The Polkadot Network has been coined “a bet against maximalism” as the blockchain network aims to fulfill the future of blockchain and crypto through interoperability. Dr. Gavin Wood is the founder of the project, where he conceived of the idea after his time as the Chief Technology Officer (CTO) for Ethereum. Dr. Wood is responsible for the creation of the Ethereum Virtual Machine (EVM) and its underpinning smart contract language, Solidity. Along with Dr. Wood, the Web3 Foundation and Parity Technologies have been building and organizing funding for the Polkadot Network. Currently, the Polkadot Network has been undergoing a prolonged soft launch by making use of a “canary network” called Kusama. The Kusama Network acts as a real life test ground for the Polkadot Network as real capital is at stake. Polkadot is looking to expand on the short-comings of Ethereum by providing an interoperable, scalable, and low-cost solution for smart contract projects to deploy.
Polkadot’s relay chain is the base connectivity layer for the entire Polkadot ecosystem. Parties termed nominators and validators will be responsible for ensuring the security and immutability of the entire network. Validators will run the software that maintains and progresses the Polkadot Network, but require backing in DOT tokens to be part of the active validator set. This is where nominators come into play as they are parties that will stake DOT tokens with the validators to signal to the rest of the network that a given validator is seen as a “good actor” to the network. Both validators and nominators receive rewards from inflation of the DOT token for contributing to Polkadot’s consensus mechanism. The idea behind the Polkadot relay chain is to provide a lean and efficient blockchain to handle consensus for the entire ecosystem. This lessens the burden on projects to figure out their decentralization and allows them to focus on their application development.
In order to maintain the efficiency of the Polkadot relay chain, parachains have been created to offload much of the heavy computational work needed to run decentralizaed applications (dApps). Parachains tap into the shared security model of the Polkadot Network as they rely on the consensus of the relay chain for their security and decentralization. Each parachain will have parties termed collators that will be responsible for grouping transactions on the parachain and sending them to the relay chain to be included in consensus. Some parachains will feature staking rewards for collators and any nominator groups involved in this process.
The number of parachain slots for Polkadot’s relay chain is limited as their is limited scalability on any blockchain network. Therefore, a mechanism called a parachain loan offering (PLO) is being implemented to facilitate the reservation of these slots. Potential parachain projects can participate in the PLO process, so that they can receive enough backing for their parachain slot lease. DOT holders will be able to bond their DOT tokens behind a parachain project often in return for boosted rewards or a share in the native token supply for the opportunity cost of not being able to use the DOT in consensus staking on the relay chain. PLOs utilize an candlestick auction mechanics, which means that during an auction time period a random snapshot of all the bids behind each competing project is taken to determine the winner.
DOT holders that choose to bond their tokens behind a project must keep those tokens locked for the duration of the lease period to withdraw their DOT tokens without any penalties. It is important to note that leasing a parachain slot does not include any payments but rather a sizable enough stake to signal a project is worthy of that spot as DOT holders have determined that project to have the most beneficial impact on themselves and the ecosystem as a whole. Additionally, some parachain projects may only plan on bootstapping through a parachain slot for a given period of time before becoming their own blockchain with a bridge to Polkadot. Parachains ultimately will allow the Polkadot ecosystem to scale through specialization.
Parathreads are essentially a lite form of parachains on the Polkadot ecosystem. Some projects may only want to participate with the Polkadot Network on a temporary (or block by block) basis. Parathreads allow a conglomeration of projects to compete within one parachain slot, when it makes economical sense for them to do so. This will allow smaller projects with most likely a lower capital backing to still glean some of the benefits from the relay chain. While this may lead to parathread projects having slower transaction confirmation times, it does provide a more equitable access to all types of projects looking to be involved with the Polkadot ecosystem.
Collators on parathreads will still provide state proofs to the relay chain, but these proofs will also be coincided with a fee bid to have the state changes verified and recorded on the relay chain. Parathread projects also must pay a fixed fee to register on a particular parathread, which is returned at the end of their parathread term. Projects will also be able to seamlessly move between operating as either a parachain, parathread, or independent blockchain connected via a bridge. Additionally, parachain slot swaps will be incorporated for projects nearing the end of a parachain lease term to become a parathread, thus relinquishing the parachain slot to a parathread project for the next term.
Bridges on Polkadot will serve the purpose of connecting two sovereign blockchains with one another. These blockchain bridges will allow digital assets to move between Polkadot and the other chain the bridge is integrated with. This creates interoperability for the Polkadot Network with other blockchain communities. There is no set method for Polkadot bridge creation. They can range from fully-permissioned to entirely permissionless and utilize as little or as must trust as each bridge chooses to do so. Additionally, bridges are perfect candidates for common good parachains, which do not require the auction process and are decided on by Polkadot governance.