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The money market is diversifying, and digital currencies are becoming popular with the probability of driving markets in the future years. Cryptocurrencies are not left behind. They have emerged massively, and many forms are coming up. They do not use a tangible medium of exchange. Instead, they use blockchain technology which is circulated across computers that control transactions.
Polkadot is one of the upcoming digital currencies. This article discusses what it is, how it is used, and its advantages and disadvantages.
What is Polkadot cryptocurrency?
Polkadot is a security-focused interchange blockchain specifically made to connect customized side blockchains to a single combined network. It was designed by Gavin Wood, a co-founder of the ethereum, in 2016 and was launched in 2020. It was ranked the 7th largest project by market cap in the whole blockchain industry, as stated by coinmarketcap.com. Its main aim is to promote a more transparent, decentralized, and inclusive internet architecture.
Polkadot’s main element is its relay chain which allows the collaboration of different networks. DOT also allows homogenous blockchains with their local tokens for specific use cases. Polkadot trades for $12.54 per DOT and has a market funding of $11.2 billion, according to January 2021 reports.
Usage of Polkadot(DOT) cryptocurrency The Polkadot cryptocurrency is utilized for purposes like:
Those possessing the DOT coin can govern the system. They have authority over activities like changing the network fees, adding parachains and also help preserve the integrity of the arrangements' on-chain decision-making process.
DOT is used to ensure coin owners are honest and give space to validators to earn rewards for keeping the network's consensus and security.
DOT coin is used to take care of the system's economic needs like funding the treasury, rewarding network branches that run on the network’s consensus mechanism, and controlling the increasing rates.
Polkadot is also used to allocate parachain slots and determine which one attaches to the Relay Chain through a process known as bonding.
Just like any other system, the Polkadot cryptocurrency has both advantages and disadvantages. However, the benefits of the system are more.
The advantages of the Polkadot cryptocurrency
Cross-chain communication and interconnectedness
Unlike other traditional networks, Polkadot is better because it allows connection and communication across chains. This helps applications and networks exchange information and ideas on functioning without relying on specific service providers.
Ability to Upgrade
Polkadot blockchain is known for the aspect of enabling upgrading without having to split the system, unlike conventional blockchains, which needs breaking the network to upgrade.
Diversified sharding mode
Unlike other Blockchains, Polkadot offers a diversified sharding model that enables every chain in the network to be customized rather than obligated to stick to one model for a specific use case. The polkadots’ model allows several transactions to be processed similarly and keeps away minor issues like transactions executed one by one.
Polkadot governance is transparent and fair because it is controlled by DOT owners alone. The holders are given the mandate to suggest protocol changes or vote on current proposals. They can also choose passive stakeholders from elected members of the council as they follow the Polkadot governance structure.
Disadvantages of the Polkadot cryptocurrency
Polkadot uses an interconnected chain which puts the entire chain at a security risk. If the security of one network is compromised, it will affect all the connected chains.
Limited Slot For Parachain
A limited number of parachains are available, approximately a maximum of 100 slots for Parachain. That puts Polkadot in the situation it can’t connect all blockchain projects into one network.
Insane Inflation rates
Polkadot doesn't have a fixed inflation rate, but it fluctuates between 8% to 10%. It’s insane. It has several negative implications.
Polkadot cryptocurrency is an upcoming digital currency. The benefits are remarkable; however, it has few disadvantages. It stands out as the network that can interconnect several networks to work in synergy.