Polkadot (DOT) is an extraordinary proof-of-stake (PoS) cryptocurrency and a decentralized protocol focused on delivering compatibility between blockchains. Polkadot’s protocol is modeled for permissionless and permissioned blockchains as well as oracles (a means for smart contracts to access data from the world outside the blockchain) to work in symbiosis.
The Polkadot blockchain works as a cornerstone for developers to build their own blockchains (parachains) and then connect them to the main Polkadot chain (Relay chain). Curious to learn how Polkadot works and where/how you can buy Polkadot crypto? Then follow along as we break it down one step at a time.
Connecting your Polkadot (DOT) Address to ZenLedger For Your Crypto Tax Forms
- To import your Polkadot (DOT) transactions into ZenLedger for your crypto tax forms, all we need is your public address.
- Select the proper blockchain or wallet from the dropdown list.
- Paste your address into the address field in ZenLedger.
- Select if the wallet is based in the USA or not.
- Then hit the ADD COIN button
How Does Polkadot Blockchain Work?
The Polkadot crypto network sustains consensus with the help of two discrete but complementary consensus algorithms. The first is the GHOST-based Recursive Ancestor Deriving Prefix Agreement (GRANDPA), which assists in achieving block finality. The second one is the Blind Assignment for Blockchain Extension (BABE), which helps in producing blocks.
It is a mechanism that helps the Relay Chain in achieving finality and it works provided two-thirds of the nodes are behaving correctly. Also, even if one-fifth of Byzantine nodes are asynchronous, the GRANDPA mechanism works correctly.
When over two-thirds of validators testify to a chain comprising a certain block, all the correlated blocks leading up to that block are simultaneously finalized. Rather than reaching an agreement on specific blocks, GRANDPA reaches an agreement on chains, streamlining the transaction finalization process remarkably.
It operates between the validator nodes and confirms new block creation in the Polkadot blockchain. Moreover, it uses a randomness cycle identical to Ouroboros Praos to allocate block production slots among validators, but the allocation is based on the DOT—Polkadot’s native currency—a validator holds. To get chosen as a block producer, validators partake in a lottery for every slot.
Types of Blockchain on Polkadot
On the Polkadot protocol, there are three types of blockchains:
- Relay Chain
Let’s discuss these blockchains in detail
As we’ve already mentioned, the Relay Chain is the main Polkadot blockchain, and it is the command center of the entire Polkadot ecosystem. The objective of the Relay Chain is to ensure network security and offer cross-chain interoperability and interaction among parachains (more on this later) and external blockchains. This is achieved with the help of the parachains and the GRANDPA and BABE consensus mechanisms. Moreover, the Relay Chain facilitates several types of transactions that support the system’s network governance, partake in the network’s nominated proof-of-stake (NPoS) mechanism, and conduct parachain auctions.
Parachain can be seen as dedicated sovereign blockchains that work as a link in the Polkadot blockchain and are responsible for lightning-fast transactions. To achieve this speed, parachains leverage parallel processing and spread out the transactions across numerous parachains linked to the Relay Chain. Parachains have the capability of hosting their own coins optimized for specific use cases.
As the name implies, Bridges act as a bridge and connect two or more blockchains and facilitate communication among them. These Bridges allow Polkadot shards to connect with Bitcoin and Ethereum blockchains along with parachain blockchain networks with the Polkadot ecosystem.
Roles on the Blockchain
Whoever stakes Polkadot crypto (DOT) on the network has to perform one or more roles on the ecosystem:
- Validators: They validate blocks on the parachains, partake in consensus, and cast their vote for proposed changes on the network.
- Nominators: They select trustworthy validators and secure the Relay Chain.
- Collators: They are full nodes and maintain parachains by gathering transactions on the parachains and generating state transition proofs for the Relay Chain validators.
- Fishermen: They keep an eye on the Polkadot blockchain and report bad behavior to the validators.
Users who stake Polkadot crypto have these responsibilities and also receive DOT in return.
How to Buy Polkadot Crypto?
Now that we know how the Polkadot blockchain works, let’s see where and how to buy Polkadot crypto step-by-step.
Step 1: Open an Online Account
DOT is available in crypto exchanges such as Coinbase, Binance.US, Kraken, Next, and more. You have to open an online account on one of these trading platforms. When you open the account, you have to authenticate yourself by providing your name, address, email id, SSN, and maybe a selfie.
Note: Compare the trading fees, maintenance charges, and other expenses before choosing a crypto exchange.
Step 2: Buy or Download a Crypto Wallet
A crypto wallet is a mobile or desktop application that stores your crypto tokens with a private key. But, for high levels of security, we recommend a hardware wallet. It is a physical device that works like a flash drive, enabling you to transfer your coins into the wallet either via BlueTooth or a USB port.
Step 3: Make Your Purchase
Once your online account and crypto wallet are all set, add funds to your online account and buy DOT. After buying the token, safely store them in the wallet of your choice.
The Polkadot network is appealing to the users because it is focused on interoperability between blockchains. Furthermore, the network is all set to launch a cloud platform, various types of block explorers, and a browser extension wallet. With such projects ready to launch, Polkadot can lead the crypto space in the future.