Step-by-Step Guide to Polkadot

Polkadot Guide


What is Polkadot?

Polkadot is a platform that allows diverse blockchains to transfer messages, including value, in a trust-free fashion; sharing their unique features while pooling their security. In brief, Polkadot is a scalable, heterogeneous, multi-chain technology.

Polkadot is heterogeneous because it is entirely flexible and makes no assumptions about the nature or structure of the chains in the network. Even non-blockchain systems or data structures can become parachains if they fulfill a set of criteria.

Polkadot may be considered equivalent to a set of independent chains (e.g. a set containing Ethereum, Ethereum Classic, Namecoin and Bitcoin) except with important additions: pooled security and trust-free interchain transactability.

Unlike previous blockchain implementations that provide a single chain of varying degrees of generality, Polkadot provides a Relay Chain upon which a large number of verifiable data structures may be hosted. We call these data-structures “parallelized” chains or parachains. Polkadot provides a networking and consensus layer that allows blockchain developers to focus on creating a state machine with unique features, such as formal verification or anonymity.

Polkadot consists of many parachains with potentially differing characteristics. Transactions can be spread out across the chains, allowing many more transactions to be processed in the same period of time. Polkadot ensures that the security of all blockchains in the network is robust and that any dealings between them are faithfully executed. All parachains share security and state, meaning if one chain has a message reverted, all chains get reverted. It is also possible for independent chains with their own validators to be linked to Polkadot via bridges, thereby foregoing Polkadot’s shared state and security system. These chains can benefit from Polkadot’s interoperability without being hosted on the platform, examples of these would be Bitcoin and Ethereum.

How does Polkadot work?

As mentioned in the article, Polkadot provides a core network, the relay chain, and parallel blockchains called parachains.

Let’s take a closer look at the network’s architecture, the system’s technical components and how they work in conjunction.

The relay chain’s protocol determines the network’s shared security, consensus and cross-chain interoperability. It is the engine that keeps the whole infrastructure together, connecting other network participants and providing transaction finality.

The relay chain was deliberately built to provide minimal functionality. For instance, smart contracts are not supported, and the chain’s primary responsibility lies in the coordination of the system as a whole, including parachains.

The term parachains is short for parallelized chains. They are sovereign blockchains with their tokens and governance and offer their specific use cases.

However, parachains use and take advantage of the relay chain’s security and interoperability for the finality of transactions. The use of the relay chain allows parachain’s system to work seamlessly while developers and users can focus on other specific goals like privacy or scalability and their particular applications.

In essence, parachains get to enjoy one of the network’s most significant benefits: using Polkadot’s established security and fast and scalable transaction speeds.

Parachains need to lease slots that are limited to one hundred in Polkadot to participate in the network. Due to its limitation of space, parachain’s slot allocation may, therefore, in the future become somewhat competitive and challenging to obtain. There are three ways to gain a slot allocation:

The parathreads have similar functions to parachains. However, they run on a pay-as-you-go model that allows them to work when needed and does not require being connected to the relay chain at all times.

Parathreads participate temporarily without the need to lease a parachain slot. Parathreads will have a slower block time than parachains but have the same security level and interoperability feature. Also, depending on the relay chain’s slot availability and needs, any blockchain can switch between being a parachain or a parathread.

Finally, bridges allow parachains and parathreads to communicate with external networks like Bitcoin and Ethereum, thereby further expanding the interoperability of the Polkadot blockchain. Bridges can, eventually, enable different tokens and coins to be swapped without a central exchange.

Who’s building Polkadot?

Polkadot is the flagship project by Web3 Foundation, a Swiss Foundation founded to facilitate a fully functional and user-friendly decentralized web.

The Web3 Foundation is partnering with best-in-class entities to build Polkadot and foster development of the services and applications that will run on it.

Researchers from Inria Paris and ETH Zurich, developers from Parity Technologies, and capital partners from crypto-funds such as Polychain Capital are all working together to develop a superlative realization of Web3, with Polkadot at its core.

Web3 Foundation is providing grants for development of the ecosystem.

Can Polkadot connect any blockchain?

Polkadot can connect any previously existing blockchain if it matches two criteria:

  1. It must have the ability to form compact and fast light-client proofs over the finality and validity of its blocks and state change information (this would include new UTXOs in a Bitcoin-like chain or logs in an Ethereum-like chain).
  2. There must be a means by which a large set of independent authorities (perhaps up to one thousand) can authorise a transaction. This could include recognition of threshold signatures, such as the Schnorr scheme, or a smart contract able to structure logic against a multi-signature condition.

Bitcoin and Bitcoin-like chains fall short on these characteristics. To address the first criteria, Polkadot validators can simply run a full Bitcoin node. To address the second criteria, either a soft-fork allowing extra-protocol controls over funds or a hard-fork enabling a threshold-signature-friendly signing scheme such as Schnorr is needed. Neither are impossible goals, however a significant degree coordination would be required to achieve them.

Ethereum conforms to these characteristics, particularly after the Metropolis protocol update, and therefore integration should be possible.

Private “proof-of-authority” (PoA) chains generally fulfill the first characteristic, since authorities attest to the validity of blocks, and the proof-of-validity attestation is little more than checking signatures. The second is possible Ethereum-like chains that have either smart contracts or threshold signature schemes. Interoperability with non-Ethereum blockchains such as Hyperledger and Quorum is feasible.

Where Polkadot works best is connecting new blockchains expressly designed to fit the parachain model. Under this model, Polkadot manages the chain’s consensus and validation activities. A parachain is an integrated member of the Polkadot network and benefits from immediate finality and disinterested validation (as opposed to the “interested” validation that facilitated the DAO hard fork). Parachains need not secure themselves, and are therefore free to focus purely on innovating in terms of its state machines.

