So - In short, Polkadot is a next generation blockchain which connects other blockchains into one unified network. Polkadot was the brainchild of Gavin Wood – one of the co-founders of Etherium. It is intended to be a much more functional and well thought out alternative to Etherium. There’s a lot to this project, and I can’t possibly cover everything here. But I’ll try to give a general overview of what it is and what it intends to be.
Imagine you have several standalone database servers. One is Oracle , another is MySQL, another is Sybase, and so on. Now imagine you have a network which provides connectivity to all of these (otherwise incompatible) databases, and provides a common framework to query and move data back and forth . This network is what Polkadot looks to achieve – except with blockchains. ( Bitcoin , Etherium, etc.. and even private/proprietary blockchains).
Some example use cases:
- You are releasing a Bitcoin payment, but first need to make sure that a smart contract has been fulfilled on Etherium.
- You need to execute an Etherium smart contract, but first need to make sure that a payment has processed on the Visa corporate blockchain.
One of the core components of Polkadot is the substrate. The substrate in the most simple terms is an extensive application framework. Entire decentralized ecosystems can run natively on this framework. Polkadot intends to connect major parts of the crypto ecosystem into a unified network which has this rich framework to host and run applications.
I haven’t even touched on parachains (which are a big part of DOT), web3, its well thought out coin structure and governance. Again, there’s a lot more to this project.
So what about the tokenomics?
According to coinmarketcap, DOT has a circulating supply of 938,296,164 coins. Its marketcap at the time of writing is around 42 Billion USD. Coins can be staked.
There is no cap on coins with Polkadot, but is fairly low due to their unique way of managing new coins and fees. Polkadot has a treasury. All new coins and fees are deposited into the treasury. A portion of those are distributed to validator nodes, while the rest stay in the treasury.
Polkadot uses a modified Proof of Stake consensus called Nominated Proof Of Stake. Validator nodes are nominated, with 100 validator nodes currently (recently increased from 20 to move towards further decentralization). Becoming a validator node is a pretty competitive process, requiring millions of staked DOT. Validators are highly incentivized to keep their spot through the difficulty of obtaining the spot to begin with.
Performance-wise, Polkadot has stood up pretty well. Like most other alt coins, it is still tied pretty heavily to BTC’s whims. It is up 200% in 2021 – most of which was at the beginning of the year. It has been trading relatively sideways with BTC since March, and looks like it will soon be squeezed into another leg up. BTC willing, of course.
Anyway, this turned out to be much longer than I intended, but I enjoyed the dive. Maybe I'll do more of these for other coins :)