A blockchain network dubbed Polkadot is made to accommodate a variety of parachains, or linked, application-specific sub-chains (short for parallelized chains). Polkadot’s chains are all constructed using Parity Technologies’ Substrate modular architecture, which enables developers to choose particular parts that are ideal for their application-specific chains. Polkadot is the collective name for the network of parachains that connect to the Relay Chain, a single fundamental platform. This base platform, which also uses Substrate, has the consensus, finality, and voting logic from Polkadot but does not provide application functionality; instead, it secures the network’s parachains.

History

Origins of Polkadot Dr. Gavin Wood, one of the Ethereum co-founders and the creator of the Solidity smart contract language, is the mind behind Polkadot. Midway through 2016, Dr. Wood began developing his idea to “build a sharded version of Ethereum,” and in October of the same year, he published the initial edition of the Polkadot white paper. The Web3 Foundation is a non-profit organization that was created in 2017 by Dr. Wood and Peter Czaban of Parity to promote Polkadot’s research and development as well as to manage its fundraising initiatives. In October 2017, the Web3 Foundation, located in Switzerland, held the inaugural token sale for Polkadot. To distribute the proceeds, a Spend-All Second Price Dutch Auction was used. The Web3 Foundation selected Parity Technologies to build Polkadot after the sale garnered $145 million in little under two weeks by selling 50% of the original 10 million DOT (old) supply.

Dr. Wood and Jutta Steiner formed Parity Technologies, which is well-known for developing Substrate, the development environment for Polkadot, as well as the Parity Ethereum client. Parity Wallet theft and ensuing fundraising initiatives A little over $90 million worth of ETH, or around 66% of Polkadot’s token sale revenues, were compromised ten days after the token sale concluded (on Nov. 6, 2017) when someone permanently frozen the money in the Parity multisig contract (the second such event in recent months). pleaded with the Ethereum community to take into account figuring out a means to get the money back, but nothing has changed. Polkadot and Web3 Foundation announced that despite the missing finances, the project still had enough funding to complete its milestones for development.

According to reports, the Web3 Foundation held a 2019 private token sale to gather more cash to make up for the lost monies. At a valuation of $1.2 billion and a price of $120 per token, Polkadot intended to sell 500,00 DOT (old) tokens during the auction. Despite the fact that the foundation withheld all information about the fundraising, it was stated that the transaction finished in June 2019 at a “successful” valuation. Mainnet launch and technological advancements with Polkadot In May 2018, Polkadot began releasing a number of proofs-of-concept (PoCs) to test its basic relay chain, the relay chain’s support for parachains, and its finality agent (dubbed GRANDPA). The Alexander testnet, Polkadot’s first test network, was introduced in PoC 3, which was launched in January 2019. The public introduction of Kusama in August 2019 was the project’s first substantial release, nevertheless. Kusama is an early, unpolished, and unaudited version of Polkadot that was created to act as a “canary” network for testing governance, staking, and sharding under actual business situations. Additionally, Polkadot provided Kusama stakeholders with 1% of the first DOT supply in order to promote participation. For the mainnet launch, Polkadot used a phased deployment approach.

On May 27, 2020, Phase 1, the first mainnet chain candidate for Polkadot, went live. It was the first phase of a multi-stage rollout procedure that was outlined in the project’s mainnet launch plan. When Polkadot first launched, it was a Proof-of-Authority (PoA) network run by six Web3 Foundation validators. On June 18, 2020 (Phase 2), the network switched to its intended Nominated Proof-of-Stake (PoS) scheme, enabling DOT owners to claim validators slots and unlock staking incentives. Polkadot’s governance features and transferring protocol control to the community were implemented in Phases 3 and 4 in late July 2020, respectively. On August 18, 2020, the last step will enable DOT token transfers.

The Web3 Foundation continues to support projects based on Polkadot and ecosystem activities with the profits from DOT sales (see: the Polkadot Ecosystem Fund). Dr. Gavin Wood, president and founder, Dr. Aeron Buchanan, vice president, and Reto Trinkler make up the Foundation Council, which oversees the foundation. DOT redenomination Holders of Polkadot tokens decided to modify the denomination between DOT and the network’s smallest unit, plancks, by a factor of 100 in the first public vote for the project. On August 21, 2020, block #1,248,328 came, around 72 hours after DOT transfers enabled at block #1,205,128. (Aug. 18, 2020). It was a superficial adjustment akin to a stock split. Each Polkadot account’s token balance grew by 100 times, bringing the total DOT supply from its initial 10 million units to 1 billion. But because each DOT’s value will be reduced by 100 times, the decision had no effect on Polkadot’s pre-market pricing.

Technology

The Polkadot Runtime Environment (PRE), parachains, the relay-chain, and cross-network bridges are only a few of the technological elements that make up Polkadot. Relay-chain Substrate, a blockchain construction framework created by Parity Technologies based on lessons learned while constructing Ethereum, Bitcoin, and corporate blockchains, is used to create Polkadot’s relay chain. At the center of the network, it aids in the mapping of addresses to account information, coordinates communications, and establishes consensus using a pooled security mechanism that makes use of proof-of-stake (PoS). On the relay-chain, all validators stake their DOTs and generated blocks. The relay chain is intended to be a simple protocol to link other network members and guarantee transaction finality; it does not include features like smart contracts. The majority of the network’s transaction flows are handled by this core chain, hence activities on the relay-chain could be more expensive. Although the parachains close by may have “differing implementations and characteristics,” the relay-chain will transfer a substantial percentage of the computing load to them.

