You know how we have covered a ton of different blockchains, like Solana and Tezos and Cardano and Monero… and it just seems like there’s a never ending list of these coins and platforms for you to throw your money at? Each one does something a little different, but says they are the next new and crazy idea that will solve the scalability trilemma? Well, Polkadot offers itself as something actually new, they plan to be the very first layer-0 solution. We’ll talk about what that means in a bit, but first...
Welcome to whiteboard crypto, the #1 Youtube channel for crypto education and here we explain topics of the cryptocurrency world using analogies, stories, and examples so you can easily understand them. In this video, we are going to explain what Polkadot is, how it plans to solve the big problem of blockchains talking to each other, and as always, at the end, we’ll get into the tokenomics of the DOT coin and what it means for the future price.
What’s in a name? In crypto, we see an awful lot of emphasis given to names, and sometimes they can seem a little odd. The Polkadot blockchain name can actually be a huge asset to help beginners visualize what it’s all about.
You can probably guess where this is going. Polkadot is kind of similar to, you know, polka dots. The fabric pattern featuring a blank background with scattered “dots” is a good starting point to visualize the project.
That’s because right now, crypto is a little unfriendly. We have a lot of competing projects doing similar things using blockchains, working in isolation. Each of these blockchains can basically be seen as one individual “dot.”
But that’s just the start. The reason Polkadot is important is because it lets us connect all these chains with each other. So imagine you have this huge field of polka dots, but you could actually draw lines between all the dots and connect them. Each dot would represent an individual blockchain, and drawing lines between them connects all of these different projects.
What problem does PolkaDot solve?
One of the biggest problems we constantly see in the crypto space is a lack of what they call “interoperability.” The problem is like the problem in early personal computers before the internet. We have all these blockchains hanging out like stars in space, drifting around without any way to actually interact with each other.
Polkadot is basically a way to make it easy to create and connect blockchains to each other. Computers were great, but the ability to actually send and receive information between computers really got people on board.
Polkadot is betting on the same being true for blockchains. Bitcoin and Ethereum and Cardano and all the other chains might be great on their own, but they need to be able to interact with each other easily.
The Polkadot blockchain actually serves what they call a “layer zero” function. Think about this like a neighborhood. We have our little crypto neighborhood, with all our blockchains basically like individual houses. But how do these houses all get electricity, water, what roads are they all connected to? Polkadot wants to get even more fundamental than “layer one” individual blockchains and give an easy way to connect them all together.
This layer zero foundation is intended to make building and using blockchains easier.
So how does Polkadot actually work?
At its core, Polkadot is just a proof of stake blockchain that connects other blockchains to each other. Great! They’re all connected...but how do they actually become connected? How do they maintain their connection? And what does being connected actually do?
We’re going to answer these questions by talking about the two main components of Polkadot - the “relay chain,” and the many different “parachains” that exist on the network.
The Polkadot network actually works like a hub and spoke model. For those unfamiliar, this basically means that there is one center, and many different branches coming off the center.
For Polkadot, the hub or center is the relay chain. This is the basis of the network where all the different parachains come to achieve consensus. As we mentioned before, Polkadot is a proof of stake blockchain, and requires that validating nodes stake at least 10,000 DOT (the token used on the Polkadot network, like ETH on Ethereum.)
This ensures that those validating the blockchain are financially invested in its future and will not attack it or cheat. So when all these validators come together to achieve consensus, it happens right in the relay chain.
But if the point of Polkadot is to connect different blockchains and dApps (decentralized applications) then how do those things maintain their own individual unique rules and use cases? This is where parachains come in.
Parachains are the spoke part of the hub and spoke model we mentioned earlier. The parachains go do their own thing - whatever the use case of their specific blockchain is - and then they come back to the relay chain for everything to sync up.
Gavin Wood, the founder of Polkadot describes this process like an office. The employees in an office will have their own specific jobs they do by themselves. But every so often, they come together to sync up and coordinate their work with meetings or phone calls. Parachains are timed to meet up with the relay chain every so often to make sure everything is secure and on the same page.
In fact, this shared security is a huge part of what makes Polkadot attractive. Instead of having to secure your own network, secure funding, and figure out a million other details, Polkadot makes it easy to set up parachains quickly and easily which reduces the feedback loop time. You can see that Polkadot is set up to be very responsive to new ideas and experiments, which makes it very robust and in some ways, antifragile.
The two main tools that allow Polkadot to change and adapt quickly and thoroughly are the Treasury, and its test network - Kusama.
According to Gavin Wood, Kusama has a “live fast, die young” attitude, and embraces chaos. Normally, blockchain projects want to emphasize their reliability and security to counter the typical connotation that comes with being a crypto project. This isn’t to say that Polkadot is not reliable or secure, but that they recognize the time and place for experimentation and adaptation.
Kusama is basically a practice network. A lot of blockchain networks have things like this where users can test different things before they get launched on the real network. The interesting thing about Polkadot’s test network, Kusama, is that Kusama has real stakes. The amounts of money and stakes are much lower than the actual Polkadot network, but it gives people enough of an incentive not to play around too much and actually try things that are both ready for the real world and a little risky.
Kusama isn’t just a JV version of Polkadot’s varsity platform. Because it shows which things are working and which aren’t, it actually ends up having a significant influence on the development of the real Polkadot network.
We can see this concept in many blockchain projects, like Cardano. An official Treasury is useful because you know that when you are using the blockchain to engage in transactions, the fees from those transactions are helping the network as a whole.
These funds can be used for a variety of different reasons like community building and outreach, marketing, security, and software development. Those who want to make changes can use funds from the Treasury by sending a deposit and their deposit is returned if the changes are accepted.
From the Treasury and Kusama, to its fundamental basis, Polkadot clearly wants to position themselves as the platform for innovation, interoperability, scalability, and experimentation. It’s truly a fresh idea in the world of crypto that may end up being the idea that ties everything together and truly creates a massive, interconnected crypto ecosystem. I am very curious to see how it all plays out.
Oh, and as we end this video, we wanted to let you know about a secret project we’ve been working on. If you’re new to the world of decentralized finance or want to learn about how to make money using cryptocurrency, we put together a guide for beginners that explains important ideas in very simple topics. If you’re interested, you can grab a copy of that guide for free at WhiteboardCrypto.com right now, but you don’t have to if you don’t want.
Thanks for watching, we hope you enjoyed this video, we really hope you learned something, and most of all, we hope to see you in our next video!