Created by Gavin Wood, co-founder of Ethereum, Polkadot is a fragmented multichain network, coordinated by its Layer 0 relay chain, capable of processing transactions on multiple chains in parallel (parachains).
It is known as a multi-chain network because it can link networks by allowing them to interact with each other.
The idea behind Polkadot is to take care of complicated and expensive cryptocurrency mining processes, allowing developers to focus on creating some dapp and smart contract functionality.
Its purpose is to solve two of the main problems that characterize blockchain-based systems: scalability (the number of transactions per second the network can handle) and governance (how the community manages updates and protocol changes).
DOT: the Polkadot cryptocurrency
DOT is the native token of the Polkadot network and allows holders of this token to vote on possible code changes throughout the network.
At the time of writing, Polkadot has an allocation of 1 billion DOT tokens, following the redenomination of the network from an initial maximum supply of 10 million in August 2020.
How to mine Polkadot?
Before answering the question How to mine Polkadot, it is important that you first learn about the consensus mechanism on which this platform is based and how it works.
The Polkadot network has a highly sophisticated governance system in which all DOT holders have a voice and help protect it.
As you have probably already read in another article dedicated to Polkadot, this platform has 4 parts that constitute the key point of its operation: nominators, validators, classifiers and fishers that perform various tasks to help protect and maintain the network and eradicate misbehavior.
- NOMINATORS secure the network and function as trusted validators.
- The VALIDATORS are responsible for sealing the network blocks.
- The CLASSIFIERS are responsible for maintaining the blocks and the information necessary to create new network blocks.
- Finally, the FISHERS are in charge of finding potential malicious behavior on the network.
Regarding the consensus algorithm, the network uses the NPoS (NominatedProof of Stake) mechanism to select validators, nominators and maximize the security of the chain.
This is an adaptation of Proof of Stake (PoS) in which an unlimited number of DOT token holders can choose a large number of validators who are responsible for executing the relay chain.
In the NPoS, a proportional representation system is used in which each minority in the nominating pool can elect a number of validators in proportion to their participation, with no under-represented minorities.
Nominators share potential fines and financial rewards with the validators they endorse, and are therefore financially incentivized to choose validators with a strong track record of performance and safety practices.
The chosen validators produce new blocks, validate the parachain blocks and ensure finality. Nominators may choose to support specific validators with their participation.
The system pays validation rewards equally to all validators regardless of their participation, and participation rewards are distributed proportionally to all participants after the validator’s payment is deducted.
Now that you know how polkadot’s platform works, you will have intuited that its native DOT cryptocurrency cannot be mined in the classic sense of the term. If you want to earn DOT tokens you will have to own an amount of DOT (this is a dynamic amount) which will give you the possibility to participate in the governance of Polkadot and to earn rewards for voting and keeping the network safe.
IS IT PROFITABLE TO EARN DOT REWARDS?
Polkadot is currently the leading NPoS-based platform and one of the most secure. It currently has a market capitalization of over $47,484,555,625 and offers estimated rewards of 14%. At the time of this writing, there are 925,745,211 DOTs in circulation.
Which Wallet to choose for DOT Staking?
If you want to know how to do Polkadot (DOT) staking, we tell you that you will need to bet a minimum amount of DOT necessary to obtain rewards. This amount is dynamic.
Remember that, at the moment Validators are nominated, users’ DOT tokens are locked for 28 days.
So, if you need a wallet to store and bet DOT, you need to have a Polkadot Wallet.
This is why I advise you to use a browser extension (polkadot{.js} extension) that allows you to create your own Polkadot wallet.
If you have Chrome, you can install it here. If you use Firefox you can download it from here.
Once the extension is installed you will be able to create your wallet to store your DOTS. Always remember to keep your private keys in a safe place.
If you prefer a more secure option, then I recommend the Ledger Nano hardware wallet.
Future of Polkadot
Polkadot had a successful launch and has become the fifth largest cryptocurrency by market capitalization in a remarkably short time, thanks to its aim to solve scalability, governance and interoperability issues. Now, its main challenge is to maintain its position and defend itself against other competitors that promise more efficient and effective solutions in terms of scalability and interoperability.
