Polkadot is a protocol that enables independent blockchains to exchange information. The defined purposes behind the project are:
- To enable applications and smart contracts on one blockchain to transact with data and assets on other chains;
- To run several parachains, each processing multiple transactions in parallel, allowing networks to enjoy infinite scalability;
- To benefit from shared security, where individual chains leverage collective security without having to start from scratch to gain traction and trust.
The unique technical aspects behind Polkadot’s heterogeneous multichain technology are the use of relay chains, which coordinate consensus and transaction delivery between chains; parachains, the connected blockchains running transactions parallely to one another; and bridges, the link to blockchains that have their own consensus, such as Ethereum.
Polkadot’s vision is to enable a truly decentralized Internet which serves the true promises of blockchain technology, where independent blockchains exchange information trustlessly, and where the creation and mass adoption of decentralized applications will distribute power and equality for the common good of the world.
Blockchains may be applied to a wide variety of fields, including Internet of Things (IOT), finance, governance, identity management, web decentralization, or asset tracking. That said, despite the promises, we have still not witnessed a significant real-world deployment of present technology.
The five key points of failure recognized by Polkadot of current blockchain technology that they aim to solve are:
Polkadot aims to become a network that connects blockchains, allowing new blockchain designs to communicate and share security, while still retaining their entirely customized and unique state-transition functionality (virtual machines, consensus protocols, etc.). At a high level, Polkadot aims to solve the problems of blockchain interoperability, scalability, and shared security. With Polkadot, developability is no longer limited, and applicability is therefore widened to real world use cases.
Polkadot’s goal is to provide a scalable, heterogeneous multichain that is built under a minimal, simple, general, and robust design. Unlike previous single blockchain implementations, Polkadot provides no specific functionality. Instead, it provides a relay chain layer upon which a larger number of validatable, globally-coherent, dynamic data structures (no requirement to be a ‘blockchain’) can be hosted in parallel. These are called parachains (short for parallelizable chains).
Polkadot may be considered the equivalent to a group of independent chains, except for the features of shared security, and trust-free interchain communication. These are the main points behind Polkadot’s scalability advantage. To provide a brief but technically comprehensive overview of the system as a whole, we’ll explore:
- A description of their underlying consensus mechanism design.
- The Nominated Proof of Stake algorithm.
- How Parachains work.
- The process of Interchain Communication.
- The use of Bridges to integrate with other blockchains.
Consensus mechanism design.
In the Polkadot Network, a low-level consensus over a set of mutually agreed valid blocks is reached through an asynchronous Byzantine fault-tolerant algorithm. Its integration is inspired by the simplicity of Tendermint, and the efficiency of HoneyBadgerBFT at identifying defective network infrastructure, given a set of mostly benign validators. This particular consensus design is important because it requires the means of choosing and setting validators and incentivizing them to be honest under any form of network deployment, without any particular organization or trusted entity required to maintain it.
Nominated Proof of Stake.
Polkadot requires the measurement of stake for any particular account, in order for validators to be elected. These are chosen infrequently, once per day at most, but can go up to once per quarter the NPoS scheme. Under this algorithm, all token holders are incentivized to participate in consensus. Nominators choose the block validators by staking tokens on the presumed strongest candidate, and the validators in return are bonded heavily by their stakes. Any misbehavior is punishable by a slash. Through the NPoS, Polkadot maintains checks and balances across the system to encourage game theoretic situations to run under strong incentives for benign outcomes.
Parachains are a simpler form of a blockchain, which connect to the security and trustless transactions of the relay chain, similarly to the concept of sharing in Ethereum. Each parachain has is independent and transactions can be executed parallely across all parachains, while using the same source of security. These are important factors for network scalability, as distributed computations won’t need to fully depend on the root relay chain. At the core of Polkadot, parachains meet the vision to enable a truly decentralized Internet, where different decentralized apps and services connect under a common communication point, each with their own custom settings but while sharing a common pool of security.
