When describing Polkadot, Web3, interoperability, and layer 0 are all tossed terms. But what do they mean, and how will they affect the Internet and the cryptocurrency market? A new report from Cointelegraph Research explores how Polkadot solves the problems of distributed ledger scalability and network centralization at the same time.
First, imagine a world where Facebook is replaced by a decentralized social media application built on Polkadot. This is what projects like Subsocial build on their platforms, and it allows users to decide what data to keep secret and share. Users can make profits by minting Ocean Protocol token OCEAN and selling it on a decentralized exchange like Polkadex, selling their data stored in the blockchain to third-party companies.
When your account balance is less than $0.00, dissatisfied with the overdraft fees charged by the bank? Well, a Polkadot-based project called Acala has built an on-chain automatic scheduler, similar to the decentralized version of Stripe. This enables users to automatically transfer mortgage rewards to their wallet address, which can be linked to a physical credit card. This means that a person can be paid for helping to ensure a decentralized currency and banking system, and the money they earn can be deposited into a credit card and used to buy coffee at Starbucks.
This report covers:
- How Polkadot allows blockchains with different structures to coexist in an interoperable environment with shared security.
- How does the slot auction system allow items to compete to maintain the right to be connected to the network.
- How the ecosystem around Polkadot has spawned various decentralized products from social networks to cloud computing and prediction markets.
Has Polkadot fulfilled the promise of Ethereum?
Ethereum’s consensus mechanism forces all nodes to verify all transactions. In contrast, the Polkadot blockchain divides a batch of new transactions into many shards and processes them in parallel. Blockchains plugged into the network can have very different operating rules, transaction processing and functions, so that the entire system has greater flexibility.
Polkadot tries to achieve scalability without reducing network security. This famous question is called “Blockchain trilemma“Clarified by Ethereum founder Vitalik Buterin himself.
Compared with Ethereum’s single blockchain design, Polkadot has many different blockchains, called parachains, which are inserted into a main blockchain, also called relay chain or layer 0. Similar to the spoke model commonly used in airport design, a method of sending messages and transactions across multiple blockchains is established by connecting different blockchain central relay chains without slowing down the traffic on the transaction highway. Layer 0 refers to the concept that layer 1 protocols such as Bitcoin and Ethereum can be used as spokes and Polkadot can be used as hubs.For example, the NFT project Bit.Country is a Substrate-based blockchain that uses Bridge With Ethereum. This enables assets to flow between Ethereum and the meta universe based on Bit.Country’s TEWAI blockchain.
There is no smart contract on Polkadot
Since Polkadot’s Relay chain does not have smart contracts, smart contracts are enabled by plugging into Polkadot’s blockchain. For example, a parachain called Moonbeam is fully compatible with Ethereum contracts. The developers of Moonbeam created a way to interact with the Polkadot-based digital currency Meta mask, A popular web browser wallet for decentralized finance. This means that the token built on Polkadot’s Substrate is a blockchain development tool that can be seamlessly sent to Ethereum wallets and smart contract addresses.
The next layer of the Polkadot ecosystem includes projects built on the blockchain on top of the relay chain. For example, Ocean Protocol is deploying their smart contract on the Moonbeam blockchain. By building on Moonbeam, OCEAN tokens will be compatible with Polkadot and Ethereum blockchain applications.
Rebuild the Ethereum network on Polkadot
Polkadot’s increased scalability has enabled many projects to overcome Etheruem’s high transaction fees and low number of transactions per second. Similar to Ethereum’s decentralized data storage projects such as FileCoin, Sia or Storj, Crust Network is building similar solutions on top of Polkadot. Unlike Ethereum-based projects, Crust Network is not limited by Ethereum’s scalability issues. Many of our favorite applications on Ethereum are being rebuilt on the Polkadot network or integrated through chain-agnostic gateways.
The Polkadot ecosystem seems to be full of projects, from decentralized cloud computing using the Phala Network to cross-chain managed wallets, such as the browser-based Math Wallet. The hardware-based virtual private network project Deeper Network has sold more than 10,000 physical devices on Indiegogo, Amazon and BestBuy. Deeper’s blockchain solution coordinates all devices and routes in a privacy-preserving way, saves the device registry (in the form of public key infrastructure) and manages the pledge and reputation subsystem.
Only time will tell whether this emerging blockchain technology can successfully achieve the affordable fees, high transaction throughput, and insurmountable security required for a fairer financial and communications future.
This 40-page report was published by Cointelegraph Research.