Since the release of Bitcoin in 2009, blockchain projects increased exponentially to the order of tens of thousands. Different projects have different value propositions, suggesting that the future will be multi-chain and that inter-chain communication will be crucial to establish collaborations and leveraging each other strengths.
Polkadot 1.0 reflects the status of Polkadot in 2023 at time of the release of the Polkadot runtime v1.0.0. This sections focuses on Polkadot 1.0 and some philosophical digressions about network resilience and blockspace.
Polkadot is a Layer-0 blockchain that brings to the multi-chain vision the following innovations and initiatives:
- Application-specific Layer-1 (L1) blockchains (or parachains). Polkadot is a sharded network where transactions are processed in parallel with each shard. Polkadot shards can be heterogenous (i.e. they do not need the same state transition function as in the proposed Ethereum sharding architecture). This allows to build L1 chains designed explicitly around their application and value proposition.
- Shared security and financial scalability of L1 chains. Any L1 chain attached to a Polkadot core can benefit from Polkadot shared security model. This means the Polkadot Nominated-Proof-of-Stake (NPoS) mechanism along with its consensus mechanism, will secure L1 chains out-of-the-box without having to bootstrap security on their own.
- Secure interoperability. Any L1 chain attached to Polkadot (as well as L2 chains built on top of them) can benefit from Polkadot's native interoperability and will thus be able to communicate and exchange value and information with other parachains.
- Truly resilient infrastructure. This is achieved by keeping the network decentralized without compromising scalability and throughput and through on-chain treasury funds that can be accessed through governance referendum. Those funds guarantee constant sponsorship for events, initiatives, educational material, education, software development, etc.
- Fast development and deployment of L1 chains. This is achieved through the modular and flexible Polkadot SDK Substrate.
- Fostering next-gen of Web3 core developers. This is achieved through different initiatives such as:
Polkadot has a Relay Chain acting as the main chain of the system. The Polkadot relay chain has been represented as a ring surrounded by multiple parachains attached to it. Based on Polkadot's design, as long as a chain's logic can compile to Wasm and adheres to the Relay Chain API, then it can connect to the Polkadot network as a parachain.
Parachains construct and propose blocks to validators on the Relay Chain, where the blocks undergo rigorous availability and validity checks before being added to the finalized chain. As the Relay Chain provides the security guarantees, collators - full nodes of these parachains - don't have any security responsibilities, and thus do not require a robust incentive system. This is how the entire network stays up to date with the many transactions that take place.
The Cross-Consensus Messaging Format (XCM) allows parachains to send messages of any type to each other. The shared security and validation logic of the Relay Chain provide the environment for trust-free message passing that opens up true interoperability.
In order to interact with chains that want to use their own finalization process (e.g. Bitcoin), Polkadot has bridge parachains that offer two-way compatibility, meaning that transactions can be made between different parachains.
Polkadot's Additional Functionalities
The Polkadot relay-chain also manges crowdloans, auctions, staking, accounts, balances, and governance. Parachain slots or cores are leased in 6-month chunks for a maximum of two years, and crowdloans allow users to trustlessly loan funds to teams for lease deposits in exchange for pre-sale tokens. There is no other way you could use Polkadot 1.0.
Decentralization is a crucial aspect of blockchain networks, but there is a trade-off between:
- having an over-decentralized network that struggles to reach consensus and consumes a lot of energy to operate, and
- having a network that reaches consensus fast at the expense of being centralized, making it trivial to manipulate or attack.
Ideally, a network should be decentralized "enough" to make it practically impossible for someone to exert manipulative or malicious influence on the network. So, decentralization is a tool while the goal is resilience, which is achieved by additionally providing on-chain treasury and governance mechanism allowing continuous incentives for the network's participants without relying on intermediaries or centralized entities.
Currently, Polkadot 1.0 achieve resilience through the following strategies:
- Nominated Proof of Staking (NPoS) where the stake per validator is maximized and evenly distributed across validators.
- The 1KV program aims to incentivize new operators to become network participants and further increase physical (how many validator nodes per service provider) and social decentralization (how many validator nodes per operator). Those can be explored with the Polkawatch App.
- An on-chain treasury and governance (see: OpenGov where every decision goes though public referenda and any token holder can cast a vote.
The design and realization of Polkadot 1.0 allowed its creators to enable commoditization of blockspace.
A blockchain is a way to store data. The storage unit is the block, and once a block is finalized onto the chain, it is practically impossible to modify the data within that block. In addition to being tamper-proof, public permissionless blockchains like Polkadot store data that are visible to everybody (i.e. public), and anybody can become a network participant permissionlessly.
Blockspace is the capacity of a blockchain to finalize and commit operations. It represents a blockchain's security, computing, and storage capability as an end product. Blockspace produced by different blockchains can vary in security, flexibility, and availability.
- Security, intended as how secure the blockspace is. In Proof-of-Stake (PoS) networks, this is directly related to how much stake is locked on validator nodes, how much variance in stake there is between validators (i.e. how easy it is to attack a single validator), and how many validators there are securing the network (i.e. how easy it is for colluding validators to exert influence on the network). Additionally, it is also important to look at how many validators are owned by single operators (this will determine the degree of social centralization of the network), and how many validators run on the same service provider (this will determine the degree of physical centralization of the network).
- Flexibility, intended as how flexible the blockspace is, what can be done with it, and what type of data can be stored. Data quality plays an important role depending on the type of network. One might avoid having situations in which poor quality data flood blockspace hindering the prompt execution of vital processes.
- Availability, intended as how available blockspace is and how difficult it is to access it. It should not be too difficult to get your hands on it so that any business model can thrive using it. Ideally, a marketplace must drive the blockspace price based on demand, with secondary market options to ensure the usage of "second-hand" blockspace.
Polkadot has been designed around those core blockspace principles. However, its design can be further improved such that the tasks which are currently managed on the relay chain, such as balances transfers, staking, and governance, can be delegated to system parachains to increase flexibility and to focus the use of the relay-chain to provide shared security and interoperability. Blockspace is only accessible through slot auctions, but an auction winner has access to a "freighter of blocks" regardless it is needed or not. This creates high entry barriers and it can lead to waste of energy and resources.
A Perspective Shift: Upcoming Polkadot Features
As with many other projects before Polkadot, at some point in time after achieving the initially-planned goals, a perspective shift allows you to understand better what your project is about and what you actually have built. This allows you to "run the extra mile" and achieve more than what was originally planned.
The quote below by Marcel Proust must remind us that sometimes a perspective shift is crucial in understanding the world, and perhaps it is more important than seeing more of the world.
The only true voyage of discovery, the only fountain of Eternal Youth, would be not to visit strange lands but to possess other eyes.
Thus, if we start to see Polkadot with other eyes we can truly envision its potential and what it could become.