What does it mean to be an active participant in Polkadot?

Polkadot is designed to encourage active participation in Polkadot by holders of DOT (DOT are explained in the “DOT” section). Active participation in this context involves a holder of DOT performing one or more of the following roles within Polkadot:

  • Validators: These participants will play a crucial role in adding new blocks to the Relay Chain and, by extension to all parachains, such that parties can complete cross-chain transactions via the Relay Chain. Validators perform two functions. First, verifying the information contained in an assigned set of parachain blocks is valid (such as the identities of the transacting parties and the subject matter of the contract). Their second role is to participate in the consensus mechanism to produce the Relay Chain blocks based on validity statements from other validators. Any instances of non-compliance with the consensus algorithms result in punishment by removal of some or all of the validator’s staked DOT, thereby discouraging bad actors. Good performance, however, will be rewarded, with validators receiving transaction fees in the form of DOT in exchange for their activities.
  • Nominators: these participants may nominate validators to carry out validation work on their behalf by contributing to the security bond of their nominated validators. It is anticipated that a significant portion of DOT in existence at any particular point in time are likely to be bonded to validators for the purpose staking. Bonding DOT to a validator requires nominators to perform due diligence and constant analysis in order to select the validators which are the most likely to behave according to Polkadot’s rules. Nominators receive a pro-rata increase or reduction in their DOT holding according to the growth or depletion of the security bond to which their DOT were contributed.
  • Collators: These participants will sit atop parachains and provide proofs to validators based on transactions from parachains. Collators maintain parachains by aggregating parachain transactions into parachain blocks and producing state transition proofs for validators based on those blocks. They also monitor the network and prove bad behaviour to validators. Collators maintain a “full-node” for a particular parachain; meaning they retain all necessary information to be able to author new blocks and execute transactions in much the same way as miners do on current PoW blockchains. Under normal circumstances, they will collate and execute transactions to create an unsealed block and provide it, together with a zero-knowledge proof, to one or more validators responsible for proposing a parachain block.
  • Fishermen: these participants are not engaged in the process of validating transactions in the same way as validators or nominators, but rather they deter bad actors by monitoring activity across the platform to determine whether any other participants have acted in breach of the rules. Fisherman will be required to provide significantly fewer DOT by way of a security bond but can receive proportionately larger DOT rewards (in comparison to rewards received by validators and nominators) in proportion to the size of their security bond.


Why do we need Polkadot?

Polkadot makes blockchain experimentation possible in the same way Ethereum made decentralised application (DApp) experimentation possible. Polkadot is designed to facilitate faster innovation cycles, particularly when experimenting with new state transition functions. There are many trade-offs to consider when building a blockchain, and it’s clear from the number and diversity of the various Web3 projects that nobody has a framework that encompasses all chains. Polkadot is a vehicle that can get us to a general framework faster.

A primary use case for Polkadot is enabling interoperability between chains, regardless of their features or their status as a private or public chain. Interoperability lets diverse chains perform arbitrary messaging, including value. This interconnectivity could encompass privacy-oriented projects, forks, permissioned chains and more. Polkadot allows all parties to take public and private chains and “plug them in” to a shared connectivity layer. Chains can choose to maintain their own validator set or utilize Polkadot’s pooled security system to verify their transactions via the Relay Chain. With Polkadot the features of one chain can be leveraged on another. In other words, where there is innovation for one, there is innovation for all.

How many chains can Polkadot connect?

There is no specific limit to the number of chains that can be connected to the Polkadot network, which is scalable by design. Initial predictions suggest the basic Polkadot design will be able to handle at least dozens and perhaps hundreds of parachains. There are also paths to more enhanced models. For example, there is no reason why Polkadot cannot be composed in a recursive fashion, making some of the chains that Polkadot connects be themselves “mini Polkadots.” Should this be introduced, it is difficult to imagine an upper limit on the number of chains it could connect and thus the number of transactions it could process.

What is the difference between a Parachain and a blockchain connected via a Bridge?

Parachains are the name given to the parallelized chains that participate in the Polkadot network. Polkadot’s natively supported blockchains achieve consensus using the greater network’s consensus mechanism, both adding to and benefiting from pooled security.

Bridges are connecting layers that will enable existing blockchains with their own state histories and methods of consensus to link with Polkadot without having to be a native parachain. These include Bitcoin and Ethereum.

How do I get testnet DOT?

The current Polkadot testnet is Westend. From Polkadot-JS, you can switch to the Westend network, then create an account. Once you have saved your password, you can obtain your address by clicking on the icon to copy your address to the clipboard. Then post “!drip ADDRESS” to the Westend Faucet Element channel.

When did Polkadot launch?

The Genesis block of the Polkadot network was launched on May 26, 2020, as a Proof of Authority (PoA) network, with governance controlled by the single Sudo (super-user) account. During this time, validators started joining the network and signaling their intention to participate in consensus.

The network evolved to become a Proof of Stake (PoS) network on June 18, 2020. With the chain secured by the decentralized community of validators, the Sudo module was removed on July 20, 2020, transitioning the governance of the chain into the hands of the token (DOT) holders. This is the point where Polkadot became decentralized.

The final step of the transition to full-functioning Polkadot was the enabling of transfer functionality, which occurred on Polkadot at block number 1,205,128 on August 18, 2020, at 16:39 UTC.

On August 21, 2020, Redenomination of DOT occurred. From this date, one DOT (old) equals 100 new DOT.