Polkadot is an open-source blockchain network designed to enable various separate, siloed blockchains to become interconnected, application-specific sub-chains called parachains. Each chain built within Polkadot uses Parity Technologies' Substrate modular framework, which allows developers to select specific components that suit their application-specific chain best. The Polkadot network is the entirety of all parachains that plug into a single base platform known as the Relay Chain. This Relay Chain does not support application functionality but instead provides security to the network's parachains and contains Polkadot's consensus, finality, and voting logic. The network aims to offer advantages of scalability, upgradeability, transparent governance, and cross-chain composability over other projects. The native token (DOT) is used to incentivize and coordinate behavior across the different actors of its ecosystem that promotes the well-being and proliferation of the entire project. 

Use Case

Polkadot was conceptualized in 2016 when Ethereum Co-Founder Gavin Wood realized the necessity for a relay chain to connect independently-operating blockchain networks. It is an open-source platform with low barriers to entry that connects and protects autonomous economies under its shared security umbrella. Polkadot attempts to address three core problems: 

• Interoperability: As the nascent crypto space has evolved over the past ten years, thousands of blockchains have emerged. While it’s not likely all of them will exist in a few years’ time, the future will almost certainly consist of a multitude of diverse blockchains with specific and unique functions. At the moment, blockchain networks like Bitcoin or Ethereum exist independently and function with no communication or interoperability between one another. In order for a truly trustless ecosystem to further develop and succeed, this disconnection needs to be resolved. Gavin Wood’s solution was creating Polkadot which is designed to enable smart contracts on one blockchain to easily interact with data and assets on other blockchains.
• Scalability: Currently, most blockchain transactions are processed sequentially on network nodes which creates bottlenecks and limits transaction speeds. Polkadot is designed to remove these bottlenecks by allowing several parachains to run simultaneously through one relay chain, each parachain processing multiple transactions in parallel. If dozens of blockchains are able to run in parallel, that system’s scalability would be about one hundred times greater than that of a current Proof of Stake system. Potentially, a later iteration of Polkadot could have multiple relay chains attached to the root relay chain which would result in scalability 1000x to 10,000x greater than a current PoS system. Given that the Polkadot relay chain is itself developed with Substrate, the same technology stack most parachains will be built with, this is especially feasible.
• Security: In current blockchain networks, chains compete with each other over security resources. Conversely, Polkadot pools security within the network, allowing individual chains to leverage pre-existing collective security as opposed to previously having to start over to gain trust. This allows independent blockchains with differing degrees of security finalities to strengthen their individual weak points by pooling their security resources and delegating it to the Polkadot relay chain. Better yet, Polkadot’s shared security system doesn’t require a validator community to secure the system, allowing each blockchain’s network to focus on scaling or runtime while deferring security to the Polkadot relay chain.

Governance

Within the Polkadot ecosystem, DOT token holders control the direction of the network. Governance functions controlled by DOT holders include determining fees on the network, auction dynamics, and the addition of new parachains. Holders can vote with their DOT on events such as upgrades and fixes to the Polkadot platform.

The Web3 Foundation continues to use the proceeds from the initial DOT sale to fund network initiatives and support projects building on Polkadot with the Polkadot Ecosystem Fund. The foundation is governed by the Foundation Council, which consists of Dr. Gavin Wood (President and Founder), Dr. Aeron Buchanan (Vice President), and Reto Trinkler.

Additionally, there are two different DOT treasuries that exist within the Polkadot ecosystem. The first consists of 3 million DOT (30% of the initial supply) that were allocated to the Web3 Foundation to help fund research and development during the initial token sale. The second is an on-chain treasury controlled by the Council.

The on-chain treasury collects funds through transaction fees and slashing bad actors.  Network participants can petition for a portion of the treasury by submitting a spending proposal which requires the proposer to deposit collateral with the submission that gets burned if rejected. If approved, the request enters in a list of proposals that clears every 24 days called the ‘budget period.’ The Council is incentivized to spend from the available funds because if the treasury ends a budget period without issuing all of the funds, a percentage of the remaining DOT is burned.

Parity Technologies, with oversight from the Web3 Foundation, built the Polkadot blockchain and Substrate framework and controlled much of the process during the project's early stages. This centralized control remained intact through Polkadot's mainnet launch and beyond. In July 2020, control over the network was opened to the blockchain’s proposed on-chain governance system which takes into consideration token holders, validators, a Council, and a Technical Committee. These network parties are now the primary participants responsible for upgrade submissions and approvals. Parity and Web3 can still develop and submit proposals of their own, but they must pass through the governance system before being implemented.

Polkadot is working towards a future on-chain governance system that gives decision-making power over members voted in by network stakeholders called the Technical Committee. This will allow active DOT holders and Council members to propose codebase changes by bonding a minimum amount of DOT to the network to ensure some economic buy-in. Other token holders can also deposit an equivalent amount of tokens to the proposal to support it. The proposals with the highest stake amount are selected. Bonded tokens are returned once the proposal is brought to a vote. 

In the beginning, the Council consisted of 13 members, represented as on-chain accounts with plans to increase this total to a maximum of 24. DOT holders vote in these representatives via elections. Network participants rely on the Council for two primary tasks: proposing new referenda and canceling suspected malicious proposals. 

Polkadot also maintains a Technical Committee consisting of teams whose sole purpose is to produce emergency referenda in the event of a dire situation. These proposals get fast-tracked for Council voting and implementation. The Committee members have the power to either add or remove Technical Committee teams by a simple majority vote.