What is DOT Coin and How Does it Work?

What is DOT Coin and How Does it Work?
What is DOT Coin and How Does it Work?

So, what is DOT coin? It is a coin that supports the Polkadot network. We believe it will be useful to find out what the network is and what specific features it has.


What is Polkadot

Polkadot is a fundamentally new type of blockchain technology and cryptocurrency. The technology is designed to solve logistical and technical problems encountered with Bitcoin and Ethereum.

This technology provides scalability through the secure interoperability of specialized blockchains. Polkadot is built to connect the unique blockchains of Web3 technology:

  • Public networks;
  • Private chain consortia;
  • Oracles;
  • Networks without permissions.

The platform has two use cases. It is possible to create smart contracts on Polkadot, but it is possible on many other platforms in the cryptosphere as well. And all of these platforms work in isolation.

Polkadot provides what the DeFi space was lacking. Namely the compatibility of independent blockchains. This project creates bridges between blockchains by connecting different cryptocurrencies. How it might work:

  • You create a smart contract on Tezos, and its event triggers a payment on the Ethereum or Bitcoin network;
  • Shiba swap Fantom internetwork using a smart contract, bypassing the stage of centralized exchange;
  • An oracle that transmits price data for dozens of blockchains.

Actually, these are just the most obvious possibilities of the network. And the developers continue to work on the creation and implementation of new interaction projects.

How Polkadot Scales

Scalability is one of the key challenges faced by crypto projects. The creators of Polkadot claim that the system using Parachains will be able to scale from 100,000 to 1,000,000 transactions per second.

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Parachain or otherwise a shard is nothing more than a parallel blockchain. The bottom line is that Polkadot can be divided into several chains, which often interact with each other. Executing projects in parallel chains reduces the load on the network and provides greater speed.

Parachain can be bought and customized to fit the needs of a cryptocurrency project. So far, the upper limit is limited to 100 parachains, which will be deployed in the next few years.

Polkadot Coin: DOT

Like other smart contract protocols, Polkadot uses the Proof of Stake (POS) consensus mechanism. The network has its own DOT token. The DOT coin has several functions:

  • Betting. DOT holders can place bets on Polkadot and receive staking rewards.
  • Binding. When purchasing a parachain, the user “ties” some DOT required to control the parachain.
  • Control. Holders of the DOT coin are eligible to participate in the management of the platform. In particular. They can vote to approve updates or change network service fees.

In addition, DOT is used for settlements within the network. DOT coin is among the top 10 cryptocurrencies by market capitalization and is seen as a potentially profitable investment.

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