Parachains Transactions will be gathered and processed via parachains, with finality provided by the relay chain. Instead of queuing and processing transactions sequentially, parachains will process transactions simultaneously across many chains to boost transaction throughput. The construction and design of parachains are unrestricted by Polkadot. These network components may provide a particular feature or be application-specific (e.g., privacy or scalability). But in order for a selected Polkadot validator to check and reconcile previous transactions, each parachain must periodically produce a proof. The relay-chain and parachains both share the same state, therefore if the relay-chain were to ever revert at any moment, all parachains would likewise do the same. Cross-parachain communication is an inherent feature of Polkadot in terms of composability. As a result, parachains will be able to communicate with one another “without the requirement for smart contracts to conduct the bridging functionality.”

The subsystems for networking, consensus, and WebAssembly Virtual Machine make up the Polkadot Runtime Environment (PRE). PRE components are divided by Polkadot into: Network Interactions State storage and the Storage Trie Consensus Engine Wasm Virtual Machine (VM) Polkadot’s state machine is compiled to WebAssembly (WASM), a high-performance virtual environment. Major corporations like Microsoft, Google, Apple and Mozilla are among those working on the WASM standard, and together they have built a sizable ecosystem of support for it. For peer discovery and communication inside the Polkadot ecosystem, Polkadot’s networking makes use of libp2p, a cross-platform network framework for peer-to-peer applications. To make Polkadot available to a larger variety of developers, the Polkadot runtime environment is being developed in C++ and Golang. With the use of a number of specific bridge contracts or bridge modules, bridging Polkadot will eventually make links to other networks like Bitcoin and Ethereum possible. In Polkadot, there are two main kinds of external bridging: Bridge agreements: Polkadot’s relay-chain is connected to external chains using smart contracts (for instance, the Parity Bridge connecting an Ethereum Proof-of-Authority (PoA) sidechain to a Substrate-based chain). Built-in bridging modules: Modules that allow Polkadot link to external chains.

Supply Curve Details

Although the structure of the inflation rate is still being determined, it will vary depending on the total network stake. The current specs, which are published on the Web 3 Foundation website’s Token Economics page, provide for a 10% inflation rate and 75% staked supply. Since the specifications set an ideal supply as 75% of the outstanding supply staked, we utilized this criteria to calculate future issuance. Additionally, transaction and slashing fees will be paid to a treasury. Through governance, it is possible to regulate the percentage of those fees that will go to the block producer. To keep inflation and deflation under better control, it was once proposed that 20% go to block producers and the remaining 80% go to the Treasury (instead of being burned). To create the supply curve, the effects of the burn mechanism of transaction fees and fee reductions have not been taken into account.

Consensus Details

The hybrid consensus method used by Polkadot isolates finality from the block manufacturing process. Polkadot allows the network to generate blocks quickly while allowing the slower finality agent to operate in a separate process, which doesn’t effect the speed at which transactions are executed. The potential for unintentionally choosing the wrong fork or the impossibility of creating new blocks are two drawbacks of probabilistic finality that this design potentially attempts to address (aka stalling). Polkadot’s consensus is powered by two methods, which are as follows: BABE: The block generation process is called the Blind Assignment for Blockchain Extension (BABE). According to stake, it distributes block production slots to validators chosen at random (as defined by the Polkadot randomness cycle). The Polkadot relay chain’s finality device is the GHOST-based Recursive ANcestor Deriving Prefix Agreement (GRANDPA). This agent makes decisions based on chains as opposed to blocks, which could hasten the finalization process.

If “more than 2/3 of validators testify to a chain containing a given block, all blocks leading up to that one are completed at once,” according to Polkadot, it helps to clarify this term. Polkadot’s relay chain serves as its foundational technology, but the network obtains agreement through a modified and unique PoS technique that involves four important parties: collators, fishermen, nominators and validators.

In a proof-of-work (PoW) blockchain, each parachain has a collator who performs the role of a miner. Both the parachain’s state and the Polkadot relay chain’s state must be maintained by a collator. The collator then controls the flow of transactions into and out of the relay chain’s parachain. In exchange for payment for their efforts, collators gather parachain transactions, generate state transition proofs, make new candidate blocks, and then send them on to validators. In a market where collators are numerous and competitive, collators might encourage validators to select their block by splitting a piece of their fee with the validator.

To accept block candidates from parachain collators, validate the data in the block, and republish the block candidate to the Polkadot relay chain, validators are chosen at random. By shifting the transaction data from the input queue of the originating parachain to the output queue of the destination parachain after confirming a block, a validator also validates and modifies the state of the relay chain block. The Polkadot (DOT) tokens that validators must stake in order to be selected as active validators are used as incentives in the staking process. Validators that violate the consensus algorithm are penalized by losing some of their stake, but validators who successfully secure the network and validate blocks are rewarded with extra tokens.

Those who are nominators donate tokens to a validator of their choosing since they may be unable to actively participate in the transaction validation process. Nominators are encouraged to select a validator who would most likely obtain the greatest reward since nominators receive a pro-rata part of the validator payment depending on their proportion of the validator’s bond. The team is certain that the nominator procedure will produce a cutthroat but ethical market for excellent validators and nominators. Fishermen instead of participating in the transaction validation process alongside validators and nominators, fishermen serve as watchmen who keep an eye on network activities and spot validators who violate consensus rules. Fishermen participate in the network’s security with a lesser commitment of tokens than validators, but they are rewarded proportionately more.