Polkadot (DOT): 5 Essential Things You Must Know Before Thinking About Investing in DOT

Polkadot is a scalable, secure, decentralized multi-channel network that also reduces costs. The Polkadot ecosystem should be seen not just as a competitor to Ethereum, but as an ideal complement to existing blockchains. DOT is the native currency of the Polkadot network.

Polkadot (DOT): What you need to know

1 – What is Polkadot (DOT) cryptocurrency?

  • The basic principle : Polkadot is a scalable, secure and decentralized multi-chain network developed using Substrate (a framework that allows the creation of interoperable and custom blockchains made up of custom or pre-built components). This ecosystem can connect private channels or public networks. This gives rise to a new form of network where independent blockchains can confidently exchange data and transactions.
    DOT is the native currency of the Polkadot network, the smallest unit of which is called the plank. Unlike most other cryptocurrencies, the supply of DOT is unlimited. This is intended to stimulate the network and dynamically adjusts based on the level of user participation.
  • Functioning: Through its DOT token, Polkadot allows you to send and receive funds. It is also used to process “high-bandwidth” data and transactions on multiple chains in parallel rather than sequentially across the entire network as in older generation blockchains.

2 – The project and blockchain that underpin this ecosystem

  • Project : Instead of just competing with Ethereum, it should be seen as the perfect complement to existing blockchains. The 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 relay chain that connects parachains, parathreads and gateways.
    • The relay chain is “layer 0” and governs cross-chain consensus, security, and interoperability.
    • Parachains are optimized blockchains that facilitate 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.
    • The gateways further expand scalability and interoperability by providing compatibility with the Polkadot ecosystem and allowing Parachains to interact with external blockchains with confidence.

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3 – Analysis and opinion on Polkadot (DOT)

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  • With a next-generation multi-chain blockchain network, this ecosystem manages to contain spending without sacrificing security or decentralization.
  • It also eliminates “friction” between projects, allowing compatibility with existing platforms such as Ethereum. Thus, there is no reason to choose one isolated blockchain network over another, with well-defined community governance and automatic updates.

  • Polkadot is not the only universal blockchain with smart contracts and proof of stake. We can also mention Cosmos or Cardano. Another drawback is that 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 the NPoS (Nominated Proof of Stake) consensus mechanism. That is, rewarding users for staking their DOTs, rather than the mining incentives offered on Proof-of-Work blockchains like Bitcoin.

There are two ways to stake: as a validator (those who create blocks) or as a nominator (those who vote to determine who will be the validator). The first hypothesis would require a high level of technical know-how and an investment in a masternode that would need to run 24/7.

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