What is Polkadot (DOT)?

Polkadot is a project that aims to connect the currently highly fragmented world of blockchains. It acts as a neutral middleman who mediates between the peculiarities of the individual blockchains and thus allows users to communicate with different blockchains from a central point of contact. This means that Polkadot has a very useful application with a lot of future potentials.

Photo by Markus Spiske on Unsplash

The components of the Polkadot structure

  • The Relay Chain: This is the Polkadot mainchain to which all individual blockchains are connected. It manages the states of the blockchains known as parachains, which are connected to the system. The native tokens used on the relay chain are called DOTs.
  • The Parachain: The abbreviation stands for parallelized chain. These individual blockchains run in parallel in the Polkadot network. The Polkadot relay chain has limited space for parachains. In the long term, there are plans to introduce the so-called Nested Relay to be able to execute a practically unlimited number of blockchains based on Polkadot.
  • Parathreads: Parathreads are parachains that are only used temporarily. Instead of buying a dedicated parachain slot by auction, you only pay for the duration of use. This can for example be the time used for a single block.
  • The Bridgechain: The Bridge Chain is designed to interconnect blockchains that do not use the Polkadot governance protocols. Bridges represent specialized parachains that monitor external networks and, if necessary, trigger transactions there. Such bridges thus take over the task of oracles within the Polkadot system, which monitor what is happening on other blockchains.

The connection to the relay chain solves the problem of interoperability, whereby the intelligent smart contract function ensures that all transactions between the individual chains are carried out correctly. The scalability problem is solved by parachains by processing transactions in parallel.

Staking Polkadot

Polkadot uses a proof-of-stake algorithm to secure the relay chain against attacks. The largest part of the newly created dots is distributed to stakeholders who invest their DOTs. Stakeholders can play different roles in the Polkadot network. There are the “nominators” and the “validators”. To take on one of the roles, it is necessary to lock your own dots in a smart contract. With proof of stake, Polkadot wants to ensure that the network remains efficient under all conditions and enables fast transactions. This algorithm selects a participant from the network who is allowed to generate the next block. Weighted randomness is used, i.e. the more tokens someone has, the higher their chance of being chosen. The validators will be rewarded in DOT.


Another feature of the system is that it can be easily upgraded. In contrast to other blockchain systems, even major function updates in Polkadot do not require forking the network, as is necessary with Bitcoin, Ethereum, and many other systems. Polkadot, on the other hand, has so-called governance mechanisms. Stakeholders, regardless of whether they are active or passive, have the option of electing a “council” to initiate referenda on code and rule changes. Every 28 days it is decided whether a referendum will be held. To vote, stakeholders have to bind DOTs via smart contracts. This approach avoids impractical chain splits.

The developers at Polkadot have identified a clear problem in the blockchain and crypto world and are offering a smart solution with their system. Polkadot is making the initiation of small blockchain projects a lot easier and cheaper. Of course, it remains to be seen whether it will ultimately be able to exploit this potential.

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