An Explanation of Polkadot for Humans

What is Polkadot, and how does it differ from existing blockchains? What is its purpose and which chains does it compete with? This post will explain it all from a very high level - no technical expertise needed other than a basic familiarity with the term blockchain.

Video version

How Polkadot Works

Polkadot has a main Substrate-based blockchain called the Relay Chain. Other blockchains can connect to this main chain, and we call those parachains.

The connecting chains produce blocks however they see fit - the Bitcoin blockchain has its own rule for making blocks, Ethereum has its own rule, and Edgeware, a smart-contract blockchain, has its own method of building blocks.

What they get from the Relay Chain is finality - the ability to call a block final, so that it - and transactions within it - can't be reverted.

For the curious: A block can be reverted if a fork occurs. A fork is a disagreement between the different software programs running the blockchain where one set of programs, also called nodes, will build blocks in one direction, and the other will go their own way.

Forks happen all the time and usually die off, but in some very rare cases a long-lived fork can take over a previous fork, up until that moment thought of as the main chain. The fork would then become the main chain, and the transactions executed on the overwritten fork would effectively be reverted. Finality prevents this. 

Polkadot itself is not a blockchain that wants to compete with any of the popular blockchains out there right now. Instead, Polkadot wants to bridge the chains so they can communicate - the goal is to unify the fragmented blockchain ecosystem.

Cross-Chain Composability

Bitcoin is a blockchain. Ethereum is a blockchain. The two are fundamentally different, and what value is locked on Bitcoin cannot move to Ethereum - you cannot send bitcoins to Ethereum trustlessly (without a centralized intermediary to hold your Bitcoin for you).

For the curious: Why would I want to move my Bitcoin to Ethereum? Ethereum has a vibrant DeFi (decentralized finance) ecosystem in which you can issue or take loans, put your money to work by investing in synthetic assets, or even bet on the price of Ether without losing exposure to your Bitcoin. On Bitcoin, none of this is possible - the money just sits there.

Polkadot is a system for cross-blockchain communication.

Polkadot allows completely different blockchains to talk to each other in a decentralized way. Polkadot allows you to compose cross-chain applications. It allows sending of messages from one chain to another, and if we consider a message to be anything from a financial transaction, to a chat message, or even some web content, we can apply this to our Bitcoin-to-Ethereum problem.

For the curious: a slighlty more technical version of this story is illustrated in this video.

Shared Security

The Relay Chain is a blockchain, and this blockchain is secured (or "mined" for lack of a more familiar term) by entities we call validators. Validators run Polkadot nodes which are occasionally given the right to produce a new block. They are rewarded for doing this well.

Anyone can become a validator if they have enough stake behind them. Stake is expressed in DOT tokens, the native currency of Polkadot's Relay Chain. The top few hundred validators ordered by stake will be selected as active validators.

For the curious: Validators can be punished if performing their duties badly - like being offline when they're expected to do work. This will take away some of their stake, literally confiscating their money.

A subset of active validators is randomly assigned to each parachain, and this assignment rotates in an unpredictable way every few hours.

Once in every period of six seconds a parachain will send a block candidate to the Relay Chain. This candidate will be inspected by the validators dedicated to that parachain at that moment. If that block candidate checks out, it gets included in the main Relay Chain block, and the parachain can produce the next block. The parachain's last submitted block has been finalized, and it can continue growing worry-free.

Every parachain depends on the Relay Chain validators for this ultimate seal of approval. The more parachains there are, the more validators there will be, and the more economically secure the whole system is - remember, you need stake to become a validator, and your stake is locked (bonded) in the system while you perform the duty of a validator.

In this way, all the parachains share the security provided by the Relay Chain, and every chain is as attack-resistant as the entire system.

Forkless Upgrades and Governance

Traditionally, upgrading a blockchain's features always caused a fork: some nodes update, others do not, and those that do not stay behind on a fork until they update and sync up with the others. This is a painful process when your chain's nodes are globally distributed and you have no way of contacting your anonymous patrons.

Polkadot solves this with on-chain runtime and on-chain governance. On-chain runtime means the code containing the rules for producing new blocks is stored on the chain itself. So nodes, programs running your blockchain, just need to read that and they're up to date. So how do we update this code?

On-chain governance lets any DOT holder propose and vote on a referendum. A referendum is a suggested change to the blockchain's logic or data. With governance, the community can propose and vote on a change to the on-chain logic, which gets auto-applied when it passes. No replacing of software, no manual intervention.

For the curious: a very detailed breakdown of on-chain governance can be found on the wiki.

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