Parachain transactions asynchronously sends off the the resolution of a transaction into a second parachain, or, potentially, the relay chain itself. This ensures the correct processing of transactions between different chains. To ensure minimal implementation, interchain transactions counts only with an origin segment and an address. There is no payment associated; rather a system such as Ethereum’s Serenity is envisioned as a means to cross-chain resource payments. A queuing mechanism based on a Merkle tree structure ensures tamper-proof communication, where relay chain maintainers move transactions from the one queue to another. Involved across the interchain communication process are validators, securing the relay chain by staking DOTs, validating proofs from collators and participating in consensus; nominators, in charge of selecting good validators by stake; and fishermen, the final security layer, monitoring the overall network and proving bad behavior to validators. As with parachains, interchain communication is a fundamental feature of Polkadot’s architecture, bringing logical and algorithmic order to fee-less transaction flow and ensuring tamper-proof communication and overall correctness.
For blockchains that are not necessarily parachains but still need to connect to the network, Polkadot features bridges, providing these chains the opportunity to be interoperable with each other, within reasonable security standards. There are methods to connect Polkadot interoperability with Ethereum via transaction-forwarding contracts and logs. In the case of Bitcoin, despite its complexity, it is not totally unrealistic to establish a reasonably secure Bitcoin interoperability virtual parachainn, but it would require efforts under an unexpected timeframe from developers in both networks. Ultimately, bridges are an important asset to Polkadot’s value proposition, as it builds on the promise of multichain communication, without necessarily being part of the network, but simply by establishing a non standardized communication path.
Relay chains, interchain communication, and bridges, are the core and necessary elements for Polkadot’s approach to blockchain interoperability, with the added features of shared security and cost-free transactions. The architecture achieves its mission of minimalism and simplicity and at the same time general and robust. Within and outside of the industry, Polkadot is a viable and elegant option for blockchains to no longer be siloed, and brings interesting incentives to new blockchains to benefit from increased security. While Polkadot shows great promise in the vision of enabling a decentralized Internet, the main concern with this technology is that relay chains are presumed the hardest of all interoperability approaches; at the expense of not being a connected parachain to the network, custom bridge solutions require heavy-lifting.
- Networking subsystem: This is the means by which a peer network is formed and maintained. First an altered devp2p, then libp2p.
- Finalisation mechanism: Optimistic BFT Proof of Authority consensus mechanism. The mechanism allows the proof of misbehaviour for the dismissal of malicious validators.
- Parallelised candidate selection: This is allowing multiple independent items to be agreed upon under a single series based upon subjective reception of the partial set of validator statements. Used as an input to the finalization mechanism.
- Parachain implementation: This will include an integration with the Proof of Stake chain, allowing the parachain to gain consensus without its own internal consensus mechanism. More than likely this will include a WebAssembly-based contract execution architecture.
- Transaction processing subsystem: An evolution of the parachain and relay-chain, this will allow for transactions to be sent, received and propagated. It includes the designs of transaction queuing and optimised transaction routing on the network layer.
- Transaction-routing subsystem: This introduces more specifics into the relay-chains’ behaviour. Management of the ingress/egress queues and network protocol with means of directed transaction propagation, ensuring independent parachain collators are not overly exposed to transactions that are not of interest.
- Relay chain: This is the final stage of the relay-chain, allowing the dynamic addition, removal and emergency pausing of parachains, the reporting of bad behaviour and includes implementation of the ‘fisherman’ functionality.
- Independent collators: This is the delivery of an alternative chain-specific collator functionality. It includes proof creation (for collators), parachain misbehaviour detection (for fishermen) and the validation function (for validators). It also includes any additional networking required to allow the two to discover and communicate.
Project goals are clearly outlined and well aligned in regards to the technical challenges behind Polkadot’s architecture. We presume that all objectives were reached, as there is no timing information provided on the official website, and we rely on the history of Medium updates to keep track of Polkadot’s promising progress. This includes progress updates on parachains, bridges, and the consensus algorithm back in January, a first and a second live proof of concept updates in May and July respectively, and the announcement of expected full launch by Q3 2019.
