Whitepapers Deconstructed: Polkadot
This is my first article I’ve ever published to the public. I’m not really expecting anyone to read this, but I’ve found this a great exercise in honing my research skills and explaining it as concisely as possible. That being said, I hope this can provide some value to anyone who has stumbled across this and would love any feedback or suggestions.
Polkadot network is a meta-protocol, or an underlying protocol (Relay chain) on which other blockchain protocols (Parachains) can build on top of. The vision of its founder, Dr. Gavin Wood, is to create a network protocol that facilitates an entire ecosystem of individual, specialised blockchains that can interoperate with each other. The layer 0 design of Polkadot has a number of advantages over current blockchains ecosystems;
- Scalability: Limitations in current blockchain networks stem from the state transition mechanism and consensus mechanism being coupled together. That essentially means transactions within blocks achieve finality in a linear fashion, resulting in bottlenecks by transactions having to be validated in order.
Polkadot uses a model where many individual Parachains run in parallel (heterogenous sharding model), and thus block finality on each blockchain can be achieved concurrently. This allows for far more transactions processed per second, resulting in faster block times and lower fees.
- Isolatability: The Parachains built on top of the Polkadot network are able to be purpose built to optimally serve their specific use case. Polkadot allows Parachains to do this through a flexible blockchain-building framework called Substrate. Substrate consists of a number of components that can be easily assembled to develop a blockchain, removing the difficulty and expense of doing it from scratch. By bypassing much of the blockchain development process, cryptocurrency developers are able to focus on business logic which stimulates innovation.
- Interoperability: All of the purpose-built Parachains on top of the Polkadot network combine to form an ecosystem. The communication of data between these specialised chains creates an environment where Parachains form symbiotic relationships with each other. This creates a strong network effect, providing value to protocols collaborating within the Polkadot ecosystem.
- Upgradeability: Current blockchains require forks in order to change update consensus rules, which results in a fragmented community and reduced security. The Polkadot network and its Parachains are built to be future-proof, by having the ability of forkless updates. This is done by updated logic code being uploaded to the chain, where the nodes will be forced download and execute this code with the new rules. This removes the need for users running the nodes to download the code on their own volition, however they still have the option to make it native which will give it a performance boost.
- Relay chain: The Relay chain is the central blockchain that has 100 slots for Parachains. The Relay chains first responsibility is to provide security for the entire ecosystem by validators staking their DOT on it. The second responsibility is to act as the mechanism that provides updates to the protocol, according to the governance system in place.
- Parachain & Parathreads: Parachains are the blockchains that fit into slots on the relay chain and form the ecosystem. They are made using the Substrate framework, and are purpose built for a specific use case, such as smart contracts, oracles, identity, privacy or file storage
Parathreads are similar to Parachains, but are for use cases that do not need constant access to the relay chain process transactions, and are instead able to write blocks as they need to. Multiple Parathreads are able to take up a single slot on the relay chain.
These individual Parachains and Parathreads can combine together to create composite use cases in way that a single application cannot do by itself.
- Bridges: The Polkadot network is designed by be interoperable with external blockchains. This will be achieved through two-way bridges to ecosystems such as Ethereum and EOS.
All individual Parachains on the Polkadot network are secured through the pooled set of validators who have staked their DOT tokens on the central Relay chain. This means the individual Parachains do not have to compete for validators, and thereby have a more robust security model than if they were to do their own individually.
There are four consensus roles, all of which involve staking DOT token in order to keep their performance accountable, where they will be rewarded for good behaviour and punished for bad.
- Validators: Validators add new blocks coming in from their Parachain to the Relay chain.
- Collators: The collators receive transactions within a Parachain, propagate them between one another then delegate them to the Validators in the form of blocks. The Parachain that validators are assigned to are constantly altering in order to prevent any form of collaborated attack between them.
- Nominators: The nominators are full nodes within the Parachain who select the best validators. Nominators are held accountable through the performance of their selected validator.
- Fishermen: Fishermen are full nodes of Parachains, who check for misbehaviour between the collators of a Parachain.
As a fully decentralised protocol, Polkadot has a transparent on-chain governance mechanism. The network is governed by anyone who holds DOT tokens, allowing it to adapt and evolve over time without the need of an often-destructive hard fork. DOT owners together with council members (represent passive DOT holders) are able to propose referenda on which voters have to lock up DOT for the enactment period.
DOT is the native token of the Polkadot network, and has three use cases;
- Governance: The first use case of the DOT is to provide governance to the network, the more DOT you stake in voting in a referenda on the future of the network, the more say you have. This ensures updates are beneficial to the community of DOT holders.
- Staking: The second case of DOT is for participators in the consensus mechanism to stake, allowing them to receive block rewards for work.
- Bonding: The final use case for DOT is for protocols who want to be a part of the Polkadot network. They must bond their DOT in order to lease a slot for a Paracahin or Parathread, depending on its use case. The mechanism for this to be done is a candlestick auction, where different blockchains to bid for a spot on the blockchain, and the end point will be randomly decided retroactively. These auctions will be conducted sometime in mid-late 2021.