What is Polkadot (DOT)?

Several blockchain projects in recent years have focused less on specific applications and more on general infrastructure-related improvements. Among them is Polkadot (DOT), arguably one of the most successful projects working to improve the fundamental technology that powers decentralized applications (dApps).


The Polkadot protocol attempts to break down the barriers between various blockchain ecosystems, allowing intermediary-free communication among these networks. Polkadot can be thought of as a network of networks, allowing even vastly different blockchain architectures to interact with each other. It does this through parachains, or specialized blockchains that have their own functionality and tokens. The network uses the nominated proof-of-stake (PoS) consensus algorithm and was inspired by the Ouroboros protocol.

Learn what Polkadot is, how it works, and why it’s important to blockchain and cryptocurrency advancements.

Polkadot Basics

Polkadot was started by Peter Czaban and Ethereum co-founder Gavin Wood, who, incidentally, coined the now-ubiquitous term Web3 in 2014. Wood published the white paper for Polkadot in 2016. They also launched the Web3 Foundation in 2017. The foundation then raised $145 million for the development of the protocol by selling DOT tokens. There was another private sale in 2019, which raised $43 million.

Issues Addressed by Polkadot

Industry experts and developers list three major obstacles hindering the growth of blockchain technology: speed, scalability, and security. Most first-generation blockchains, a somewhat loose term, have made incremental improvements over time, but they remain inhibited by technical limitations such as scalability.

Parachains and the Relay Chain

Parachains are essentially PoS blockchains that can run independently and be completely customized by the owner. They are focused on applications with features and programming logic that is limited to themselves. These chains serve as the governance layer of the network and are a management mechanism.

But what binds these parachains is the relay chain, which is responsible for shared network security, consensus, and interoperability. The relay chain validates data and ensures that it is understandable; i.e., it is responsible for achieving consensus and ensuring that transactions are executed.

Bridges and Parathreads

Polkadot also contains bridges, which connect blockchains and allow data to be transferred among them. Bridges are what establish interoperability and can be used to connect with external networks like Bitcoin (BTC) and Ethereum. Another part of the network is parathreads, a smaller-scale version of the parachains that works on a pay-as-you-go model. It is useful for blockchains that don’t require continuous connectivity to the Polkadot network.


The benefits are not limited to only addressing the previously mentioned technical pain points. Polkadot’s Substrate, a blockchain development framework, is a vital part of the project’s offerings and has strong implications for how development in the industry evolves. Its design is such that teams, companies, and individuals can focus on building the actual product — as much of the initial legwork of designing a blockchain is taken care of by the framework.


Three stakeholders exist within the nominated proof-of-stake consensus model on Polkadot. They are nominators, validators, and collators:

  • Nominators: secure the relay chain and select trustworthy validators.
  • Validators: responsible for staking DOT, validating proofs from collators, and participating in consensus.
  • Collators: require less involvement than a validator — they are responsible for keeping a record of valid parachain transactions and sending them to validators on the relay chain.

The DOT Token

The DOT token has two uses: for staking on the network to bolster network security — also called bonding — and in the governance mechanism.

  • Staking: Like other proof-of-stake blockchains, staking DOT incentivizes network participants to act honestly by holding DOT as collateral for good behavior. Rewards are issued to those who stake their DOT.
  • Governance: DOT holders are given rights and abilities to participate in voting through referenda — a voting scheme weighted by stake.

Polkadot’s Future

Many see Polkadot as one of the most promising networks of the future, as it is attempting to lay a foundation for a multitude of purposes. While the project is still in its early years, many developments indicate that the path it has laid out could be the standard for value exchange.

Polkadot may or may not become the go-to platform for developing blockchain-based applications, especially with Ethereum releasing its own improvements that address many of the same issues. However, what is particularly favorable is the combination of the Substrate development tool along with the fundamental technical benefits, which could attract a lot of development.

The Polkadot transactions acting in parallel via parachains — 100 are currently supported — offer developers a great degree of freedom. Those building on parachains have a lot of flexibility regarding state changes and the creation of general rules.

Polkadot can process an estimated 1,000 transactions per second. The potential upper limit for Polkadot’s transaction throughput is 1 million transactions per second.

Polkadot says the parachain model is more decentralized and trustless than layer-2 scaling solutions alone. Many teams have already built parachains, so the future bodes well for this budding ecosystem. As of 2022, millions of transactions have been processed on parachains.

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