Token Acronym: DOT
Circulating Supply: 312,018,000 DOT
Total Supply: 577,018,000 DOT
Marketcap: $3,945,959 USD
Marketcap at ICO: $150,000,000 USD
Distribution: 5M DOTs were sold under a Spend-All Second Price Dutch auction. This means that “tokens were offered high in the start, and lower throughout the auction period in a predefined scheduled. The auction closes once orders received at the current provisional price are enough to purchase the entire 5 million DOTs. You don’t bid on a number of DOT tokens, but rather on an amount to spend, and thus receive more tokens as the auction continues and price lowers”. Source: https://polkadot.network/Polkadot-lightpaper.pdf
Token release schedule: The ICO was issued on October, 2017
Intrinsic Token Value: The DOT has 3 purposes:
- DOT holders have the complete control of the protocol. All privileges are given to the relay chain participants, including the management of events including protocol upgrades and fixes.
- Under game theoretic situations, token holders are incentivized to behave honestly. Good actors are rewarded, while bad actors lose their stake in the network.
- New parachains require bonding of tokens, and the inverse event acts accordingly be removing the bonded tokens. This is simply a form of Proof of Stake.
Polkadot presents a reasonable marketcap and distribution, as it is one of the most popular projects bringing an approach to blockchain interoperability. The token’s intrinsic value directly correlates with the aims and purposes of the project, with well established incentives across all the network’s features and functionalities.
Team & Leadership
Polkadot was initiated by the Web3 Foundation, and commissioned to Parity Technologies to build the Polkadot Network. Web3 Foundation leads the vision of a serverless, decentralized Internet, with Polkadot as their sole and leading project moving forward. “The Web3 Foundation nurtures and stewards technologies and applications in the fields of decentralized web software protocols, particularly those which utilize modern cryptographic methods to safeguard decentralization, to the benefit and for the stability of the Web3 ecosystem.” Source: https://web3.foundation/
The council behind the Web3 Foundation features:
- Gavin Wood, President
- Co-Founder and Director of Parity Technologies, as well as former CTO and Co-Founder of Ethereum
- Designed state-of-the-art analysis tools and programming languages, as well as co-founded several technology startups
- PhD in Computer Science from the University of York
- Aeron Buchanan, Vice President
- Head of European Operations and Regulatory Compliance for Ethereum
- Doctorate from the Robotics Department of Oxford University in the field of Computer Vision
- Designed algorithms for UAVs, started tech companies building light-show controllers and blockchain technology
- Peter Czaban, Executive Director
- Masters of Engineering degree at the University of Oxford
- Worked across defense, finance and data analytics industries, working on mesh networks, distributed knowledge bases, quantitative pricing models, machine learning and business development
- Contributed to the Parity Ethereum Client development, in particular looking at consensus algorithms
- Reto Trinkler
- Chairman and Co-Founder of Melonport AG
- Background in mathematics from ETH Zurich
- Advisor to the Multichain Asset Management Association
- Ryan Zurrer
- Principal and Venture Partner at Polychain Capital
- Active investor and miner in the blockchain ecosystem since 2012
- Worked in investment banking focused on financial technology
Polkadot, led under the vision of the Web3 Foundation and the execution of Parity Technologies features one of the industry’s leading teams. The teams are experienced, both technically and in business, understanding of the blockchain industry, and largely accountable to meet the expectations of the upcoming developments in the Polkadot roadmap.
Besides the fact that the team is a combination of the Web3 Foundation and Parity Technologies, Polkadot features numerous industry relevant partnerships on a technical level to integrate Polkadot interoperability, including:
- Zcash, the first permissionless cryptocurrency utilizing zero-knowledge cryptography.
- Melonport, a crypto asset management platform.
- OmiseGO, a next generation financial network and decentralized economy.
- Grid Singularity, an open, decentralized energy data exchange platform.
- Waves Platform, a platform to store, trade, manage, and issue digital assets.
