Polkadot is a public chain developed by Parity Technologies in 2017 and is backed by Web3 Foundation. It is a shared blockchain that connects several chains together in a single network, allowing them to process transactions in parallel and exchange data between chains.
The network of Polkadot is separated into the main chain called Relay Chain, various application-specific chains (app chains), and bridges. These components are supported by Substrate (SDK).
What is Relay Chain?
Relay Chain is the central chain of Polkadot. It is used for connecting other networks and providing transaction finality. Relay Chain is designed to have a minimal amount of functionalities, therefore, it only supports limited types of transactions and does not support smart contracts. In addition, Relay Chain is also responsible for the consensus, parachain auctions, and platform governance. Users need to stake $DOT to be a validator on the Relay Chain.
What is Parachain?
Parachains are app-specific chains which can have their own economy and native token. However, Parachains cannot use other consensus algorithms that provide their own finality. The parachains are connected to the Relay Chain and share in the security of the Relay Chain. More specifically, it will collect and process transactions while using the relay chain for finality.
The amount of parachains on Polkadot is limited. App-specific chains need to lease a slot on the relay chain through on-chain auction. The winners are required to lock $DOT for the lease duration (up to 96 weeks at a time).
XCM is a cross-consensus message format, which is used for communication between parachains.
What is Parathread?
Parachains and Parathreads are very similar from a development perspective. Parathreads have the exact same benefits for connecting to Polkadot that a full parachain has.
The difference between parachains and parathreads is economic. Parachains must be registered through a normal means of Polkadot, i.e. governance proposal or parachain slot auction. Parathreads have a fixed fee for registration that would realistically be much lower than the cost of acquiring a parachain slot.
Registration of the parathread does not guarantee anything more than the registration of the parathread code to the Polkadot Relay Chain. When a parathread progresses by producing a new block, there is a fee that must be paid in order to participate in a per-block auction for inclusion in the verification of the next Relay Chain block.
What is Bridge?
A blockchain bridge is a connection that allows for arbitrary data to transfer from one network to another. The Polkadot bridges are used to connect the relay chain, parachains, and other chains (even chains outside of the Polkadot ecosystem).
$DOT serves three key functions in Polkadot:
- to be used for governance of the network,
- to be staked for the operation of the network,
- to be bonded to connect a chain to Polkadot as a parachain.
Gavin Wood was the co-founder and CTO of Ethereum. Before working on Ethereum, he was a research scientist at Microsoft. Gavin Wood proposed and helped develop Solidity, a programming language for writing smart contracts. He also released the paper defining the Ethereum Virtual Machine in 2014.
Wood left the Ethereum Foundation and founded Parity Technologies in 2016. Parity Technologies (formerly Ethcore) is a blockchain infrastructure provider, which developed Parity Ethereum (an Ethereum client), Polkadot, and Kusama. Then, he founded the Web3 Foundation in 2017, a nonprofit organization focusing on decentralized internet infrastructure and technology, starting with the Polkadot network.