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DOT, the cryptocurrency of Polkadot, serves as the backbone of the innovative blockchain interoperability protocol founded back in 2016. As a sharded blockchain solution, it offers an efficient approach to connecting multiple disparate chains into a unified network, resulting in parallel processing of transactions and secure data exchange across different chains. The sharded architecture of Polkadot’s network enables it to scale efficiently and perform optimally, thereby providing a promising solution for bridging the gap between various blockchain systems.
Launched in October 2017, Polkadot raised $145 million worth of ether (485,331 ETH) through an initial coin offering (ICO) by releasing 10 million DOT tokens into circulation. 58.4% of the total supply of DOT tokens is held by investors, including 50% issued in the original ICO, 5% of the total supply sold in 2019, and another 3.4% sold in 2020. The Web 3 Foundation, which operates the network, owns 11.6% of the tokens, while 30% is held by the founders and the foundation.
DOT serves three crucial functions in the Polkadot network: governance, staking for network operations, and bonding to connect a new blockchain, also known as a “parachain,” to the network. Unlike other cryptocurrencies, Polkadot has no hard limit on its total supply, with new DOT tokens being released into circulation at an annual inflation rate of 10%. DOT’s price reached an all-time high of $49.80 in May 2021 after fluctuating between $4 and $5 in 2020. During the bull run of Q4 2021, the price of DOT reached another peak of $44.41 in October.
Polkadot is a blockchain framework that enables intercommunication between different cryptocurrencies. Most cryptocurrencies can’t communicate with each other, but Polkadot aims to change that by connecting blockchains through its central “relay chain.” This chain processes all transactions in the ecosystem to improve scalability. User-created blockchains that connect to the relay chain are called “parachains.”
Polkadot uses Nominated Proof-of-Stake (NPoS) to validate crypto transactions based on the amount of collateral each participant holds. NPoS has four roles for dot holders: Validators secure the network, Collators maintain the history of the relay chain and parachains, Fishermen police for invalid transactions, and Nominators are active dot holders who stake their tokens without taking on other responsibilities.
The Polkadot roadmap provides more information on the progress of connecting blockchains.
