Polkadot (DOT): 5 fundamental points that you absolutely must know before thinking about investing in DOT

Polkadot is a scalable, secure, decentralized multi-channel network that also keeps costs low. Rather than just a competitor to Ethereum, the Polkadot ecosystem should be seen as the perfect complement to existing blockchains. DOT is the native currency of the Polkadot network.

Polkadot (DOT): the essentials to know

1 – What is Polkadot (DOT) crypto?

  • Basic principle : Polkadot is a scalable, secure and decentralized multi-chain network designed using Substrate (a framework allowing the creation of compatible and specific blockchains composed of custom or pre-built components). This ecosystem can connect private channels or public networks. This is spawning a new form of the web where independent blockchains can exchange data and transactions with confidence.
    The DOT is the native currency of the Polkadot network, the smallest unit of which is called the Planck. Unlike most other cryptocurrencies, there is no limit in DOT supply. This is designed to incentivize the network and dynamically adjusts based on user staking participation rates.
  • Functioning : Through its DOT token, Polkadot enables the sending and receiving of funds. It is also used to process data and “high throughput” transactions across multiple chains in parallel rather than sequentially across the entire network like older generation blockchains.

2 – The project and the blockchain behind this ecosystem

  • Project : Rather than just a competitor to ethereum, it should be seen as the perfect complement to existing blockchains. Proof of this is that there are already more than 350 projects in its ecosystem, both in terms of smart contracts, decentralized finance (defi), digital collectibles (NFT), and games.
  • blockchain : Its architecture is coordinated by a chain of relays, which connects parachains, parathreads and gateways.
    • The relay chain is “layer 0” and manages cross-chain consensus, security and interoperability.
    • Parachains are optimized blockchains that promote transaction processing. They also solve network scalability issues.
    • Parathreads offer an alternative to Parachains, by temporarily participating in the network on a block-by-block basis.
    • Gateways further extend scalability and interoperability, providing compatibility with the Polkadot ecosystem and allowing Parachains to communicate confidently with external blockchains.

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3 – Analysis and opinion on Polkadot (DOT)

The +:

  • Thanks to the multi-chain network of its next-generation blockchain, this ecosystem manages to limit costs without sacrificing security or decentralization.
  • It also removes “friction” between projects, ensuring compatibility with existing platforms like Ethereum. So there is no reason to choose one isolated blockchain network over another, with clearly defined community governance and automatic upgrades.

The –

  • Polkadot isn’t the only versatile, smart-contract, proof-of-stake blockchain. We can also mention Cosmos or Cardano. Another disadvantage, security vulnerabilities have already been exploited in the past. This resulted in the loss of millions of dollars.

4 – How to earn or mine Polkadot (DOT)?

To coordinate its network, Polkadot uses an NPoS (Nominated Proof of Stake) consensus mechanism. That is, rewarding users for staking their DOTs, rather than the mining incentives offered in Proof-of-Work blockchains like Bitcoin.

This staking can be done in two ways: as a validator (those who create the blocks) or as a nominator (those who vote to determine who will be a validator). In the first hypothesis, it will require a high level of technical know-how and an investment in a masternode which will have to operate 24/7.

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