Being a relatively new blockchain protocol that was launched in May 2020, Polkadot has gained tremendous traction as being a serious competitor to Ethereum, the largest blockchain that supports smart contract functionality.
The rise of Polkadot as a next-generation blockchain was not an expected event, given the issues it was conceived to address.
Current issues existing blockchains face
The advent of Bitcoin as digital cash was a revolutionary step in establishing a global and immutable monetary system that facilitated the transfer of value without the need for intermediaries.
Although its value proposition is recognized, there were limitations in scalability that hindered adoption. For instance, the Bitcoin network can process 4.6 transactions per second (TPS) but VISA, one of the largest card payment organization in the world, can process more than 1,700 TPS.
More importantly, the Bitcoin protocol lacked the ability to expand the use cases of blockchain technology, which is seen as a missed opportunity given that diverse applications that this new technology could bring.
This led to the rise of Ethereum, a blockchain protocol that facilitated the use of automated smart contracts that enables the creation of any decentralized applications (dApps) one could think of.
Ethereum extended Bitcoin’s utility as a decentralized network capable of not only facilitating value transfer in a much more flexible manner, but also allowing dApps to be created without the need for any intermediaries.
However, Ethereum faces constraints in the form of frequent network congestion and high transaction fees. It is therefore imperative to conceive a more scalable solution to public blockchain networks.
What is Polkadot?
Polkadot is a next-generation blockchain that aims to connect different blockchain protocols into a single unified network, with the focus on greater scalability and interoperability.
It is focused in creating the foundational infrastructure for Web 3.0 by establishing an interconnected blockchain network that empowers the end-users.
While Ethereum can process 25 TPS, Polkadot’s processing capabilities can reach up to 1 million TPS, as highlighted by Gavin Wood, the founder of Polkadot who is interestingly also one of the co-founders of Ethereum:
“Ethereum can do 25 transactions per second (TPS), but, of course, the more you use it the worse it gets,” said Gavin Wood, on CoinDesk’s virtual conference. “Polkadot uses parachains [parallel processing chains] and can go from 100K TPS to up to 1 million TPS,” explained Wood.– Gavin Wood, founder of Polkadot and Co-founder of Etherem
Given the prominence of Polkadot’s founder and the merits of their technology, it is no surprise that the project raised approximately $200 million for the sale of its native token, DOT.
This makes Polkadot one of the most well-funded projects in the space. After a year of being launched, DOT has become the ninth largest cryptocurrency in the world. This feat is a reflection of the community’s support and confidence.
How does Polkadot work?
Polkadot introduces various novel technical features in its protocol. For a start, the architectural design of the Polkadot network consists of two foundational elements; a main network and user-created networks.
Main Network / Relay Chain: Also called the relay chain, this represents the heart of the protocol that ensures the shared security, interoperability and consensus of the entire Polkadot protocol. Polkadot currently runs on a nominated Proof-of-Stake (NPOS) model, which is a variation of the typical Proof-of-Stake (POS) consensus mechanism in which validators of the network are selected from the community.
User-Created Network / Parachain: Parachains are independent, user-created blockchain hosted on the Polkadot network and feeds into the relay chain, and therefore benefits from the same degree of scalability and security as the main chain.
The design of Polkadot’s protocol ensures that the resources to run the network is optimized, since all transactions can be kept accurate and secure using only the computing resources needed to run the relay chain. In parallel, end-users have the advantage of customizing as many parachains for various applications in a simple and effective manner. Additionally, users can also ensure privacy of transactions under their parachains.
Can Polkadot overtake Ethereum?
It was only natural that Polkadot received much fanfare from its release, since Dr. Gavin Wood is a renowned individual who has contributed massively in the space, from co-founding Ethereum to starting the Web3 foundation.
His vision of spearheading advanced scalability solutions to public blockchains manifested in his pursuit of creating Polkadot. Besides having greater scalablity in the form of higher transaction processing capabilities, Polkadot’s technology is forkless.
This means that it reduces the risk of a hard fork splitting the community during times of new feature introduction. Introducing new features or upgrades to the protocol is inherently automatic, without the need for participants upgrading their software and hardware manually.
Given its relative infancy, Polkadot is still much smaller than Ethereum. Ethereum’s market capitalization, which is a measure of the size of the native token, stands at $350 billion compared to Polkadot’s $23 billion. However, many are convinced that if there is any projects out there capable of toppling Ethereum, it would be Polkadot.
Many investors are convinced that Polkadot’s solution is future-proof and has the potential of escalating blockchain technology toeards a more connected Web 3.0