Polkadot

Headshot

Eden Block

• Categories:

Summary

Polkadot is a protocol that enables independent blockchains to exchange information. The defined purposes behind the project are:

The unique technical aspects behind Polkadot’s heterogeneous multichain technology are the use of relay chains, which coordinate consensus and transaction delivery between chains; parachains, the connected blockchains running transactions parallely to one another; and bridges, the link to blockchains that have  their own consensus, such as Ethereum.

 

Industry Need

Polkadot’s vision is to enable a truly decentralized Internet which serves the true promises of blockchain technology, where independent blockchains exchange information trustlessly, and where the creation and mass adoption of decentralized applications will distribute power and equality for the common good of the world.

 

Blockchains may be applied to a wide variety of fields, including Internet of Things (IOT), finance, governance, identity management, web decentralization, or asset tracking. That said, despite the promises, we have still not witnessed a significant real-world deployment of present technology.

 

The five key points of failure recognized by Polkadot of current blockchain technology that they aim to solve are:

 

Solution

Polkadot aims to become a network that connects blockchains, allowing new blockchain designs to communicate and share security, while still retaining their entirely customized and unique state-transition functionality (virtual machines, consensus protocols, etc.).  At a high level, Polkadot aims to solve the problems of blockchain interoperability, scalability, and shared security. With Polkadot, developability is no longer limited, and applicability is therefore widened to real world use cases.

 

Tech Review

Polkadot’s goal is to provide a scalable, heterogeneous multichain that is built under a minimal, simple, general, and robust design. Unlike previous single blockchain implementations, Polkadot provides no specific functionality. Instead, it provides a relay chain layer upon which a larger number of validatable, globally-coherent, dynamic data structures (no requirement to be a ‘blockchain’) can be hosted in parallel. These are called parachains (short for parallelizable chains).

 

Polkadot may be considered the equivalent to a group of independent chains, except for the features of shared security, and trust-free interchain communication. These are the main points behind Polkadot’s scalability advantage. To provide a brief but technically comprehensive overview of the system as a whole, we’ll explore:

 

Tech Breakdown

Consensus mechanism design.

In the Polkadot Network, a low-level consensus over a set of mutually agreed valid blocks is reached through an asynchronous Byzantine fault-tolerant algorithm. Its integration is inspired by the simplicity of Tendermint, and the efficiency of HoneyBadgerBFT at identifying defective network infrastructure, given a set of mostly benign validators. This particular consensus design is important because it requires the means of choosing and setting validators and incentivizing them to be honest under any form of network deployment, without any particular organization or trusted entity required to maintain it.

 

Nominated Proof of Stake.

Polkadot requires the measurement of stake for any particular account, in order for validators to be elected. These are chosen infrequently, once per day at most, but can go up to once per quarter the NPoS scheme. Under this algorithm, all token holders are incentivized to participate in consensus. Nominators choose the block validators by staking tokens on the presumed strongest candidate, and the validators in return are bonded heavily by their stakes. Any misbehavior is punishable by a slash. Through the NPoS, Polkadot maintains checks and balances across the system to encourage game theoretic situations to run under strong incentives for benign outcomes.

 

Parachains.

Parachains are a simpler form of a blockchain, which connect to the security and trustless transactions of the relay chain, similarly to the concept of sharing in Ethereum. Each parachain has is independent and transactions can be executed parallely across all parachains, while using the same source of security. These are important factors for network scalability, as distributed computations won’t need to fully depend on the root relay chain. At the core of Polkadot, parachains meet the vision to enable a truly decentralized Internet, where different decentralized apps and services connect under a common communication point, each with their own custom settings but while sharing a common pool of security.

 

Interchain communication.

Parachain transactions asynchronously sends off the the resolution of a transaction into a second parachain, or, potentially, the relay chain itself. This ensures the correct processing of transactions between different chains. To ensure minimal implementation, interchain transactions counts only with an origin segment and an address. There is no payment associated; rather a system such as Ethereum’s Serenity is envisioned as a means to cross-chain resource payments. A queuing mechanism based on a Merkle tree structure ensures tamper-proof communication, where relay chain maintainers move transactions from the one queue to another. Involved across the interchain communication process are validators, securing the relay chain by staking DOTs, validating proofs from collators and participating in consensus; nominators, in charge of selecting good validators by stake; and fishermen, the final security layer, monitoring the overall network and proving bad behavior to validators. As with parachains, interchain communication is a fundamental feature of Polkadot’s architecture, bringing logical and algorithmic order to fee-less transaction flow and ensuring tamper-proof communication and overall correctness.

