The Polkadot project is garnering a lot of attention nowadays. The reason behind it is the multiple delays of the release date. Polkadot’s whitepaper was already announced by Gavin Wood towards the end of 2016. Wood is, among other things, the designer of the Ethereum Virtual Machine (EVM) and the previous CTO of the Ethereum Foundation. He’s also co-founder and director of Parity Technologies, the company developing multiple projects, including some Ethereum projects and Polkadot.
The ICO drama
In October 2017, Polkadot held a successful ICO on the Ethereum blockchain. The ICO raised a proud total of $144,630,000. However, 2/3 of these funds were frozen following the “Parity hack”. The hack exploited a weakness in the code of the Parity wallet. Despite the staggering loss, it was decided to carry on with the project. Polkadot was poised to launch in Q3 2019, a date which has since been postponed on multiple occasions.
One of the main goals of Polkadot is to act as a sort of decentralized center for all types of blockchains. The blockchains should be able to communicate among one another (Inter-blockchain communication/IBC). The focus is to develop the necessary technology that makes it easy to intertwine older Distributed Ledger Technologies (DLTs), current DLTs, and also future DLTs. This architecture should make scaling possible.
This is made possible through so called “parachains”, which can both be added or removed. Parachains can be public blockchains, private blockchains, or other sources of data. The data in the parachain is accessed via specialized nodes, so called collators, and sent to Polkadot. This is similar to how decentralized oracles work. Parachains are activated by staking DOT tokens, and removed from Polkadot by unstaking these same tokens.
The main chain of Polkadot, also known as the Relay Chain, supports smart contracts. It is secured by a type of DPoS (Delegated Proof of Stake), which Polkadot calls NPoS (Nominated Proof of Stake). The system is made up of nominators and validators: Nominators use their tokens to elect the validators , who in turn validate (mine) the new blocks. If a validator acts maliciously, he is punished along with the nominators who voted for him.
In recent days, Polkadot’s native coin (DOT) was listed on multiple exchanges. Users have been able to trade it since Tuesday. On August the 21st, the total number of coins will be multiplied by 100 at the behest of the community. The total amount of DOT will thus be taken from 10 million to 1 billion. Every DOT holder will obtain 100 coins for each previously held old coin. The market cap will most probably not be affected by this, and the newer coins should be worth about 1/100 of the old ones.
The current price of DOT is about $300, and the market cap about $3 Billion. There are currently multiple established projects working on being integrated as parachains into Polkadot.
Polkadot definitely has potential. How this potential develops remains to be seen. Polkadot’s direct competitor in this case is Cosmos. But other projects are also working on Inter-blockchain communication.
Especially now, as the project is getting stated, one should be cautious when investing. The price of a coin often drops at first, as investors’ expectations aren’t met by the reality (buy the rumour sell the news). But as usual, nobody has a crystal ball at hand.
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