September 16, 2021 |James Messi
Beaxy Exchange adds support for Polkadot (DOT) deposits, withdrawals, and trading for DOT-BTC. DOT is the native token for Polkadot, cryptos leading innovator for blockchain interoperability.
What is Polkadot?
Polkadot is a blockchain protocol with a multi-chain architecture that enables external blockchains to connect and communicate with each other. As a leading innovator in developing solutions for cross-chain interoperability, Polkadot allows its users to seamlessly and trustlessly send digital assets and data back and forth between external blockchains such as Bitcoin and Ethereum. Cross-chain interoperability opens up a whole new world of possibilities for what blockchain technology can achieve.
The Polkadot protocol was created by Gavin Wood, an Ethereum co-founder that was eager to begin building a decentralized solution to connect all blockchains. The development wing of the project is managed by Parity Technologies, which focuses on building the infrastructure for Web 3.0 or the Decentralized Web.
The ultimate goal of the Polkadot ecosystem is to enable a fully decentralized internet where participants are in control of their digital assets and personal information. By facilitating a new type of internet where any type of blockchain can swap assets or information in a trustless manner, Polkadot is delivering on its mission.
How Does Polkadot Connect External Chains?
Polkadot connects independent protocols by acting as an internet for blockchains. Polkadot is able to connect external chains by deploying a relay chain, parachains, and bridges.
The relay chain is the core layer of the Polkadot ecosystem. It maintains the primary ledger that organizes and tracks all of the transactions that take place on the network.
Parachains make up the second layer of the Polkadot protocol that sits on top of the relay chain. Parachains refer to the independent chains that are interacting with Polkadot’s relay chain. The external blockchains run in parallel to create the parachains.
Running independent chains in parallel allows for greater scalability and faster transaction confirmations. Parachains can be used by private organizations to create custom protocol slots that can then be connected to any other blockchain.
The outermost layer of the Polkadot protocol consists of bridges. The bridges execute two smart contracts that create and relinquish a connection to an established blockchain such as Chainlink. These smart contracts allow users of established blockchains to seamlessly connect to the Polkadot ecosystem.
The DOT Token
DOT is the native token for the Polkadot blockchain. Within the Polkadot ecosystem, the DOT token is used for maintaining governance, staking, and bonding.
Anyone that holds the DOT token is given certain rights within the Polkadot ecosystem. Top among these is the right to vote. DOT token holders are given the opportunity to vote on proposals for upgrades to the network, determining what Polkadot’s network fee should be, and general matters of governance.
Votes are counted both by the number of tokens held by the voter and are weighted by the amount of time that is chosen to lock the tokens for the vote. For example, a DOT holder that decides to lock their tokens for a longer duration for the vote will receive more total votes towards their choice.
The Polkadot protocol uses Nominated Proof of Stake as a consensus mechanism. In a Nominated Proof of Stake system, nominators support validators by staking tokens as a means of collateral for the validator. Nominators can support up to 16 validators. The validators confirm the transactions on the Polkadot network and mint new blocks.
DOT token holders can participate in securing the Polkadot network by staking their tokens as a nominator or a validator. Both nominators and validators provide important support that helps to secure the network and receive DOT tokens are a reward for staking.
Bonding refers to the process required for one to acquire a parachain. To purchase a parachain, the user needs to bond DOT tokens from the parachain, to the relay chain. This establishes and validates the running connection between the independently owned parachain and the base-layer relay chain.
At the time of writing, the DOT token has a market capitalization of $15 billion. There are currently 958,102,580 DOT tokens in the circulating supply. The maximum future supply is set at 1,088,826,736 DOT. Global daily volume typically falls in a range of $1 to $4 billion. The all-time low price for DOT was made at $2.69 on August 20, 2020. The all-time high for DOT was hit at $49.69 on May 15th, 2021.
Trading DOT on Beaxy Exchange
Trading DOT has never been easier. Seamlessly convert BTC to DOT when you sign up on Beaxy Exchange. Create your account today to buy, sell, or trade DOT on a secure exchange with low fees.
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