- Shard, a decentralized community publishing for video game developers.
- Colony, a platform for open organizations.
- Gnosis, new market mechanisms to enable the distribution of resources.
- BlockEx, a digital asset exchange platform.
- BigchainDB, a database with blockchain functionalities.
- Soramitsu, a blockchain company focused on digital identity management.
- it, a blockchain enabling the economy of things.
Polkadot partnerships include some of the largest and most reputable names in the industry, and is sufficient to bring Polkadot interoperability integration across a wide variety of decentralized applications and services.
Marketing & Social
Twitter: 23.8K followers, and 810 tweets since July, 2013.
Riot: 3.3K members with daily discussions.
Medium: 912 followers with a good flow of articles, including recent ones, with hundreds of claps.
GitHub: Used only as storage for documentation, it does not feature any relevant code.
Polkadot features a comprehensive architecture, clear token economics, an experienced team, and a wide variety of highly reputable partners to bring on their vision of the decentralized Internet. As one of the leading names in interoperability, Polkadot’s integration of relay chains, parachains, and bridges is a viable and elegant option for blockchains to no longer be siloed from each other, and presents incentives for blockchains to work together in return of more interesting real world applications and shared security. In conclusion, we believe Polkadot will come to be one of the leading names behind the vision of the decentralized Internet, but likely not the only one.
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Disclaimer: This is not investment advice, merely our opinion and analysis on the project. Do your own research.
Polkadot is a protocol that allows independent blockchains to exchange information.
Defined purposes of the project
- Enable applications and smart contracts on one blockchain to seamlessly transact with data and assets on other chains.
- Run several parachains, each processing multiple transactions in parallel, which allows networks to obtain infinite scalability.
- Shared security through pools within the network, where individual chains can leverage collective security without having to start from scratch to gain traction and trust.
Brief overview of unique technical aspects
The unique technical aspects behind Polkadot’s heterogeneous multichain technology are relay chains, which coordinate consensus and transaction delivery between chains; parachains, the constituent blockchains which gather and process transactions; and bridges, the link to blockchains with their own consensus such as Ethereum.
Competitive solutions outside of the industry, and what they lack
Polkadot enables an internet where independent blockchains can exchange information and trust-free transactions. They allow for the development of a truly decentralized Internet, serving to fulfill the true promise of blockchain technology: the creation and mainstream adoption of Dapps and services that will distribute power and equity for the common good.
Competitive solutions inside of the industry, and what they lack
Blockchains show great promise of utility over several fields including “Internet of Things”, finance, governance, identity management, web decentralization and asset-tracking. However, despite the technological promise, we have yet to see significant real-world deployment of present technology.
Five key points of failure in current blockchain technology are:
- Existing blockchain technology doesn’t have the capacity to run the amount of transactions needed to host a decentralized world.
- Current blockchain governance is focused on proof of work vs proof of stake, incorrectly rewarding the few at the expense of the many.
- Blockchain networks exist in isolation with no communication or interoperability between them.
- DApp development is limited by the lack of integration opportunity.
- End consumer use cases are not realized.
How Polkadot is better than inside of the industry solutions
Polkadot is a network that connects blockchains, allowing new designs of blockchains to communicate and pool their security while still allowing them to have entirely arbitrary state-transition functions. At a high level, Polkadot solves the problems of blockchain interoperability, scalability, and shared security. With Polkadot, developability is no longer limited, and applicability is widened to real world use cases.
Introduction and tech overview
Minimal, simple, general, and robust. Polkadot is a scalable heterogeneous multichain. Unlike previous blockchain implementations focused on providing a single chain, Polkadot itself is designed to provide no inherent application functionality at all. Instead, Polkadot provides the bedrock relay chain upon which a large number of validatable, globally-coherent dynamic data structures may be hosted side by side. These data structures are called parachains. Polkadot can be considered the equivalent to a set of independent chains except for pooled security and trust-free interchain transactability. These are the points why Polkadot is considered scalable. To give a brief overview of the system as a whole, we provide an exploration of the consensus, the NPoS, parachains, interchain communication, and potential bridge connections to Ethereum and Bitcoin.
