Can Polkadot save DeFi from Ether’s scalability problems?
Web 3.0, interoperability and Layer 0 are all terms that have been used to describe Polkadot. But what do they mean, and how will they affect the Internet and cryptocurrency markets?A new report from Cointelegraph Research explores how Polkadot addresses both the scalability of distributed ledgers and the centralization of networks.
First, imagine a world where Facebook is replaced by a decentralized social media application built on Polkadot. This is what projects like Subsocial build on its platform, which lets users decide what data needs to be kept private and what needs to be shared. Users can profit by minting Ocean Protocol tokens, OCEAN, and selling their data stored on the blockchain to third-party companies on decentralized exchanges like Polkadex.
Are you upset about your bank charging overdraft fees when your account balance falls below $0? Well, a Polkadot-based project called Acala has built an on-chain automated scheduler, similar to a decentralized version of Stripe. This enables users to automatically transfer pledged rewards to their wallet address, which can be linked to a physical credit card. This means that a person can get paid for helping to maintain a decentralized currency and banking system, and the money they earn can be transferred to a credit card and used to buy a cup of coffee at Starbucks.
Does Polkadot deliver on the promise of Ether?
Ether’s consensus mechanism forces all nodes to verify all transactions. In contrast, the Polkadot blockchain breaks new transactions into batches of many shards and processes them in parallel. Blockchains connected to the Polkadot network can have very different operating rules, transaction processing and capabilities, making the whole system much more flexible.
Polkadot is trying to achieve scalability without compromising the security of the network. This famous problem is known as the “blockchain trilemma” and was first articulated by Vitalik Buterin himself, one of the co-founders of Ether.
In contrast to Ether’s single blockchain design, Polkadot has many different blockchains, called parallel chains, accessing a main blockchain, which is also known as a relay chain or layer 0. Similar to the hub-and-spoke model commonly used in airport design, connecting different blockchains through a relay chain creates a way to send messages and transactions between multiple blockchains without slowing down transactions. layer 0 refers to the first layer of protocols, such as bitcoin and ethereum, which can be referred to as spokes, and Polkadot can be referred to as hubs. For example, the NFT project Bit.Country is a Substrate-based blockchain that uses a bridge between Polkadot and Ether to enable assets to flow between Ether and a meta-universe built on Bit.Country’s TEWAI blockchain.
No smart contracts on Polkadot
Since Polkadot’s relay chain does not have smart contracts, it relies on access to Polkadot’s blockchain to enable smart contracts. For example, there is a parallel chain called Moonbeam that is fully compatible with Ether contracts. the developers of Moonbeam have created a way to interact with Polkadot-based digital currencies through MetaMask, a popular decentralized financial browser wallet. This means tokens built on Polkadot’s Substrate (blockchain development tool) can be sent seamlessly to ethereum wallets and smart contract addresses.
The next layer of the Polkadot ecosystem includes projects on blockchains built on top of relay chains. For example, Ocean Protocol is deploying its smart contracts to the Moonbeam blockchain. By building on top of Moonbeam, the OCEAN token will be compatible with Polkadot and Ether blockchain applications.
Rebuilding Ethereum’s network on Polkadot
The improved scalability of Polkadot allows many projects to overcome the high transaction fees and low transaction volume per second of Ether. Similar to Ether-based decentralized data storage projects such as Filecoin, Sia or Storj, Crust Network is building a similar solution on top of Polkadot. Unlike Ether-based projects, Crust Network is not limited by Ether’s scalability issues. Many of the applications we love on Ether are being rebuilt on the Polkadot network or integrated through the chain-agnostic gateway.
The Polkadot ecosystem is full of projects ranging from decentralized cloud computing for the Phala network to cross-chain hosted wallets such as the browser-based MathWallet. the hardware-based virtual private network project Deeper Network has sold over 10,000 physical devices on Indiegogo, Amazon and BestBuy. Deeper’s blockchain solution coordinates all devices and routing in a privacy-preserving manner, holds a device registry (in the form of a public key infrastructure), and manages pledge and reputation subsystems.
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