Investing in Polkadot

By   |   Verified by David Boyd   |   Updated 15th August 2022

Polkadot (DOT) gives users the opportunity to run their own blockchains. It is designed to expand the ecosystem of cryptocurrencies by allowing different blockchains to operate on one blockchain.

The project has some heavy-hitting backing. It was launched in 2020 by the co-founder of Ethereum, Gavin Wood. Polkadot is somewhat similar to Ethereum in both design and operation.

If you’re interested in Polkadot as an investment, read on for more information.

What is Polkadot?

The Polkadot project enables external user-created blockchains to run on a single relay chain. It has a main network that powers and operates multiple external networks called parachains. Different parachains can communicate with each other via the relay chain or the main network.

This multi-chain structure allows different parachains to be created for different uses. The Polkadot network is composed of three types of blockchains: the Relay Chain, Parachains, and Bridges. Bridges enable the Polkadot network to build bridges and communicate with other blockchains like Ethereum and Bitcoin.

Unlike Bitcoin and other blockchain-based networks, Polkadot consumes less computational power as all parachains are fueled by a central source. It is a more eco-friendly alternative to other blockchains.

Polkadot transactions are carried out in the same way as Ethereum or Bitcoin. However, Polkadot uses proof-of-stake (PoS) protocol as a consensus mechanism to validate transactions.