Polkadot Deep Dive | Part 1
In the first of a two-part series, Master Ventures takes an in-depth look at one of the most promising projects in the crypto-verse: Polkadot (DOT).
Polkadot is an open-source project led by Gavin Wood, a Co-Founder of Ethereum.
Designed to operate similarly to Ethereum, Polkadot will employ the use of a Proof-of-Stake consensus instead. Nodes have a stake in the network and are incentivized to validate trustless transactions.
Polkadot forms a global network of computers designed to allow anyone to develop and launch their custom blockchains and dApps.
The network, which started as a Proof of Authority protocol with a single super-user account overseeing its entire governance structure, has grown into one of the largest cryptocurrencies and a market capitalization exceeding $38 billion (as of writing).
Polkadot is designed to emphasize scalability, and the protocol structure allows the processing of millions of transactions per minute without any downtime or transaction fees.
DOT is the network’s native currency and plays a significant role in the overall ecosystem and protocol governance.
As cryptocurrencies evolve and expand, the idea of scalable, trustless, and cheap blockchain networks has gained massive prominence.
To solve this problem, Polkadot introduced their form of governance known as Parachains.
Parachains are project-specific blockchains — capable of being grouped to create larger blockchains.
In Polkadot, this idea is developed further as the governance of a chain is decentralized across its parachains.
In addition to giving control back to the individual chains, this system makes it easier for developers and stakeholders to originate an idea and enable a faster, seamless, and more efficient execution that would otherwise be possible on a less scalable network such as Ethereum.
Several positive effects can be traced back to the Parachain governance in Polkadot.
These include strategic monitoring, an advanced consensus mechanism, and improved verification mechanisms.
Parachain Governance in Polkadot: A New Way of Thinking About Blockchain Governance
The governance of blockchain networks is essential for ensuring adoption and stability. Yet, an increasing number of networks are suffering from congestion issues, leading many to explore alternative methods for governance.
Parachains introduce a unique perspective to blockchain governance. They allow for scalability and decentralization, meaning smaller blockchain networks enjoy the same benefits as larger networks.
Substrate is the modular blockchain framework and foundation for the whole Polkadot ecosystem. Substrate allows developers to quickly build and launch a blockchain with multiple options available for a wide range of project needs.
The Polkadot network connects blockchains, parachains, or parallel chains with a goal to become an ecosystem.
A Relay Chain is the main chain that guarantees security and transmits messages between the parachains. Parachains are part of Polkadot’s infrastructure next to the Relay Chain and bridge to additional blockchains. Essentially, parachains are native blockchains that rely on Polkadot’s relay chain for security and communication with other relay chains. Each parachain is customizable and built to its own specification for different use cases.
There’s a limited number of parachain slots, which will be auctioned in a permissionless way.
Blockchain developers and early start-up networks are encouraged by Polkadot’s decentralized, scalable and low fees, enabling projects to prioritize development and not worry about such fundamental issues, including security, customization, bridges, and smart contracts.
Polkadot simplifies the process of creating peer-to-peer connections or bridges between networks, including Bitcoin and Ethereum. With Substrate’s framework, it’s easier than ever to develop blockchains with Polkadot.
Trustless bridges don’t require trust in a single entity or authority but rather trust in the mathematical process built into the code.
Polkadot’s trustless interactions are enforced by code or incentivization mechanisms rather than a simple promise or legal agreement.
The Polkadot protocol facilitates the creation of trustless and secure bridges between blockchains. Bridges allow for the easy transfer of value, data, and information between blockchains.
The Upcoming Parachains Auctions
As the parachain slots are limited, they will be auctioned by the Polkadot team using a Candle auction. During a Candle auction, a candle is lit, bidding continues until it goes out, and the last bid made before it goes out is the one that stands.
Parachains connect to Polkadot by leasing a slot on the relay chain for up to two years at a time, with an option of renewing. Slots are assigned through an on-chain auction where winners bond their DOT that corresponds to the duration of the lease.
Auctions on Polkadot have an open bidding period of approximately one week.
Parachain teams can fund their auction bid with the help of a crowdloan campaign, which allows them to accept contributions from DOT holders. Crowdloan contributors receive their DOT at the expiry of the lease.
In part two of our deep dive into Polkadot, we’ll discuss parachain leases, the network’s architecture as well as DOT, Polkadot’s native token.
About Master Ventures
Master Ventures is a blockchain-focused venture studio helping to build the next generation of blockchain-based Web 3.0 system innovations within the crypto industry. Launched in 2018 by Founder and CEO Kyle Chassé, the company’s ethos can best be summarized in the acronym #BeBOLD: Benevolent, Open, Love, Decentralized.
Master Ventures co-creates with entrepreneurs and businesses worldwide to turn the best ideas into innovative and disruptive products. They do this by investing as strategic partners through offering advisory services to the projects they believe in. To date, Master Ventures has invested in over 40 crypto projects, including the likes of Kraken, Coinbase, Bitfinex, Reef, DAO Maker, Mantra DAO, Thorchain, and Elrond.
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