Table of Contents
As suggested by the name, Polkadot is similar to a polka dot, with the dots being blockchains. Scattered, isolated and not interacting with each other, tons of similar projects are running on similar blockchains in isolation. Polkadot is a way to create and connect blockchains. Bitcoin, Ethereum, Cardano, etc. are all big chains, but they need a way to communicate with each other, and this is where Polkadot comes in handy with a layer-0 function. This solution intends to make building and connecting blockchains easier.
At its core, Polkadot is a Proof-of-Stake (PoS) blockchain that connects other blockchains. Two main components of this blockchain are the Eelay Chain and the many different Parachains. Polkadot has one center and many other branches coming off the center, which is very much like a hub-and-spoke model. The basis and hub of this network is the Relay Chain, and many Parachains come to the Relay Chain in order to achieve consensus. Polkadot is a PoS blockchain which means it requires validating nodes or people who want to participate in the network to stake at least 10000 dot coins which is the token used on Polkadot network (similar to Ether on Ethereum). This ensures that the validators are financially invested in the project and will not attack it or cheat. All these happen in the Relay Chain.
Decentralized blockchains and dApps (decentralize applications) maintain their rules with the use of Parachains. Parachains are the spoke part of the hub-and-spoke model, and they do what that specific use of the blockchain is and bring it to the relay chain to sync everything up. In other words, Parachains are customizable and can be used for a variety of cases. Dr. Gavin Wood describes this process like an office. The employees have their specific jobs, and they will do that by themselves, but once in a while, they meet up to sync up and exchange information to coordinate their work. Parachains are timed to meet with the Relay Chain every so often to ensure that everything is secure and synchronized.
You can learn more about the Parachains' mechanism here.
Polkadot's lead investor is Web3 Foundation, of which Dr. Gavin Wood is also a founder. This token has a 78% liquidity score, which is very promising for those who seek to invest. At the time of writing, Polkadot sits comfortably in 8th place of market cap ranking, with a $31 billion market cap. This token's ROI (Return-on-Investment) over the past year was 577%, with similar projects' ROI being 152% in the same timespan.
To check more details of this token and see its most recent performance, you can visit here.
We are here to help you make smarter financial decisions by freeing up your intelligence through making it easy to compare thousands of coins. We do all the hard work for you and help you remove emotions from your decisions. However, making an investment decision requires considering your own financial situation and comparing your investment options.
To see our reports and easily compare the available investment options, check out our website.