What is Polkadot (DOT) - new emerging crypto: Mechanism, Where to Buy, Token
What is Polkadot?
Polkadot is a next-generation blockchain protocol connecting multiple specialized blockchains into one unified network. Designed as part of a broad vision for a web that returns control to individuals over internet monopolies, Polkadot builds on the revolutionary promise of previous blockchain networks while offering several fundamental advantages, according to Polkadot.network.
The Mechanism of the Polkadot Chain
Dr. Gavin Wood founded the Polkadot project in 2016, which is handled by Parity Technologies. The project was built using the blockchain building tool called Substrate. This is a technology built by Parity technologies, which is another tech company co-founded by Dr. Gavin.
Many have dubbed Polkadot as the alternative to Ethereum and given that the co-founder of Ethereum develops it, it is easy to see why people draw up that comparison. However, things are not that straightforward. Polkadot was founded to be what Ethereum could not be by introducing a multi-chain environment and interoperability. The protocol itself is a system of multiple blockchains with the main Polkadot chain known as the Relay Chain. So, connected to this relay chain is a series of blockchains called the Parachains and each one has its structure on governance, consensus mechanisms, and tokens.
We said earlier that the protocol is built using Substrate, which means that all Parachains built with the same tool can link the Relay chain with ease. However, external blockchains like Ethereum will require a bridge to link the Relay chain. Polkadot relies on a hybrid consensus system to work. The Relay chain uses a type of Proof of Stake known as GHOST-based Recursive Ancestor Deriving Prefix, while the Parachains utilize a type of Proof of Work known as Blind Assignment for Blockchain Extension. The main components of the hybrid consensus include Fishermen, Validators, Nominators, and Collators.
Before technical hullabaloo bores us, it is also important we get an idea of the issue Polkadot is trying to solve in the cryptocurrency industry. This help will get an idea of how worthy an investment Polkadot could be or not.
The foremost problem that Polkadot attempts to solve in the blockchain industry is the issue of interoperability. The crypto industry is seriously segregated as different blockchains act as an island of their own. This eliminates the chance of one blockchain being able to utilize the data that the other chains have. To solve this, Polkadot introduces a series of signatory technologies that allow the communication of data across several chains. This includes the exchange of data between public and private chains and the other way round, Cryptotelegram noted.
What Problems Does Polkadot (DOT) Solve?
|Polkadot attempts to tackle one of the most pressing issues facing the blockchain sector, interoperability. Currently, the market is in a state of extreme compartmentalization. Blockchains function as separate islands of data with little way of leveraging the information the other networks posses. Polkadot eliminates these concerns through the integration of a variety of proprietary technologies. Notably, Polkadot is even able to communicate information from private blockchains to public networks and vice versa, Securities expressed.|
Where can I buy DOT?
There are a number of ways to buy DOT. However, many find that it is easiest to purchase it through a trusted global exchange like Kraken. One of the simplest ways to buy DOT is by using your debit or credit card on Binance. Here's how:
Step 1: Create or log in to your Binance account. Once logged in, hover over the 'Buy Crypto' option found in the header. Here, select your desired payment currency in the top right and then click on your chosen payment option. In this example, we're going to buy DOT using a Visa debit card, while paying in US dollars (USD).
Step 2: You will then be presented with the payment screen. Select the asset you want to purchase from the drop-down 'Coin' menu. In this case, we'll select DOT. Then, enter the amount of DOT you are looking to purchase. This is the amount of your chosen currency you will spend on DOT.
Step 3: Click on 'Buy DOT'. You will then be asked to complete identity verification. This will involve providing some basic information, like your name, address, and date of birth, and uploading two images:
- A photo of a valid identity document (such as a national ID card, passport, or driving license)
- A selfie that matches the ID document
Step 4: Once your identity has been verified, you will be able to complete the purchase process, and will be asked to enter your payment information. Simply enter your card's payment details and your billing address, and click 'Pay now'.
Once Binance has verified your payment information, it will then charge you the amount you selected in an earlier step, and you will receive your DOT deposited directly to your Binance wallet. Many other exchange platforms have a similar procedure, but may vary slightly in the currencies and payment methods they support. For more information, see the supporting documentation offered by your exchange of choice, Decrypt expressed.
*Read More: How many Cryptocurrencies are there & Top 10 Most Popular Digital Currencies
The DOT Token
Polkadot raised about $140 million by selling its DOT token in a 2017 ICO. The company also ran two private sales in 2019 and 2020 and raised an estimated $100 million in those later sales.
Due to a bug in the Parity’s Ethereum wallet, about half of the original ICO tokens were frozen. Those frozen tokens have not been recovered, but the loss has not affected Polkadot’s ability to operate.
Polkadot began to allow investors to trade the remaining tokens starting in August 2020. Since then, DOT has been listed on over 40 exchanges, and high trading volumes have caused the coin’s market cap to skyrocket and become the top five coin.
The DOT token was also “redenominated” by a factor of 100x at the time that trading began. This did not change the token’s market cap; it merely made token amounts more readable.
There are three main uses for the DOT token apart from basic financial transactions: governance, staking, and bonding, Cryptobriefing noted.
Staking and bonding on Polkadot
Polkadot's approach to interoperability goes well beyond just the exchange of data and assets. It is also a way to introduce new concepts, such as incentivizing honest token staking and bonding tokens.
Staking tokens on a blockchain network is not a new concept. Known as Proof of Stake (PoS), this consensus model works by rewarding users for staking coins on the network. With Polkadot, honest stakers are rewarded, while bad actors can lose their entire stake.
As we’ve mentioned, every new parachain is added by bonding DOT tokens. Bonding refers to committing tokens to the network for a specific period of time. Chains that aren’t useful or projects that are no longer maintained will be removed, and their bonded tokens returned, Academy.binance sited.
*For more information about other cryptos, please click here!
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