Developers have tried to "bridge" blockchains in the past. Doing so allows chain A to work with chain B and vice versa. However, connecting many (think hundreds or thousands) blockchains at the same time remains a pressing issue. Polkadot's team, and by extension, the Web3 Foundation, is confident that an elegant solution can be created over the coming years.
What is Polkadot?
Any developer, company, or individual can spin up their custom parachain through Substrate, a framework for creating cryptocurrencies and decentralized systems. Once the custom chain is connected to the Polkadot network, it becomes interoperable with all other parachains on the network.
Building cross-chain applications, products, and services should become a lot more straightforward with this design. Cross-blockchain transfers of either data or assets have not been possible on a large scale before.
Securing and validating the data across these different parachains is done through network validators, where a small set of these validators can secure multiple parachains. These validators will also ensure transactions can be spread across multiple parachains to improve scalability.
The benefits of Polkadot
There can be many reasons for developers to explore the Polkadot ecosystem. Due to the limited nature of current blockchains, it’s evident there are a few core issues to address: scaling, customization, interoperability, governance, and upgradeability.
On the scaling front, Polkadot checks a lot of boxes. It acts as a multichain network, allowing it to process transfers in parallel across different individual chains. This removes one of the biggest roadblocks associated with blockchain technology today. Parallel processing is a significant improvement and can pave the way for broader global blockchain adoption.
Those who seek out customization can tap into some other features provided by Polkadot. As of now, there is no "one blockchain infrastructure to rule them all". Every project has its individual needs and requirements, and Polkadot allows every individual chain to have its design optimized for that specific functionality. With the help of Substrate, developers can efficiently adapt their individual chains to suit the needs of the project.
On the interoperability front, having projects and applications share data seamlessly is a big factor. While it remains to be seen what type of products and services this will create, there are many possible use cases. It can create an entirely new financial ecosystem, with every individual parachain taking care of one particular aspect at a time.
Any community associated with a specific parachain will be able to govern their network as they see fit. Moreover, all communities are crucial to the future governance of Polkadot as a whole. Gathering feedback from the community can yield valuable insights that evolve projects over time.
The DOT token explained
Similar to most other blockchain infrastructure projects, Polkadot has its own native token. Known as DOT, it serves as the network token, just like ETH is the token for Ethereum and BTC is the token of Bitcoin.
Several use cases exist for this token. First of all, it grants token holders with governance rights of the entire Polkadot platform. This includes determining network fees, voting on overall network upgrades, and the deployment or removal of parachains.
DOT is also designed to facilitate network consensus through staking. Similar to other networks that involve staking, all DOT holders are incentivized to play by the rules at all times. How come? Well, if they don’t, they could lose their stake.
The third option is to use DOT for bonding. This is required when new parachains are added to the Polkadot ecosystem. During a bonding period, the bonded DOT is locked. It’s released once the bond duration has ended and the parachain is removed from the ecosystem.
Staking and bonding on Polkadot
Polkadot's approach to interoperability goes well beyond just the exchange of data and assets. It is also a way to introduce new concepts, such as incentivizing honest token staking and bonding tokens.
As we’ve mentioned, every new parachain is added by bonding DOT tokens. Bonding refers to committing tokens to the network for a specific period of time. Chains that aren’t useful or projects that are no longer maintained will be removed, and their bonded tokens returned.
On paper, there are many things that can make Polkadot attractive to developers. It’s an ecosystem capable of catering to individual coders, as well as small businesses and large corporations. Being able to deploy custom blockchains to suit specific needs, and upgrade them without hassle is a novel concept that could be valuable for the entire crypto space.
As far as DOT is concerned, the Polkadot creators have claimed this is not a token designed for speculation. Although it has a monetary value on exchanges, it’s primarily designed for the purposes outlined above.