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Polkadot Dot Coin Explained for the Dummies!

If you are keeping an eye on the cryptocurrency market, you must have heard about the Polkadot blockchain and DOT coins. Polkadot cryptocurrency is one of the top 10 cryptocurrencies in terms of market capitalization. 

The Polkadot project is an ambitious one, which wants to lay the groundwork for a polychain Web3 foundation. Gavin Wood created this protocol to improve upon Ethereum. He tries to design a more evolved protocol that would be interoperable with other existing isolated and independent blockchains (like Bitcoin and Ethereum). 

An experimental and unaudited version called Kusama network was launched by Polkadot in August 2019. Its genesis block was launched in early 2020. This included one Polkadot relay chain along with many parachains soon afterward. In no time, Polkadot’s para chains increased to 100. 

You must be having questions such as What is the Polkadot DOT Coin? Why is it called an “Ethereum Killer”? How does it work? What are its practical use cases? What does the DOT token do? There are many such queries one has about Polkadot tokens. If you also have these questions, you’ve come to the right page. 

Let me walk you through some of the basic aspects of the Polkadot protocol and DOT coin in as simple a way as I can. 

What is Polkadot Coin?

Polkadot is a next-gen blockchain protocol that creates one unified network by connecting multiple specialized blockchains. The main goal of this protocol is to ensure that the users of this protocol have real control and not the conglomerates. 

Polkadot connects heterogeneous blockchains but is not a smart contract platform. However, the flexible and adaptive architecture of Polkadot helps to build technology that includes smart contract platforms. These capabilities pose a credible threat to the dominance of Ethereum. That’s why Polkadot blockchain technology is also called the “Ethereum Killer”.

What are the 5 Important Features of Polkadot Protocol?

  1. Interoperability

Unprecedented interoperability between diverse ecosystems is promoted by the Polkadot ecosystem. It is ensured by connecting different blockchains. This is a huge improvement over the Ethereum network. 

  1. Scalability

Scalability is increased exponentially as a standard set of validators is able to operate many blockchains that are connected with the help of Polkadot.  

  1. Innovation

You can create a customized blockchain easily with the help of Polkadot’s substrate framework. More developers can participate in the system because of the ease of development. 

  1. Removal of Forks

When a hard fork takes place, the crypto community associated with a cryptocurrency split up after havoc created during the process. However, in the case of Polkadot, no fork is needed for upgrading, fixing bugs, or integrating a new feature. 

  1. Security

As Polkadot coin enables chains in interacting meaningfully with each other by remaining independent. They remain independent enough for running their unique governance models. 

What is the Basic Structure of Polkadot?

Polkadot protocol has 3 basic components or structures:

  1. Relay Chain

All individual chains are connected by the relay chain, which is also the base Polkadot chain. The interoperability issues between the connecting individual chains can be solved organically. 

  1. Parachain

These are parallelized chains, which run through the network of Polkadot. By parallelizing operations, Parachain helps to scale up the system.

  1. Bridge Chain

Different blockchains (which don’t use the governance protocols of Polkadot) are connected by the Bridge Chain.

Can Addition of Parachains be Done on Polkadot Network?

Yes, parachains can be added. 

The process of adding parachains involves a significantly low-cost operation. However, it must be said that by adding more parachains, the validator density per parachain will decrease. This will, in turn, lead to a fall in the average bond. 

Overall speed gets reduced as the number of validators becomes larger in number due to the addition of parachains (based on the underlying consensus mechanics). In the long run, it may become an issue. This is the reason why the validators, as well as the stake-holding community, extract a price to add a new parachain. 

Two types of parachains are there for “parachain marketplace”:

  • One type of chain adds specific functionalities, thereby delivering value to the network. An example is zero-knowledge proofs, which is done through a Zcash parachain. 
  • Another chain type will have no contribution to the overall network. However, it’ll pay to be a part of the system.

Therefore, the Polkadot community has two options:

  • Either add a chain through financial motivation or
  • Add a chain through network improvement motivation, which will have positive effects in the long run.  

What is Polkadot Governance Protocol?

Polkadot implements the “nominated proof of stake” protocol, which is one version of the proof of stake protocol. To understand how Polkadot staking works, you can go through these 6 things:

  1. Secure Relay Chain

Validators stake Polkadot DOT coins to secure the relay chain.

  1. Participate in Concensus Process

Validators participate in the consensus along with others and also validate proofs of collators.

  1. Maintenance of Parachains by Collators

Parachain transactions are collated by collators from users. Then the proof of transactions is sent to the validators by the collators. 

  1. Two more actors in the Consensus Mechanism

The consensus mechanism has two more actors:

  • Nominators
  • Fishermen
  1. Nominators and Fishermen
  • Nominators

Good validators are nominated or selected by the Nominators. The relay chain is further secured by this process.

  • Fishermen

Their sole responsibility is to promote good behavior within the network. The system is monitored by the Fishermen. Bad behavior is continuously proven to the validators by the Fishermen. In case, any misbehavior is proven, the convicted validator loses all or some stake. 

Polkadot DOT Coins: Use Cases with Examples

Here are 4 prospective use cases of Polkadot coin:

  1. A blockchain project may want to raise Ethereum ETH. However, to do so, it may need verification from a private bank chain before being able to accept ETH officially. 
  1. A payment processor may need verification from a private bank before it becomes capable of accepting Bitcoin BTC payments. 
  1. A decentralized exchange parachain may use a Zcash parachain’s zero-knowledge proofs for allowing cryptocurrency deposits. 
  1. Polkadot coins may offer better coordination between multifarious blockchains as well as off-chain oracle. 

Buy and Invest in Polkadot DOT

You can buy and sell Polkadot cryptocurrency against various fiat currencies (US Dollar USD, British Pound (united Kingdom fiat currency), Canadian Dollar CAD, South Korean WON, Singapore Dollar, Chinese Yuan, Hong Kong Dollar, etc.) through a wide array of crypto exchanges. 

If you want to increase your investment by 5-to-6-times in the coming 5-to-7 years, buy Polkadot coins now. Keep an eye on the cryptocurrency markets, financial news, crypto news, yield farming, price statistics, block times, and others to time your trading of oracle cryptocurrencies for maximum profit and increasing your net income. 

You can also diversify your crypto coin portfolio by including other cryptocurrencies such as Bitcoin Ether ETH, Cardano ADA, Bitcoin Gold, Bitcoin Cash BCH, Basic Attention Token, Ethereum Classic, Binance Coin, Kusuma Network coin, Monero XMR, Wrapped Bitcoin (some also call it wrap bitcoin or wBTC), Dash DASH, NEM, XEM, USD Coin, Gemini Dollar, ERC20 tokens (created on Ethereum blockchain), NFTs, and others. 

Also, invest in various types of stocks (including dividend yield stocks), mutual funds, index funds, real estate, venture capital, private equity, and others to improve your personal finance. If possible, get help from a portfolio manager or wealth management firm for investment advice and get maximum return. 

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