to #32 ongoing at the time.
An Overview of the Polkadot Ecosystem
The projects that win the early slot auctions typically have the strongest community support, significant influence, and substantial funding. These early winners are a strong indicator of the broader ecosystem's health. They are often more developed, possess greater technical积累, and have robust community consensus. Below is a brief introduction to the five projects that won the first round of auctions.
Acala Network: The DeFi Hub
Acala, often called the "all-in-one DeFi hub" for Polkadot, won the first slot. Its canary network on Kusama, Karura, also won the first Kusama slot by a significant margin. This high level of recognition within the ecosystem made Acala's victory unsurprising.
Acala is a foundational DeFi project aiming to enable token exchanges between parachains and build a complete suite of decentralized financial applications. It is a Layer 1 smart contract platform featuring the Acala EVM, which offers full compatibility with Ethereum. Its core services include a decentralized stablecoin (aUSD), liquid staking for DOT (LDOT), and an enhanced EVM+ environment.
During its crowdloan, Acala received 32.51 million DOT from 25,000 contributors. Participants received over 4.61 ACA tokens for every DOT they staked.
Moonbeam Network: The Ethereum Bridge
Moonbeam won the second Polkadot slot. Its canary network, Moonriver, secured the second Kusama slot. Notably, due to Moonriver's strong performance on Kusama, Moonbeam's crowdloan gathered the largest total amount of DOT in the first round.
Moonbeam prioritizes maximum compatibility with Ethereum smart contracts. Developers can deploy existing Solidity smart contracts to Moonbeam with minimal changes, instantly connecting them to the entire Polkadot ecosystem. For example, Sushiswap announced a deployment on Moonbeam in October 2020. Since the Polkadot relay chain doesn't natively support smart contracts, Moonbeam's role is crucial. In October 2022, native USDT on Polkadot also launched on Moonbeam.
Moonbeam's crowdloan attracted 35.76 million DOT from 48,000 contributors. Participants received over 4 GLMR tokens per staked DOT.
Astar Network: The Multi-Chain dApp Platform
Astar (formerly known as Plasm) won the third slot. Its canary network, Shiden, won the third Kusama slot. Astar is another smart contract platform within the ecosystem, supporting solutions like Layer 2, WebAssembly (WASM), and EVM.
While EVM is the standard for Solidity-based contracts, WebAssembly offers higher performance and is considered a more advanced platform. By supporting both EVM and WASM, Astar can host a wide variety of applications, including DeFi and NFTs. It also supports various Layer 2 ecosystems like OVM (Optimistic Virtual Machine).
Astar's crowdloan gathered over 10.33 million DOT from 27,170 contributors. Participants received over 102 ASTR tokens for each staked DOT.
Parallel Finance: The Decentralized Lending Protocol
Parallel Finance won the fourth Polkadot slot. Its canary network, Heiko, won the fifth slot in the second Kusama auction. Parallel builds upon standard DeFi services by offering innovative products like Leveraged Staking, Auction Lending, and Insured Staking.
These features allow users to earn yield on staked assets while simultaneously using them as collateral for loans, significantly improving capital efficiency and potential returns.
Parallel's crowdloan received 10.75 million DOT from 4,009 contributors. Participants received no less than 93 PARA tokens per staked DOT.
Clover Finance: The Smart Contract Platform
Clover Finance won the fifth and final slot in the first round. Its canary network, Sakura, was the only one among these five that hadn't won a slot in the first two Kusama rounds at the time (though it later secured one).
Clover is another smart contract platform designed to make it easier for projects from Ethereum, BSC, and other networks to migrate to Polkadot. It supports both EVM and Wasm for broad compatibility and features a developer incentive program that allocates a portion of Clover EVM transaction fees to smart contract deployers.
Clover's crowdloan gathered 10.33 million DOT from 5,465 contributors. Participants received no less than 20 CLV tokens per staked DOT.
Frequently Asked Questions
What is the main purpose of Polkadot?
Polkadot is designed to enable interoperability between multiple independent blockchains. It allows them to share information and security seamlessly, creating a network of networks that can scale effectively and innovate together.
How does Polkadot's governance work?
Polkadot uses a sophisticated on-chain governance system where DOT holders can vote on proposals, referenda, and even elect council members. This allows for transparent, decentralized, and efficient decision-making about the network's future.
What is the difference between Polkadot and Kusama?
Kusama is Polkadot's canary network. It is a faster-paced, less formal environment with lower barriers to entry for new projects. It's designed for bold experimentation and rapid innovation, acting as a proving ground before deployments on the more stable and secure Polkadot mainnet.
How do parachain slot auctions benefit DOT holders?
DOT holders can participate in crowdloans to support their favorite projects. In return for locking their DOT for the lease period, they typically receive the project's native tokens as rewards. This allows them to gain exposure to new projects within the ecosystem.
What is Substrate's role in the Polkadot ecosystem?
Substrate is a foundational blockchain development framework. It allows developers to build custom blockchains quickly that are inherently compatible with Polkadot. Its forkless upgrade feature is crucial for the seamless evolution of parachains and the relay chain.
Can Ethereum projects easily move to Polkadot?
Yes, through specialized parachains like Moonbeam and Astar that offer EVM compatibility. These chains allow developers to deploy existing Solidity-based smart contracts with minimal changes, providing a smooth migration path and immediate access to the Polkadot ecosystem.
Conclusion
Polkadot stands as a pioneering project in the blockchain space with a grand vision for a interconnected, scalable multi-chain future. Alongside Cosmos, it is often called a leader in the cross-chain arena. Although the ongoing upgrades to Ethereum present new competition, Polkadot remains one of the most formidable contenders in the infrastructure layer of public blockchains.
The Polkadot team has recently published an updated roadmap outlining future developments. Key upgrades include Asynchronous Backing, Parathreads, and improvements in cross-chain communication, governance, and bridging to other ecosystems. These enhancements, after testing on Kusama, are expected to be deployed on the mainnet. Once completed, they are projected to increase the network's transaction throughput to between 100,000 and 1,000,000 TPS without compromising its security.
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