// Consensus mechanism.
- Low-level consensus over a set of mutually agreed valid blocks through a modern asynchronous Byzantine fault-tolerant algorithm
- Inspired by the simplicity of Tendermint and HoneyBadgerBFT, the latter providing efficient and fault-tolerant consensus over an arbitrarily defective network infrastructure, given a set of mostly benign authorities or validators
Why? Polkadot requires the means of determining and setting validators and incentivizing them to be honest under a network deployed in a fully open and public situation, without any particular organization or trusted authority required to maintain it.
// Nominated Proof-of-Stake.
- Assume that the network will have some means of measuring stake for any particular account
- Validators are elected, infrequently (once per day at most, and once per quarter at least), through a NPoS scheme.
Why? All token holders have a fair opportunity at participation. Validators are bonded heavily by their stakes, misbehavior results in punishment
- Parachain headers are sealed within the relay chain block ensuring no reorganization or double-spending.
- Set of validators are cryptographically randomly segmented into subsets, one subset per parachain, the subsets potentially differing per block.
Why? Enhanced security similar to Bitcoin’s side-chains and merge-mining. Strong guarantees of that the parachains’ state transitions are valid. Validity revolves around the points of being intrinsically valid (all state transactions executed faithfully and all external data referenced is valid for inclusion) and that any data extrinsic to its candidate has sufficiently high availability so that participants are able to download it and execute the block manually.
- Collators: Maintain parachains by collecting parachain transactions from users and producing state transition proofs for validators. They also monitor the network and prove bad behavior to validators
// Interchain communication.
Relay chain: the main Polkadot chain that all the individual blockchains will connect to.
Communication is simple: transactions executing in a parachain are (according to the logic of that chain) able to effect the dispatch of a transaction into a second parachain, or, potentially, the relay chain. Fully asynchronous and no intrinsic ability for them to return to any kind of information back to its origin.
Interchain transactions are effectively indistinguishable from standard externally-signed transactions. The transaction has an origin segment, and an address. This is to ensure minimal implementation complexity, minimal risk and minimal straight-jacketing of future parachain architectures.
Unlike Bitcoin and Ethereum there is no payment or fee associated. A system such as Ethereum’s Serenity release is proposed as a simple means of managing cross-chain resource payments.
Interchain transactions are resolved using a queuing mechanism based on a Merkle tree to ensure fidelity. Relay chain maintainers move transactions on the output queue of one parachain into the input queue of the destination parachain.
- Validators: Secure the relay chain by staking DOTs, validating proofs from collators and participating in consensus with other validators
- Nominators: Secure the replay by selecting good validators and staking DOTs
- Fishermen: Final security frontier, they monitor the network and prove bad behavior to validators
// Connections with Ethereum and Bitcoin.
- Ample opportunity for Polkadot and Ethereum to be interoperable with each other, within some easily deducible security bounds. Transactions from Polkadot can be signed by validators and then fed into Ethereum where they can be interpreted and enacted by a transaction-forwarding contract. In the other direction, we foresee the usage of specially formatted logs (events) coming from a break-out contract to allow a swift verification that a particular message should be forwarded.
- Bitcoin presents an interesting challenge, as a so-called two-way peg could be a useful piece of infrastructure to have on the side of both networks. However, due to Bitcoin limitations, providing such a peg securely is a non-trivial undertaking. Delivering a transaction from Bitcoin to transaction would follow a similar process to that for Ethereum, controlled in some way by the Polkadot validators. Ultimately, not unrealistic to place a reasonably secure Bitcoin interoperability virtual parachain between the two networks, though it would require a substantial effort with an uncertain timeline and requiring the cooperation of stakeholders within that network.
 The relay chain, in the context of Polkadot, is simply the main Polkadot chain that all the individual blockchains connect to.
Nice – not copied from their content, right?
Paraphrased, but the key five points remain the same, of course
Yeah. It’s good