Polkadot and its parachains: All you need to know
Polkadot is one of those sudden, not too many unexpected developments that break into the blockchain scene. Back in September 2020, it gathered a lot of press after jumping into CoinMarketCap’s top 10 cryptocurrencies list by market capitalization, leading many to wonder if we were witnessing the next big thing.
All of this wondering was followed by puzzlement, as many people struggled to understand exactly what polkadot is, what a parachain is, and why it became so hugely popular – in other words, why is this particular new blockchain important?
Joining Blockchains Together
It has long been a goal in the blockchain community to attain blockchain interoperability – in other words, to allow blockchains to contact and interact with each other. This would make token exchanges much easier, by no longer needing an intermediary – if somebody wanted to exchange ETH to BTC, the blockchains themselves would perform the currency exchange.
There are other reasons to desire interoperability, though, and Polkadot aims for this too. While a blockchain supporting other, smaller blockchains in its system is nothing new (the Ethereum blockchain has done this for a long time,) allowing them to interact with each other in complex manners is still difficult. Polkadot, and its parachain services, hopes to allow for this.
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What is a Parachain?
Parachain is the name the Polkadot network has given its set of blockchains running in parallel. This means exactly what it sounds like – Polkadot aims to become a blockchain of blockchains by the intelligent use of Parachains.
Parallel and Distributed programming is nothing new in the IT world – in fact, parallel programming is one of the reasons why computer CPUs like to show off having as many cores as possible. It allows computers to run several tasks at the same time, rather than having to wait in line.
A parallel blockchain is akin to, and much like a parallel CPU. Blockchains run operations of many types at the same time, often lumping them all together even when the consensus mechanisms that work for a type of operation might not work for another – for example, different operations might require heightened layers of security that come at a higher cost.
If all operations are lumped together, then they all have to be ran at this higher security, leading to an excess workload.
By running blockchains in parallel, Polkadot can create different rules to govern each of them, effectively tuning each blockchain for a specific task… and then joining them all together in a parachain, creating a single, large blockchain.
What about external blockchains?
Polkadot’s aspirations don’t stop there. Understanding that blockchain interoperability is a huge goal these days, one of Polkadot’s offerings is to allow the blockchain to interact with other blockchains, like Bitcoin or Ethereum. This would allow specialized processes running in said chains to be out-sourced to the Polkadot blockchain, where they might be easier to optimize.
There are other benefits to the parachains. In several occasions, existing blockchains have required changes to their structure that have, due to system limitations, led to forking the chain. This has most famously happened with both Bitcoin and Ethereum chains, but the problem has affected many more.
By operating via parachains, a blockchain can make changes to its own inner systems without ever needing a full fork – at most, just adding an extra chain to the system should fix most problems-as long as the contention is about approach and not governance structures.
How will this change the blockchain environment?
Polkadot and its parachains environments would be useless if they were limited to the main blockchain. Instead, Polkadot aims to compete directly with Ethereum by allowing users to create their own blockchains inside Polkadot, adding them to the parachain.
But there’s more. These blockchains would be parachains themselves, allowing them to run their own private, distributed processes. That way ,the main Polkadot blockchain would host blockchains that in turn could host their own blockchains to optimize their processes. This is a feature that didn’t exist so far in the Blockchain scene, and the main reason Polkadot rose to prominence so quickly.
What about the Polkadot token, the DOT?
The DOT token, in its base, works just like the tokens for most cryptocurrencies – it can be used for financial transactions and staking. There are two differences, however, that make it stand out:
First, DOT tokens are effectively stakes in the blockchain, and as such, those holding tokens have a say in the blockchain governance. Second, DOT tokens are set up to be the de-facto currency for interactions among parachains, and can also be used to create new parachains.
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Is Polkadot unique? Will it become the next big blockchain?
It’s hard to tell. Polkadot’s approach is certainly unique, and it could lead to great developments on the blockchain scene. Still, it’s too early to tell – and getting sustained attention can be difficult, even for revolutionary projects.
Moreover, there are other projects that could be competing with Polkadot for attention on the distributed blockchain front. Cosmos allows some, but not all, of Polkadot’s features, while Ethereum 2.0 is probably the largest threat. This is because, while Ethereum 2.0 won’t offer all features of Polkadot, it’s an upgrade to what is already the largest blockchain in the world – and thus, it might hinder adoption for a new one.