Polkadot, founded by Gavin Wood of the Ethereum foundation, is a multi-chain blockchain technology that allows different blockchains to interact with increased security and performance. Before talking about what you can do with Polkadot, a little background on how we got here.
In the beginning, there was Bitcoin, a peer to peer digital currency, secured and propagated by a proof of work consensus algorithm. People saw the utility of this decentralized scheme and wanted to apply it to other areas such as a decentralized DNS, smart contracts, financial agreements, user identity registers, and more using a similar decentralized scheme. The problem is that each new application would need its own blockchain network and would need to get user adoption so that they could secure that blockchain.
Enter Ethereum, which is a blockchain built with a general purpose programming language which allows decentralized applications to be built while letting them leverage the security of a mature blockchain.
So, if Ethereum solved this multi-chain problem, why do we still need multiple chains? There are cases where you might still want your own blockchain. For instance, some big banks and enterprise companies are building solutions involving private blockchains so that they can keep their data on trusted hardware. However, now we have a new problem. Blockchain solutions introduce radical transparency and reduced reliance on trust at the tradeoff of efficiency. So, aren’t private blockchains the worst of both worlds–slow and require trust?
Enter Polkadot. With a system like Polkadot that allows blockchains to be interoperable, you could have a transaction that is first verified by your bank on your bank’s private network, and is then gets published to the Ethereum network. Or, an insurance companies private chain could read from public chains to assess damage for a weather event and distribute a token to pay out damages. You could also have multiple public chains interact and leverage each other’s functionality, for example you could have a decentralized exchange protocol by which a user could deposit Ethereum anonymously using the zero knowledge proofs of the Zcash chain. These are really just the tip of the iceberg for use cases of blockchain interoperability.
Polkadot also has the added benefit of increasing security and performance. Under the hood, Polkadot works by decoupling two vital components of a blockchain network: state transition and consensus. In the Ethereum network, state transition is controlled by the EVM, whereby state is updated by applications making changes to smart contracts. The consensus portion means that once some data is written to a smart contract, then the change must be sent to everyone in the network so that it can be added to the chain. Updating the state and ensuring the transition is valid is computationally intensive, while the consensus portion is not very computationally difficult but requires communication and broadcasting information to other nodes. By decoupling these two vital functions, Polkadot increases efficiency and allows computationally difficult tasks to be done in parallel on a sub-set of the network specializing in computationally intensive tasks, called parachains, and then allow the network to synchronize all these constituent chains by communicating with each other, with what is called a relay chain.
Solutions like Polkadot will allow the decentralized ecosystem to grow and let projects build on top of the advancements of other projects. It will help to secure these applications and speed up throughput in these networks. All these improvements are great for user adoption of cryptocurrency and decentralized applications. Polkadot has recently decided to delay their crowdsale, but they are expected to announce an update around the crowdsale late 2017 or early 2018.
Crypto 2.0 investment fund
Bitcoin is the currency of choice on the multiple darknet markets. These are hidden sites mainly used for drugs and other contraband. Bitcoin’s psuedo-anonymity and decentralized nature make it appealing for online transactions of this nature. Bitcoin has been used extensively on the darknet since Silk Road launched in 2011.
A lot has changed since Silk Road. Cryptocurrencies have gotten more complex and improved on Bitcoin’s innovative design. In particular, cryptocurrencies Monero and Zcash both have built in privacy protection and absolute transaction anonymity that Bitcoin doesn’t have. Bitcoin has also recently had problems with high transaction fees and slow confirmation times, so these other coins will likely be able to handle more transactions simultaneously. AlphaBay, the leading darknet market, began accepting Monero in August 2016, and you can see the effect on the price in the chart:
While users like the privacy features, the lower fees, and faster transaction times, they complain that the existing tools for Monero, like wallets, are hard to use and they have concerns about price volatility. As developers improve on these problems and the ecosystem evolves further, it’s not hard to foresee Monero getting more mileage. AlphaBay also recently began supporting Zcash.
Bitcoin still has some advantages at the moment. It was the first mover and first to achieve widespread adoption by users and marketplaces, thus every market accepts it. With adoption comes a community with tools and support. For example, while Bitcoin does not have the built in privacy features of Monero or Zcash, there are multiple coin tumblers or coin mixers that make it more difficult to track transactions (though these methods have their drawbacks). Bitcoin is also the easiest to exchange for cash using sites like Local Bitcoins. This means someone selling drugs would first have to exchange their Monero for Bitcoin in order to turn their profits in to cash.
The online drug marketplace was an early, substantial business use case for Bitcoin and what happens there may be a precursor for other markets. The darknet is a also big business, with some estimates that Silk Road alone pulled revenues of over $100 million per year. Right now, some competing currencies offer technical advantages over Bitcoin. Will users move to using these competing currencies or will Bitcoin maintain dominance?
What is Augur and why is it cool?
Augur is a decentralized prediction market built on Ethereum. Think of it like a market place where you can bet on future events, like the outcome of the 2020 US Presidential Election. The benefits of this are 2 fold. First, Augur is a peer-to-peer prediction market place with all the benefits of a decentralized system, such as censorship resistance, lower fees, reduced trust reliance on a third party, and more. The second benefit is a little more technical.