Polkadot is one of the most hotly-anticipated blockchain platforms of recent years. After five years in development, 2021 is the year that it begins to host applications and is finally fully operational.
So, in a space that’s becoming saturated with blockchain platforms, what makes Polkadot stand out?
Polkadot has attracted significant attention since the project’s inception in 2016 due to the prestige of its founding team. Polkadot is the brainchild of Dr. Gavin Wood, who is one of the original co-founders of Ethereum and who came up with the idea of the Solidity programming language.
Wood left his position as CTO at Ethereum in 2016, shortly after the platform launched on mainnet. He’d already shared a vision for how Ethereum’s development could pan out, but it seems his co-founders disagreed. So Wood decided to implement his vision as Polkadot, a new project.
He co-founded Parity Technologies, a Berlin development firm that would build Polkadot, together with Ethereum’s former security chief, Dr. Jutta Steiner. Wood also founded Swiss nonprofit, the Web3 Foundation, which acts as the steward for Polkadot.
Polkadot has some intriguing economic forces at play around the native DOT token. Like all other platforms, DOT plays a critical role in network consensus and governance. Polkadot runs on a variation of Proof of Stake called Nominated Proof of Stake or NPoS. It’s similar to the Delegated Proof of Stake used by EOS, in that DOT token holders can nominate a validator by delegating their tokens.
However, unlike EOS, a validator can opt to finance their own stake, too—it’s not a requirement to be nominated. Furthermore, while EOS has only 21 validators, Polkadot currently supports close to 300, so it’s far more decentralized.
Unlike other blockchain platforms, Polkadot operates another layer of tokenomics around its parachains. Parachains can only connect to the Polkadot network by winning one of a limited number of parachains slots, which are awarded to the highest bidder at parachain auctions. The winning bid receives a lease for a fixed number of months.
Projects bidding for parachain slots can conduct crowd loans, asking supporters to pledge their DOT for the duration of the parachain lease. In return, projects offer their own tokens as rewards. This process creates an additional dynamic to the DOT economics, as holders have the choice to either delegate tokens to secure the network for rewards or loan them to projects in return for project token rewards.
Therefore, for DOT holders, there are opportunities to exploit the markets for both of these use cases depending on the forces of supply and demand.
DOT is available through the DOT/USDC pair.