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.
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