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In this post , we will discuss about some important informations you should know before investing in Polkadot(DOT).😉

So, What is Polkadot?🤔

Polkadot may be the most exciting and innovative crypto , since the launch of ethereum , and its price is approaching a new low for the past year potentially giving us an opportunity to buy it .

It's one of the most impactful software projects in the entire world.

While most cryptocurrencies run on their own blockchains like bitcoin or ether on the ethereum network , polkadot allows other crypto projects to run on top of their chain , this means unlike blockchains which quickly get outdated polkadot is effectively future.

Polkadot's origin actually traces itself all the way back to the early days of ethereum the groundbreaking crypto project that introduced everything from decentralized apps or dapps to nfts , one of the people most responsible for building ethereum from a technical standpoint was a man named "gavin wood" a phd who worked as the chief technology officer of the ethereum foundation for years.

While things were exciting and new at ethereum for a while gavin started to feel that ethereum's design was really limiting for new improvements while at first the ethereum foundation planned to work on new features that would one day launch as ethereum 2 way back in 2016 , if you fast forward to today most of those features still aren't built so in 2016 gavin sat down and wrote out a document that document would later be published as the polka dot white paper a 21-page breakdown of his vision to improve the blockchain paradigm.

Gavin's view of the perfect blockchain really had three main parts it had to be sustainable so no using massive amounts of electricity to make blocks like bitcoin two it had to be upgradable so unlike ethereum it wouldn't take years to add new features and three it needed to be interoperable with other blockchains and while it took four years to finally achieve this vision.

We can saw that the first little buds of the vision start to bloom gavin wood started out by testing a lot of polkadots features on a test network called kusama making sure things like proof of stake were working before building them into polkadot's mainnet proof of stake simply means the blockchain is verified by people staking or lending the dot tokens they hold to secure the network , rather than verifying transactions through an energy intensive mining process they also started testing out parachain auctions on the test network parachains is the name gavin gave to blockchains that would run on top of the polka dot network these pair chains would generally be built by people outside the core dev team usually by community members who wanted to build their own crypto but didn't want to have to reinvent the wheel when it came to making it secure they would let polka dot handle all of that polka dot would meanwhile benefit because as more pair chain projects were added it would add to the chain's functionality.

It's almost like in a video game where you have third parties who build mods and additions for the game that you can use to enhance the game experience.

If you want but gavin wasn't just going to let anyone start adding on to the polka dot mainnet so he set up an auction system where holders of dot tokens could use their dot to vote for which projects they wanted to see added .

In these auctions polkadot lets the winning projects reward people who supported them by giving them tokens from the new pair of chains providing a financial incentive for participating and while you do have to lock up your dot for two years if you win an auction you will eventually get that dot back and you get to keep the parachain tokens that you were originally rewarded.

This is how funders of one of polka dots parachains clover finance made a 3x return almost overnight see clover won polkadot's fifth parachain auction raising 162 million dollars in dot support it's over 5 000 contributors were then rewarded with clover token which immediately spiked in price before selling off over time but for the smart investor there was an opportunity to make an essentially risk-free return since those investors will also get their original dot tokens back in two years plus they keep any money that they made trading their free clover but speaking of smart investors.

That's been the story up until recently with parachain smart investors could make quick returns by funding the right projects but overall the polka dot ecosystem has not exploded in value , but that may all be about to change with functionality polka dots latest parachains have added to the network.

There are a community valued the most first up we have clover finance the fifth parachain auction winner clover finance is a smart contract platform meaning it's designed to let outside developers create new apps on top of it.

It is specifically focused on the ethereum community and the d5 contracts so it makes it easy to port defy apps on ethereum over to polka dots now right now it really is just for porting over the dapps completely but they eventually want to improve it to eventually allow seamless cross-chain interoperability , so you could interact via polka dot with someone else using a totally different blockchain , creating the internet of blockchains that dapps run on top .

So, what is defy and why is it useful ?🤔

Well defy stands for decentralized finance and his goal is really taking blockchains back to the original intention of bitcoin , when bitcoin first started people talked about it as a virtual currency a way to buy and sell goods that wasn't tied to a specific country's government over time as that network grew it became too slow and expensive for that to really be feasible.

But defy wants to scale that original vision up exponentially rather than just creating a virtual currency defy could replace the entire banking system lending earning interest investing saving all those functionalities could move from private or governmental domains into a decentralized world of code theoretically this would be more efficient since it would cut out middlemen fees and it would be more secure using the blockchain now in reality the technology isn't there yet to replace all of banking and there's also a serious risk around regulation in this space you will find countries like china senegal and even the U.S consider regulating cryptos just as an investment asset .

