What is Polkadot? (DOT)

The Beginner’s Guide (part 1)

Since I was discussing odd ball names in crypto currencies (see my recent Pancake Swap blog) here is one of the new age tokens that is enjoying  good growth.

But first some background info on Polkadot.

Wneho created Polkadot?

Polkadot was founded by Gavin Wood (a co-founder of Ethereum) alongside co-founders Peter Czaban and Robert Habermeier in 2016. 

Wood’s background is notable as he invented Solidity, the language used by developers to write decentralized applications (dapps) on Ethereum. He was also the Ethereum Foundation’s first CTO, and was previously a research scientist at Microsoft.  

Wood founded a company called Parity Technologies in 2015 with Jutta Steiner. Its purpose was to implement projects wishing to build on Ethereum. It also worked on software essential to powering Ethereum, including one of two clients run by a majority of network nodes. 

Parity Technologies now maintains Substrate, a software development framework primarily used by Polkadot developers who wish to quickly create parachains. 

Web3 Foundation

The Web3 Foundation is the non-profit that conducted Polkadot’s token sales. Gavin Wood is also its president, and he co-founded it with Pete Czaban.

The Web3 Foundation received 30% of the funds from the token offerings, and oversees the allocation of those funds for the furthering of Polkadot development.
 

Why does DOT have value?

The DOT cryptocurrency plays a key role in maintaining and operating the Polkadot network.

By owning and staking DOT, users gain the ability to vote on network upgrades, with each vote being proportional to the amount of DOT cryptocurrency they stake. As of 2020, staking DOT on Kraken yields a 12% annual return. 

Polkadot rewards these users with newly minted DOT based on how many tokens they are staking, with all four major consensus roles receiving rewards.

Of note for investors, however, is that Polkadot’s software rules initially allowed for the creation of 10 million DOT, with no capped supply. Rather, new DOT tokens are expected to be released in perpetuity, at a predetermined inflation rate.

A token holder vote in 2020 later changed the standard unit for DOT tokens, shifting the base unit of the currency and redenominating the supply to 1 billion DOT. 

Why use DOT?

Users may find the Polkadot Network appealing based on its focus on facilitating interoperability between blockchains. 

Further, there are a variety of projects already building on Polkadot. Some examples include a cloud platform, a browser extension wallet and different types of block explorers. 

DOT may be of interest to investors who want to earn rewards from staking. For example, Kraken offers a staking service that enables users to stake DOT and earn 12% annual interest. 

Check out the growth since the beginning of this year.

 Here is an insite into how the blockchain network functions.