Blockchains 101: POLKADOT

4 min readDec 21, 2020

The Ethereum killer?

Introduction

Polkadot (Ticker: DOT) is a cross-chain blockchain network and virtual operating system able to support sub-chains called parachains.

Polkadot has been created by Gavin Wood (co-founder, initial CTO, and core developer of Ethereum) who Founded the Web3 Foundation and did an ICO for the DOT token in 2017, raising $144M.

The chain went live (mainnet) in March 2020 and released DOT to investors shortly after (Phase 1 launched in 26 May 2020).

Description

The Polkadot project started in 2016 with David Wood. In 2017, Web3 Foundation conducted a private token sale that saw 5 million DOTs sold under SAFTs (Simple Agreements for Future Tokens), issued for $144 million. (66% of which were stolen in the following days in a hack exploiting a vulnerability of ETH’s Parity multisig).

Polkadot passed through various proofs-of-concept (PoCs) during 2018. A third PoC, released in Jan. 2019, introduced the Alexander testnet, Polkadot’s first test network.

In August 2019, the project passed its first significant milestone with the public launch of Kusama (unaudited early release of Polkadot, built to test governance, staking, and sharding under real conditions). The Web3 Foundation allocated 1% of the DOT supply to Kusama’s stakeholders in order to encourage their contribution and participation to the beta network.

Polkadot sold 500,000 more DOTs in late 2019 at a $1.2B valuation.

Mainnet

Polkadot Phase 1 mainnet launched in May 2020 by operating a Proof-of-Authority (PoA) consensus mechanism managed by the Web3 Foundation exclusively. This chain only allowed DOT investors to claim their tokens and declare their future intention to stake (as validator or nominator).

The Phase 2 was initiated in June 18, 2020 with a progressive transition to Proof-of-Stake (PoS), allowing DOT holder to claim validators slots, migrating progressively to Polkadot’s on-chain public governance and diminishing the Web3’s influence over the network at the same time.

Phases 3 and 4 in late July 2020 introduced Polkadot’s governance functionality and handing control of the protocol over to the community, respectively.

Polkadot has some similarities with COSMOS (Atom) notably through the introduction of its Parachain Development Kits (PDKs) for developers to quickly deploy projects on Polkadot.

DOT re-denomination

During the first official public vote on the network, stakers agreed to change the denomination from DOTs to its smallest unit, Plancks, reducing it by a factor 100 (Block #1,248,328). Consequently, each Polkadot account increased in August 21 by 100x, raising the total supply from 10 million to 1 billion DOTs at the same time.

Parachains

Polkadot achieve a high level of scalability by using multiple parallel chains, called parachains. Parachains have their own dedicated nodes which only validate their own parachain’s transactions, increasing the global transactional capacity of the whole network.

Parachains are connected by a central relay chain enabling communication across them. The relay chain is a PoS blockchain, with a pool of validators that are randomly picked from the parachains by Nominators and assigned to validate blocks on the relay chain.

Nominators are staking DOTs as collateral and can loose them in case of malicious behavior.