What is Polkadot and How Does it Work?
The Polkadot technology system allows users to connect with a multi-chain interchange in order to customise side-chains and make connections with existing blockchains.
Polkadot was born out of a need to solve the problem of sharing lots of public blockchains, and its multi-chain technology framework ensures that users can build their own secure blockchains.
Polkadot was also developed in order to further the ideology of creating a fundamentally decentralised form of currency.
As one of the most innovative platforms for trading cryptocurrencies, Polkadot continues to be secure, robust and scalable too, creating not just coins from mining blockchains, but allowing users to cross-blockchain different varieties of assets and data too.
What are the Use Cases for Polkadot?
Polkadot offers a variety of different use cases, including transaction chains, parachains, data curation and finance chains, all of which are secure and private for users. Features can be added and removed from Polkadot, with DOT tokens used as the form of Polkadot’s currency.
Users could start trading Polkadot as of late 2020, and its market cap has continued to increase exponentially as a result of it being listed on 40 plus exchanges. The Polkadot DOT tokens can be used for three primary uses –
1. Staking – Staking uses game theory in order to aid users in trading their DOT most appropriately.
Those who try to use DOT inappropriately will subsequently lose their stake, known as ‘bad actors’, whilst ‘good actors’ will be rewarded with further DOT tokens.
2. Governance – Users holding DOT tokens have complete control as to how they wish to use them.
DOT allows users access to all the benefits of the blockchain, which is unique to Polkadot as most other platforms reserve these sorts of benefits from those who are mining. DOT token holders will also be the first to hear about any prospective fixes and upgrades.
3. Bonding – Bonding refers to the addition of new parachains, which are used to replace any existing parachains that are no longer useful. This helps to provide a proof of stake.
Is Polkadot the Next Ethereum?
Polkadot was actually created by Gavin Wood, who was the co-founder of Ethereum, so it is unsurprising that the two types of cryptocurrencies have some similarities.
But whilst Polkadot allows for important blockchain innovation, the Polkadot framework is ultimately very different from Ethereum in that it is more than just a cryptocurrency.
Whilst Polkadot and Ethereum both boast secure blockchain transactions, Polkadot enables uses to interact with other different blockchains to unite blockchains together and help them to grow as assets in their own right.
Polkadot is similar to Ethereum in that both run on a system of decentralisation, championing the idea that currency can exist without any one CEO or company leader in place.
Although Polkadot does not have the same high market cap as Ethereum, it is arguable more future-proof and it will be interesting to see how this forkless form of creating blockchains and its continued innovation and adaptable technologies help the cryptocurrency industry to grow and evolve.