But imagine the pressure on regulators if big banks think they are at risk of losing trillions of dollars to decentralized crypto networks.

So, governments can't regulate cryptos?🤔

We've clearly seen government regulations take huge chunks out of the crypto community in other countries as those not willing to circumovement , the law just leave the system and there's no reason to think it would be any different in the U.S or anywhere else that being said.

Clover finance is well on its way to uniting d5 across blockchains next up we have our number four auction winner parallel finance parallel finance enables token holders and projects to flexibly and borderlessly put their idle capital to earn interest so there's really two things.

Create sort of a money market account where you can lend and borrow dot tokens to earn interest number two is to allow dots staking on non-polka dot chains by creating a derivative security out of the tokens .

You have 100 dots and give it to the other chain that chain trusts me so they accept the piece of paper and they let you earn interest on those dots even though they don't see the tokens directly.

So, how this works?🤔

It is pretty complicated but if you're really curious , you can read parallels white paper online after that we have the winner of auction , so we're getting to some of the biggest projects now that beat out all the other pair chains to get added to the network .

It was aster a substrate runtime library now those words probably didn't mean much.

It is the name for a set of tools that let developers build parachains for polka dot it's how you get your custom project working with the polka dot main net aster adds on to the existing tools available in substrate by adding tools to make it easy to launch new block chains.

Having millions of dollars in funding and lots of engineers working on them but as time goes on , we need it to become easier and easier to build on polka dot to help democratize parachain creation ideally aster lets you bring infinite scalability into your blockchain by structuring economic incentives properly to let it grow organically and not implode.

As soon as you stop managing it astr also happened to have one of the best payouts for its supporters around ten dollars per dot token that supporters put into its auction which at polkadot's current price would give you a more than 50 return just by participating in the auction and that's without any price appreciation whatsoever but that leads us to auction number two winner moonbeam the best paying parachain project which because of its volatility made some early investors 10x returns for betting on it early on moonbeam.

Also operates in the smart contract space only instead of focusing on d5 it helps build cross-chain compatibility for all kinds of dapps.

You can actually use the ethereum developer tools.

For example , to build a dap that runs on polka dot and connects back to ethereum or build a polka dot dap that interacts with bitcoin it's no surprising this was the number two auction when this technology will be right at the center of polka dot's vision of becoming the internet of blockchains.

Then for the parachain voted most important by the community and the winner of polkadot's very first parachain auction we have akala akala raised a ridiculous 500 million dollars in funding from the community and lists many partners and outside investors on its auction page .

A collis similar to clover is all about d5 but what it adds is even more fundamental.

It adds liquid crowd loan dot a trustless staking derivative that allows people to contribute to a pair chain auction without losing access to the dot tokens for two years instead they'd lock up the dot and then users would be given lc dot in return which would match up one to one with the original dot tokens.

Best of all other projects can use this same technology when they are at auction akala also issued a new stablecoin ausd that is backed by assets on multiple blockchains, potentially paving the way for a more universal stablecoin , that is pegged to the U.S dollar this cross chain compatibility could be key to knocking coins like tether off the leaderboards for most valuable stable coins especially given tether's very sketchy past third akala adds a decentralized exchange.

After that, you can trade assets without needing a market maker in the middle.

This is called amm decks and while it might sound confusing it's actually pretty simple apps like uniswap.

It let you trade coins by using a super simpler formula to calculate their value.

This is important because if you don't want to convert to us dollars in between trades you need to know how relatively valuable different coins are other organizations like wall street banks similarly set values for stocks and securities based on much much more complicated formulas and companies , like coinbase can serve a similar purpose in the crypto market.

Amm dex tries to strike a balance between the limited design of something like uniswap and avoiding giving power to a centralized exchange like coinbase and while it's still pretty early on this will offer a platform to improve decentralized exchanges in the future potentially rendering companies like coinbase completely obsolete one day and given coinbase's over 30 billion dollar market cap that seems like a service that people value pretty highly.

Akala uses tiny amounts of gas fees to make transactions so it's a lot cheaper to do stuff here than on say ethereum so put all these together .

So, akala was the first pair chain added but these won't be the only five pair chains on the network every week 🙂

Finally, this is the most important informations, you should know it before investing in Polkadot🤓

I hope that you found the post valuable☺😊

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