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What Is Polkadot and How to Buy It?

Polkadot is a bridge-like protocol that allows exchanging data and tokens across multiple blockchains. The design was developed by the Web3 Foundation with the goal of gradually building a fully-functioning and versatile decentralized web.

Polkadot’s protocol offers a safe and secure environment for cross-chain computation and transmission. This, in turn, opens up a variety of possibilities for creating and connecting decentralized applications, services, and networks.

The developer’s unique approach to solving blockchain’s interoperability issue can help build systems that operate with data stored across a variety of blockchains by establishing a system of permissioned requests. For example, a private chain containing a tax institution’s records can send the required confirmation to a proof-of-income smart contract on a public blockchain.

DOT is Polkadot’s governance token that is used for staking, bonding, and executing decisions about the further development of the project.

  • The project’s creator and core infrastructure developer Gavin Woods (the co-author of Ethereum) is fully trusted by the crypto community;
  • The idea behind the project is both inspiring and incredibly useful and its execution is remarkably well-engineered.
  • With DOT being a brand-new cryptocurrency on its own native blockchain, the options for storing the asset are severely limited.
  1. It’s used to govern the Polkadot platform. DOT holders exercise full authority over the protocol. Unlike other platforms that keep some of the privileges exclusive to miners, Polkadot allows token holders to engage in and manage updates, fixes, and the implementation of extra features.
  2. Staking DOT allows the project to operate. Staking is the process of holding crypto assets in a wallet to help upkeep the operation of a blockchain and getting rewards for contributing to its growth. The stability of the Polkadot blockchain is achieved via a validation algorithm called NPoS. In staking DOT, a user can act either as a nominator or as a validator. Nominators can choose up to trustworthy 16 validator candidates and earn rewards. Validators, in turn, need to hold at least 350 DOT and be able to operate a stable and responsive infrastructure 24/7.
  3. Bonding DOT creates new parachains. The token’s other purpose is in the ability to attach new parachains to the network by “tying up” or “bonding” DOT. Antiquated or non-useful parachains are let go by removing the tied-up tokens.

For every period of 24 hours (a single era), DOT validators are paid proportionally to the quantity of era points they have earned. Era points are accumulated by participating in the following payable events:

  • Issuing validity statements for parachains;
  • Producing a “non-uncle block” in the main chain (the “Relay Chain”) of the network. An uncle block is a block that failed to become canonical on the Relay Chain;
  • Producing a referenced uncle block, etc.

Validators are paid at the end of every era. The amount the validator had staked does not influence payout, only era points do: the block authoring payout will always be split equally.

Nominations make DOT off of the validators they back with their stake. The rewards are distributed pro-rata (i.e., proportional to the initial stake) to all nominators after the validator payment is deducted from the per-era reward.

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