What is Polkadot (DOT)?

March 28, 2023
Read time:

According to its creators, Polkadot is a network that connects blockchains.

The platform was originally led by Dr. Gavin Wood, former Co-Founder and Chief Technology Officer (CTO) of Ethereum. Wood prepared a version of PoC-1 (i.e., the first proof of concept) in January 2014, a few months before Ethereum was created.


Polkadot was founded to address limitations in the performance and interoperability of blockchain networks. It is designed as a universal blockchain platform that allows numerous blockchain networks to connect and collaborate under the protection of shared security.

Furthermore, Polkadot allows data and tokens to be transferred between different blockchain networks without the need for intermediaries.

Since its launch, Polkadot has gained recognition as an innovative and rapidly growing project.


Polkadot is a heterogeneous multichain and is divided into several main components:

source: https://coinloan.io/blog/polkadot-token-dot-a-cryptocurrency-for-web-3-0-future/

The Relay Chain

The Relay Chain (master network) is the central chain that connects all given blockchain networks into a single, integrated infrastructure. All Polkadot validators are staked on this network and validate for the Relay Chain. Its primary responsibility is to coordinate the system.


Parachains represent single blockchain networks connected to the Relay Chain. They are capable of communicating and exchanging data with other Parachains. Parachains are designed to provide scalability and interoperability by allowing multiple blockchains to operate simultaneously and securely within the same network.

Each Parachain has unique features that can be customized to suit specific use cases. This allows developers to create specialized blockchains that are optimized for particular applications or functions while still being able to interact with the Polkadot ecosystem.

Parachains are connected to the Relay Chain through a particular type of smart contract called a Parachain Slot. These slots are limited in number and allocated through an auction process in which projects bid for the right to use them.

Once a project has won a slot, it can deploy its customized blockchain and interact with the rest of the Polkadot ecosystem. By allowing multiple specialized blockchains to run in parallel, the parachain model brings scalability in a more decentralized way.


Next are Validators, the network participants responsible for validating transactions and maintaining the network's security. Validators are selected through Nominated Proof-of-Stake (NPoS), a consensus mechanism designed to ensure the integrity of the Polkadot network.

To become a Validator, a network participant must be nominated. Once nominated, they can choose to accept or decline the nomination.

If they accept, they must stake a given amount of DOT tokens, which acts as a deposit. Validators are rewarded from the inflation of the Relay Chain, transaction fees, and tips.

Nominators and Collators

In addition to Validators, there are also Nominators and Collators in the Polkadot ecosystem.

Nominators select and support Validators by staking their tokens, while Collators are responsible for gathering transactions and creating state transition proofs for the validators on the Relay Chain.

DOT Token

The DOT token is the native cryptocurrency of the Polkadot ecosystem and plays a crucial role in the network's functioning and interoperability.

Its most important purposes are:

  1. Governance: DOT token holders can participate in the governance of the Polkadot network. They can vote on proposals related to network upgrades, parameter changes, and other vital aspects.
  2. Staking: DOT holders can stake their tokens to become Validators or Nominators in the network. Token holders keep the network secure and collect rewards for staking.
  3. Bonding: Each new parachain is added by bonding DOT tokens. This is accomplished by sending tokens to the network for a fixed period. Any chains that are no longer useful or supported will be discarded, and their corresponding tokens refunded.

DOT tokens also act as transaction fees on the Polkadot network. Validators earn transaction fees for validating transactions and creating new blocks.

Advantages of Polkadot

Polkadot has several key advantages, including:

  1. Interoperability and scalability – Polkadot combines multiple blockchain networks into a single infrastructure, enabling collaboration and data exchange.
  2. Shared security – provided by the Relay Chain, makes it almost impossible to attack parachains. As activity on Polkadot increases, so does the number of validators – resulting in more DOT tokens staked, thereby increasing the ecosystem's security.
  3. Flexibility – Polkadot can adapt to different needs and applications, making it much more versatile than single blockchains.
  4. Chain customization – Polkadot enables customized chains to best suit a specific purpose, improving efficiency and security. Developers can easily add features and functionalities that fit the design and purpose of their chains.

Disadvantages of Polkadot

Polkadot also has some limitations and drawbacks, including:

  1. Complicated implementation - Polkadot is a technologically complex project with the risk of difficult implementation.
  2. High level of competition – Polkadot is competing with many other general-purpose blockchains like Tezos, Cardano, or Cosmos, which may prevent some users from participating in the Polkadot ecosystem.


Polkadot is a blockchain network designed to enable interoperability between blockchains, allowing them to work together seamlessly. It uses a sharding mechanism to process multiple transactions simultaneously, making it highly scalable. Polkadot's native cryptocurrency is DOT, used for network governance, staking, and transaction fees.

Complete quiz
What is Polkadot (DOT)?
Share this article
Explore other articles

Exponential Moving Average (EMA) and Simple Moving Average (SMA)

Exponential Moving Average and Simple Moving Average are two technical indicators used in financial analysis. While SMA calculates the average price over a specific time by taking the arithmetic mean of the closing prices, EMA places more weight on recent prices.

Algorithmic Trading

Algorithmic trading uses mathematical and statistical algorithms to make investment decisions, analyze various indicators and react rapidly to market changes. To start trading, one must acquire the necessary knowledge, choose a trading platform, test algorithms on historical data, and optimize performance.

Introduction to risk management strategies for cryptocurrencies: Trailing Stops

Trailing stops can be a powerful tool for managing risk and improving trading performance in volatile markets.