 

Bridges.

For blockchains that are not necessarily parachains but still need  to connect to the network, Polkadot features bridges, providing these chains the opportunity to be interoperable with each other, within reasonable security standards. There are methods to connect Polkadot interoperability with Ethereum via transaction-forwarding contracts and logs. In the case of Bitcoin, despite its complexity, it is not totally unrealistic to establish a reasonably secure Bitcoin interoperability virtual parachainn, but it would require efforts under an unexpected timeframe from developers in both networks. Ultimately, bridges are an important asset to Polkadot’s value proposition, as it builds on the promise of multichain communication, without necessarily being part of the network, but simply by establishing a non standardized communication path.

 

Verdict

Relay chains, interchain communication, and bridges, are the core and necessary elements for Polkadot’s approach to blockchain interoperability, with the added features of shared security and cost-free transactions. The architecture achieves its mission of minimalism and simplicity and at the same time general and robust. Within and outside of the industry, Polkadot is a viable and elegant option for blockchains to no longer be siloed, and brings interesting incentives to new blockchains to benefit from increased security. While Polkadot shows great promise in the vision of  enabling a decentralized Internet, the main concern with this technology is that relay chains are presumed the hardest of all interoperability approaches; at the expense of not being a connected parachain to the network, custom bridge solutions require heavy-lifting.

 

Roadmap

 

Source: https://polkadot.network/#roadmap

 

Verdict

Project goals are clearly outlined and well aligned in regards to the technical challenges behind Polkadot’s architecture. We presume that all objectives were reached, as there is no timing information provided on the official website, and we rely on the history of Medium updates to keep track of Polkadot’s promising progress. This includes progress updates on parachains, bridges, and the consensus algorithm back in January, a first and a second live proof of concept updates in May and July respectively, and the announcement of expected full launch by Q3 2019.

 

Token Economics

Token Acronym: DOT

Circulating Supply: 312,018,000 DOT

Total Supply: 577,018,000 DOT

Marketcap: $3,945,959 USD

Marketcap at ICO: $150,000,000 USD

Distribution: 5M DOTs were sold under a Spend-All Second Price Dutch auction. This means that “tokens were offered high in the start, and lower throughout the auction period in a predefined scheduled. The auction closes once orders received at the current provisional price are enough to purchase the entire 5 million DOTs. You don’t bid on a number of DOT tokens, but rather on an amount to spend, and thus receive more tokens as the auction continues and price lowers”. Source: https://polkadot.network/Polkadot-lightpaper.pdf

Token release schedule: The ICO was issued on October, 2017

 

Intrinsic Token Value: The DOT has 3 purposes:

 

Verdict

Polkadot presents a reasonable marketcap and distribution, as it is one of the most popular projects bringing an approach to blockchain interoperability. The token’s intrinsic value directly correlates with the aims and purposes of the project, with well established incentives across all the network’s features and functionalities.

 

Team & Leadership

Polkadot was initiated by the Web3 Foundation, and commissioned to Parity Technologies to build the Polkadot Network. Web3 Foundation leads the vision of a serverless, decentralized Internet, with Polkadot as their sole and leading project moving forward. “The Web3 Foundation nurtures and stewards technologies and applications in the fields of decentralized web software protocols, particularly those which utilize modern cryptographic methods to safeguard decentralization, to the benefit and for the stability of the Web3 ecosystem.” Source: https://web3.foundation/

 

The council behind the Web3 Foundation features:

 

 

Verdict

Polkadot, led under the vision of the Web3 Foundation and the execution of Parity Technologies features one of the industry’s leading teams. The teams are experienced, both technically and in business, understanding of the blockchain industry, and largely accountable to meet the expectations of the upcoming developments in the Polkadot roadmap.

 

Partners

Besides the fact that the team is a combination of the Web3 Foundation and Parity Technologies, Polkadot features numerous industry relevant partnerships on a technical level to integrate Polkadot interoperability, including:

 

Verdict

Polkadot partnerships include some of the largest and most reputable names in the industry, and is sufficient to bring Polkadot interoperability integration across a wide variety of decentralized applications and services.

 

Marketing & Social

Twitter: 23.8K followers, and 810 tweets since July, 2013.

Riot: 3.3K members with daily discussions.

Medium: 912 followers with a good flow of articles, including recent ones, with hundreds of claps.

GitHub: Used only as storage for documentation, it does not feature any relevant code.

