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Polkadot is both a cryptocurrency and a protocol, or blockchain platform, that allows users to send and receive assets or data. The protocol is particularly novel because it facilitates transfers across blockchains without needing an intermediary or exchange.
Polkadot was launched in 2020 and is the flagship project of the Web3 Foundation, an effort launched by a group of seasoned crypto execs that includes Gavin Wood, Ethereum's co-founder and former chief technology officer. The foundation's ultimate aim is "delivering Web 3.0, a decentralized and fair internet where users control their own data, identity and destiny".
To best understand Polkadot, think about it in terms of its two distinct functions. First, Polkadot is a token, like Bitcoin or Dogecoin, that can be bought and sold on cryptocurrency exchanges or used as payment. Its coin is known as DOT.
Polkadot is also a blockchain protocol. A protocol is a set of rules that tells software or programs how to process data. Protocols existed long before cryptocurrencies became popular; everything from email to Bluetooth to hardware like your internet router uses protocols.
The process is complex, but Polkadot's protocol basically allows different blockchains to send and receive assets or data. As a result, once-incongruous blockchains can now communicate with one another, and users can, for example, exchange coins across the Bitcoin or Ethereum networks through the Polkadot blockchain.
Polkadot operates three kinds of blockchains: relay chains, parachains and bridges. Think of relay chains as the central spokes in a network of blockchains. The relay chain permanently records coin transactions and handles the blockchain's security.
Parachains are user-created blockchains that connect to the relay chain. They can have their own uses and coins and can also be used to transfer data and other assets.
Finally, bridges are blockchains that allow Polkadot shards, or bits of its blockchain, to exchange data with other networks, like Bitcoin or Ethereum.
Polkadot's founders say this more open network of blockchains "unlocks a wide range of real-world use cases." Accordingly, Polkadot looks to support a vast communication network, which encompasses otherwise unrelated blockchains.
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Polkadot coin price today
Compared with well-known tokens like Bitcoin and Dogecoin, Polkadot is a reasonably young currency. Because of that, its market value hasn't seen the astronomical highs and lows that other tokens have experienced in recent years.
Below, you can find Polkadot's price history and current price.
Pros and cons of Polkadot
Polkadot is one of several crypto projects hoping to grow the ecosystem. Here are the pros and cons of DOT.
Experienced leadership: The team behind Polkadot and the Web3 Foundation are tenured in this space. In addition to Ethereum co-founder Wood, the foundation is helmed by Aeron Buchanan, the former head of European operations and regulatory compliance for Ethereum.
Plans beyond the coin: Polkadot's focus on its coin and its broader blockchain network speaks to its ambitions beyond its use as a digital currency. Instead, it hopes to create a linked network of once-competing blockchains — the innovation needed for blockchain technology to become more widely adopted.
Polkadot's blockchain sharding: Polkadot's expansive blockchain network is possible because of a process called "sharding," or breaking up a blockchain into smaller bits. Polkadot links "multiple specialized chains together into one sharded network," according to the coin's founders, allowing several transactions to be processed at once instead of independently. This positions Polkadot to compete against other groups building similar open blockchain networks.
Relative newness: For all the hype Polkadot generates, it's important to remember that the coin was launched in 2020. By comparison, Bitcoin dates back to 2009, Ethereum to 2013. The coin's relatively short lifespan is worth considering.
Still in development: One of Polkadot's planned features, which its founders say will increase the volume of shards a network can support, is still in development. That isn't alarming on its face, but it's a factor that should be weighed, considering much of Polkadot's appeal is tied to its potential to create and support far-reaching blockchain networks.
Sector's overall riskiness: For all of Polkadot's appeal, it is still part of a relatively new, relatively risky technology that hasn't achieved mainstream adoption. Crypto proponents are optimistic, but Polkadot's success depends on the sector's overall growth and utilization.
Disclosure: The author held no positions in the aforementioned investments at the original time of publication.