What is Polkadot Network and Staking on Polkadot Network

Are you new to the Crypto world and wondering What is Polkadot network and what the buzz is all about? Polkadot is the next big thing when it comes to stepping up blockchains in the smart crypto-age. There is a lot that Polkadot promises which you wouldn’t find with any other cryptocurrency. With all the perks that it comes with, its growth is inevitable and you better get on board while it is still early and picking. Tech savvy geeks who oversaw the mooning of Bitcoin and the ever rising Ethereum have got the attention of the amazing dot (DOT) token, of the Polkadot blockchain which has seen an explosive growth over recent months.

In this guide, we will go through the introduction of Polkadot and help you explore beyond the definition by getting you to understand more about staking on Polkadot.

What is Polkadot Network?

To better understand the Polkadot network and what comes with it, we need to first understand what and how blockchains work. A blockchain network uses peers (multiple computer systems) to store data in nodes. In a nutshell, it doesn’t store information or data in one location like you would do with data in your computer. It uses multiple nodes that are networked together. The same data is stored in these computers (nodes). Whenever the data is updated in one computer, it updates the record across all the nodes. This is meant to improve the accuracy and reliability. There is therefore no way that the data can be manipulated, and has since been used to reliably transact billions worth of dollars. It has become very dependable and its use is exploding all over the world.

The blockchain systems used by cryptocurrencies like Bitcoin and Ethereum are immutable which means that the data is entered irreversibly and spreading the data across different computers enhances dependability of the data.

Polkadot on the other end is a system that utilizes NPoS (Nominated Proof-of-Stake) which basically means that that there is a layer of validator set which is nominated by DOT holders (nominators). This improves efficiency and security and with the improved speed, users get better transaction speeds than you would find with the common blockchain based systems.

There are many instances where Polkadot can come in handy in replacing the traditional blockchain based systems. This may include applications ranging from anything in Finance, Health, Education and many other sectors.

Shared below are some of the major issues that cryptocurrency blockchains have.

Speed Limitation

the number of transactions that can be done through a normal cryptocurrency blockchain is limited. by way of example, Bitcoin allows procession of 7 transactions per second, Ethereum has a 25 transaction per second speed. By comparison, this is considered low which is a major challenge as it will lag with overloads.

System Integrity Monitoring

With normal blockchain systems, there is need to keep the system always secure and running as it is needed all the time. It is a tasky approach to secure the network and would be better if there ways a way to manage this more efficiently. And this is where dot (DOT) token like Polkadot comes to play.

Centralized Governance

As much as cryptocurrencies are run from different peer nodes, critical issues are only decided by the owner or a group of people who have their own thinking on how to run it. This leaves the future of the cryptocurrency in the hands of a few, not to mention the limitations on improvement that comes with that. updating such systems also tend to be more difficult.

How Polkadot Network Is Better

There are many ways that experts see and find the Polkadot network to solve some of the common issues experienced with the blockchain networks. Below is an overview of Polkadot network and how it can address some of the traditional blockchain system functionalities.

Polkadot Is Faster & More Efficient

Common blockchains have the tendency to break or lag when there are many people using or transacting at a time. This means that you will have to wait for some time to confirm the transaction.

Apart from this being the major issue that the blockchain based systems have had to face, it means that as they grow, they become slower and less dependable. As aforementioned, Bitcoin currently has speeds of 7 transactions per second, while Ethereum has about 25 transactions per second. By comparison with Visa card which has the capability of transacting about 65,000 transactions per second, it is clear to see why the traditional blockchain systems are a far-cry from being dependable. Amazing enough, Polkadot beat them all. The Polkadot system has the capability of handling 166,666 transactions at the moment and with ability to be upgraded to higher speeds.

Better Security With Polkadot

While top blockchains like Bitcoin and Ethereum have a dependable and very secure system. This is because the system is based on validation. The system is made up of validators and nominators (holders of DOT holders). With this, DOT holders are encouraged in a program where they nominate validators which helps to build credibility in the network. Nominators can nominate up to 16 validators as trusted candidates. These validators helps to build new chains through a system called BABE (Blind Assignment for Blockchain Extension). They also play the role of validating parachain blocks and guaranteeing finality.

From this structuring, it is clear that users will get better security and integrity as compared to when they would rely on a a blockchain system that is solely dependent on trust.