 

Conclusion

Polkadot features a comprehensive architecture, clear token economics, an experienced team, and a wide variety of highly reputable partners to bring on their vision of the decentralized Internet. As one of the leading names in interoperability, Polkadot’s integration of relay chains, parachains, and bridges is a viable and elegant option for blockchains to no longer be siloed from each other, and presents incentives for blockchains to work together in return of more interesting real world applications and shared security. In conclusion, we believe Polkadot will come to be one of the leading names behind the vision of the decentralized Internet, but likely not the only one.

 

Did you like our analysis of Polkadot?

 

Follow Eden Block on Twitter and stay tuned to our latest tweets

Join our Eden Labs Telegram Group and be part of the conversation

Follow us on LinkedIn for announcements and updates

 

Disclaimer: This is not investment advice, merely our opinion and analysis on the project. Do your own research.

NOTES

 

Summary

 

Project overview

Polkadot is a protocol that allows independent blockchains to exchange information.

 

Defined purposes of the project

 

Brief overview of unique technical aspects

The unique technical aspects behind Polkadot’s heterogeneous multichain technology are relay chains, which coordinate consensus and transaction delivery between chains; parachains, the constituent blockchains which gather and process transactions; and bridges, the link to blockchains with their own consensus such as Ethereum.

 

Industry Need

 

Competitive solutions outside of the industry, and what they lack

Polkadot enables an internet where independent blockchains can exchange information and trust-free transactions. They allow for the development of a truly decentralized Internet, serving to fulfill the true promise of blockchain technology: the creation and mainstream adoption of Dapps and services that will distribute power and equity for the common good.

 

Competitive solutions inside of the industry, and what they lack

Blockchains show great promise of utility over several fields including “Internet of Things”, finance, governance, identity management, web decentralization and asset-tracking. However, despite the technological promise, we have yet to see significant real-world deployment of present technology.

 

Five key points of failure in current blockchain technology are:

 

Solution

 

How Polkadot is better than inside of the industry solutions

Polkadot is a network that connects blockchains, allowing new designs of blockchains to communicate and pool their security while still allowing them to have entirely arbitrary state-transition functions. At a high level, Polkadot solves the problems of blockchain interoperability, scalability, and shared security. With Polkadot, developability is no longer limited, and applicability is widened to real world use cases.

 

Tech Analysis

 

Introduction and tech overview

Minimal, simple, general, and robust. Polkadot is a scalable heterogeneous multichain. Unlike previous blockchain implementations focused on providing a single chain, Polkadot itself is designed to provide no inherent application functionality at all. Instead, Polkadot provides the bedrock relay chain upon which a large number of validatable, globally-coherent dynamic data structures may be hosted side by side. These data structures are called parachains. Polkadot can be considered the equivalent to a set of independent chains except for pooled security and trust-free interchain transactability. These are the points why Polkadot is considered scalable. To give a brief overview of the system as a whole, we provide an exploration of the consensus, the NPoS, parachains, interchain communication, and potential bridge connections to Ethereum and Bitcoin.

 

Tech Breakdown

// Consensus mechanism.

Why? Polkadot requires the means of determining and setting validators and incentivizing them to be honest under a network deployed in a fully open and public situation, without any particular organization or trusted authority required to maintain it.

 

// Nominated Proof-of-Stake.

Why? All token holders have a fair opportunity at participation. Validators are bonded heavily by their stakes, misbehavior results in punishment

 

// Parachains.

Why? Enhanced security similar to Bitcoin’s side-chains and merge-mining. Strong guarantees of that the parachains’ state transitions are valid. Validity revolves around the points of being intrinsically valid (all state transactions executed faithfully and all external data referenced is valid for inclusion) and that any data extrinsic to its candidate has sufficiently high availability so that participants are able to download it and execute the block manually.

 

 

// Interchain communication.

Relay chain: the main Polkadot chain that all the individual blockchains will connect to.

Communication is simple: transactions executing in a parachain are (according to the logic of that chain) able to effect the dispatch of a transaction into a second parachain, or, potentially, the relay chain. Fully asynchronous and no intrinsic ability for them to return to any kind of information back to its origin.

Interchain transactions are effectively indistinguishable from standard externally-signed transactions. The transaction has an origin segment, and an address. This is to ensure minimal implementation complexity, minimal risk and minimal straight-jacketing of future parachain architectures.

Unlike Bitcoin and Ethereum there is no payment or fee associated. A system such as Ethereum’s Serenity release is proposed as a simple means of managing cross-chain resource payments.

Interchain transactions are resolved using a queuing mechanism based on a Merkle tree to ensure fidelity. Relay chain maintainers move transactions on the output queue of one parachain into the input queue of the destination parachain.

 

 

// Connections with Ethereum and Bitcoin.