dYdX logo
dYdX logodYdX icon
English
中文
日本語
한국어
русский
Türkçe
Français
Português
Español
Polkadot logo

Polkadot

DOT

6.27

0.00

Market Cap

$9.016927B

24h Volume

$218.604M

Volume/Market Cap (24h)

2.42

Circulating Supply

1.437953B DOT

Total Supply

1.437953B DOT

The “Web” in Web3: Explaining the Polkadot Cryptocurrency 

Interoperability—or communication between different blockchain protocols—remains an elusive goal in the crypto ecosystem. Because cryptocurrencies have unique coding standards on their respective networks, they can’t interpret data from non-native sources, meaning traders don’t have the flexibility to send native cryptocurrencies across multiple chains. While some protocols offer synthetic solutions, the lack of connection within web3 is a major hurdle preventing the widespread adoption of crypto technologies. 

Despite the challenges surrounding crypto interoperability, a few projects are working on a scalable base layer for an interconnected decentralized web. Polkadot (DOT) is one of the biggest names in the crypto market focused on integrating interoperability into web3’s infrastructure. DOT introduces a new blockchain system that aims to bring distant digital assets together, potentially realizing the dream of cross-chain functionality. 

Polkadot’s history

After playing a foundational role in building Ethereum (ETH), computer scientist Gavin Wood left Ethereum to concentrate on his idea for a more interoperable crypto project, “Polkadot.” After Wood published the Polkadot white paper in 2016, he co-founded the nonprofit Web3 Foundation and the company Parity Technologies to lead the development, research, and funding of the Polkadot blockchain. 

To raise funds for his new venture, the Web3 Foundation led an initial coin offering (ICO) for Polkadot’s native DOT cryptocurrency in 2017, raising $144 million. Despite a security vulnerability locking $155 million in Parity Technologies’ crypto wallet, the Polkadot team pushed forward with further funding rounds and development, eventually launching the Polkadot mainnet in 2020. 

How does the Polkadot blockchain work?

Polkadot’s blockchain consists of a central “relay chain” and multiple application-specific parallel blockchains (aka “parachains”). The relay chain aims to ensure that Polkadot’s core security and validation procedures using a Proof-of-Stake (PoS) consensus algorithm. Computers (aka nodes) on Polkadot’s blockchain lock (or “stake”) the native DOT coins to participate in network validation and earn crypto rewards each time they submit a batch of transactions. 

Parachains, by contrast, are sovereign blockchains built by third-party developers, similar to decentralized applications (dApps) on blockchains like Ethereum (ETH). While parachains leverage the security of the relay chain, they’re free to set up their own decentralized ecosystems with distinct tokens, consensus mechanisms, and governance protocols. 

Anyone holding the DOT cryptocurrency can vote on which parachain projects fill Polkadot’s limited slots in regular “parachain auctions.” When a parachain is set up on Polkadot’s network, it interacts with other parachains via their shared connection to the relay chain. 

Polkadot FAQs

What are DOT tokens? 

The ticker “DOT” stands for Polkadot’s native cryptocurrency, which is what crypto traders refer to when they ask for the Polkadot coin price. One of DOT’s primary purposes is to secure the blockchain through staking, but it also plays a role in decentralized governance, parachain auctions, and paying gas fees. Traders often find the latest market value per DOT on real-time Polkadot price charts on crypto exchanges or price aggregator sites like CoinMarketCap. 

What is Kusama? 

Kusama is often dubbed “Polkadot’s testnet” because it serves as a low-risk testing protocol for blockchain developers. If programmers have an idea for a parachain—or they want to explore Polkadot’s features before committing to a slot auction—they use Kusama to write code, run programs, and check for any bugs or flaws in their design. Although Kusama runs similarly to Polkadot, it uses a proprietary cryptocurrency called KSM for staking, governance, and transactions. 

What makes Polkadot unique?

Polkadot’s primary focus is increasing blockchain interoperability using its relay chain as the foundation for web3. In the Polkadot model, developers can set up decentralized protocols with native cryptocurrencies and governance structures with the security of the relay chain’s consensus plus cross-chain communication within the Polkadot ecosystem. As Polkadot continues to scale its operations, it hopes to connect with established blockchains like Ethereum and Bitcoin (BTC) using proprietary bridges

Disclosures

The content of this article (the “Article”) is provided for general informational purposes only. Reference to any specific strategy, technique, product, service, or entity does not constitute an endorsement or recommendation by dYdX Trading Inc., or any affiliate, agent, or representative thereof (“dYdX”). Use of strategies, techniques, products or services referenced in this Article may involve material risks, including the risk of financial losses arising from the volatility, operational loss, or nonconsensual liquidation of digital assets.  The content of this Article does not constitute, and should not be considered, construed, or relied upon as, financial advice, legal advice, tax advice, investment advice, or advice of any other nature; and the content of this Article is not an offer, solicitation or call to action to make any investment, or purchase any crypto asset, of any kind.  dYdX makes no representation, assurance or guarantee as to the accuracy, completeness, timeliness, suitability, or validity of any information in this Article or any third-party website that may be linked to it.  You are solely responsible for conducting independent research, performing due diligence, and/or seeking advice from a professional advisor prior to taking any financial, tax, legal, or investment action.

You may only use the dYdX Services in compliance with the dYdX Terms of Use available here, including the geographic restrictions therein.

Any applicable sponsorship in connection with this Article will be disclosed, and any reference to a sponsor in this Article is for disclosure purposes, or informational in nature, and in any event is not a call to action to make an investment, acquire a service or product, or purchase crypto assets.  This Article does not offer the purchase or sale of any financial instruments or related services.

By accessing this Article and taking any action in connection with the information contained in this Article, you agree that dYdX is not responsible, directly or indirectly, for any errors, omissions, or delays related to this Article, or any damage, injury, or loss incurred in connection with use of or reliance on the content of this Article, including any specific strategy, technique, product, service, or entity that may be referenced in the Article.