Improved & Dependable Governance

The future of a blockchain is based on how it is run. With Polkadot, the system is run on a more sophisticated mechanism which guarantees a more guaranteeing future. Unlike the blockchains which is dependent on the owner, founder or the few people at the top, Polkadot network is more open and DOT holders have a word on both how the system runs and how it is updated. It employs some novel mechanisms to achieve this. These methodologies includes using amorphous state-transition based on the chain, WebAssembly neutral language as well as voting mechanisms such as adaptive referenda based on majority stake and approval voting.

In a simpler manner, the use of Polkadot is more like a democratic controlled system where DOT holders have a say, and this is what guarantees its future.

Staking On Polkadot Network

Now that we have a better understanding of what Polkadot network is all about, let us delve onto how staking on Polkadot works.

The staking process on Polkadot network is sophisticated and is done on a pro-rata basis. The system rewards stakers not based on the amount staked but rather gives all stakers an equal amount of reward to all validators. So, regardless of the stake, everyone gets an equal reward.

However, as much as the stake amount doesn’t affect the influence nor the rewards that a validator has, there is a probabilistic component that alters the power of validators in a particular era. The system, through a pro-rata basis, incents lower stake validator nominations to equate the validator stake sets.

How Actual Staking Works On Polkadot

Here is how staking on Polkadot works. The staking process involves both validators and nominators.

Nominating Validators

Nominators are given the chance to nominate from 1 to 16 validators that they trust in helping them get rewards on the system. Nominators play a crucial role when they nominate validators. This is because the integrity of the system relies on dependable validators that the nominator elects as a candidate. It goes without saying that it is very important to nominate good validators. If the nominator fails to do so, and ends up with a poor validator who is not always online to perform their duties, the validators will be slashed and consequently the nominator will also lose a DOT. Good validators that you pick will help you share the reward stake.

On the other end, Validators are required to be available and responsive around the clock. They do most of the heavy lifting in the “parachain” and are expected to perform different duties including creating new blocks, validate the state transition function and other duties concerning data availability. They are required to execute their duties fast and promptly as required. The validators need to avoid slashable behaviors in order to keep the system running smoothly and effectively as required.

Validator Nomination Process

the process of nominating and getting validators elected is a sophisticated one. A validator is required to meet certain requirements. After which they need to state their intention of becoming a validator. Their validation intention will then be made public where nominators are free to nominate them. Nominators will then submit a list of validators that they wish to support. There is no strict requirement for one to become a nominator and every DOT holder can participate. However, they have the role of keeping track and monitoring the validators that they vote for. After this a list of validators who have received most votes will be selected and become active to operate. It is worth noting that the validator slots are limited.

The whole idea of using DOT holders as nominators and to vote for validators is to increase security and come up with a dependable system that is user defined. It also ensures that there is a fair representation in matters to do with decision making. Currently, the total number of DOT required to be approved and become an active validator is 350.

Reward Distribution Process

Through the NPoS (Nominated Proof-of-Stake), a validator pool is created where validators have their backers. The reward system works in a stake based mechanism where for instance if a certain nominator has multiple validators that they back, their stake-power would be split among the nominators that they have. A validator will receive rewards based on the backers that they have which means that there is involvement of multiple pools created by the different backers that nominate them. The rule of the thumb is that a validator pools are rewarded the same as other pools and not proportionally based on the stake in that pool.

In a validator pool, there is a percentage that is set aside to be used to pay for the validator service fees while the remainder goes to the nominators and validators and this is usually based on the amount of stake. The total reward amount that one can get is 100 DOT tokens.

As much as validators and nominators in a validation pool receive the same amount of rewards, it is worth noting that lower-stake pools tend to pay higher per DOT to nominators as compared to those that have higher stake. In a nutshell, nominators gain more when they shift their focus and preferences to smaller staked validators who have a good reputation. The validators do not usually have their own stake and receive the same number of era points. Validators do not change any commission fees.

Below is a video guide on Polkadot for beginners.

Final Word

Polkadot is taking over, and with the history of how Bitcoin came to dominate the cryptocurrency arena, this is something that is not only worth watching but also diving in and being part of the growth. It demonstrates and promises a more stable, secure and more dependable way to transact. Millions of people are banking on it, and with the results of its growth already visible, there is no reason why you shouldn’t dive in.

The Polkadot network uses a system dubbed as “parachains”, and is very promising in terms of speed, efficiency and security.

The appetite for a better chain system in the cryptocurrency world has been increasing, and Polkadot is here with goodies.

Here at Substar, we are enthusiastic and always keen on Polkadot as a new game-changer. We would be pleased to have you on board to our network where we have been running a successful validator nodes for a while. Get in touch with us if you need anything, or would like to chat with someone to guide you through the mazes of the Crypto world.