Now that Bitcoin and Ether have both seen mainstream institutional interest, what will be the next big thing? Keld van Schreven, managing director at digital asset investment company KR1, says to watch out for Polkadot.
“We’re seeing talent move on to Polkadot that was going to build on Ethereum,” he said to Forbes. “I think it’s going to be one of the winners in the next few years, and then it’s going to last for maybe a hundred years.”
High praise, indeed. But what is Polkadot? Like Ethereum, it is a blockchain network that allows for smart contracts and decentralized applications. Also like Ethereum, it has its own native cryptocurrency that adds built-in liquidity to the ecosystem; Dot (DOT) is to Polkadot what Ether (ETH) is to Ethereum. The two technologies even share a co-founder, the English computer scientist Gavin Wood.
The biggest difference between the two networks is that, unlike Ethereum, Polkadot is comprised of multiple blockchains. The central “relay” chain provides security for the entire network, while the side chains increase the network’s capacity and functionality. While it is the relay chain that makes sure nothing fishy is going on, the fancy stuff is all happening elsewhere. Anyone — or at least, anyone with the funds and the know-how — can lease a side chain and bring a new feature to Polkadot.
While Ethereum is still working on their version 2.0, Polkadot has been characterized as Ethereum 3.0. The use of multiple blockchains sounds cumbersome, but it makes the network much more scalable. Each application having its own dedicated side chain means that transactions can be freely added now, then verified later. This what allows Polkadot to process up to a thousand transactions a second, ten times the speed of Ethereum.
DOT investment products, like the ones released by Osprey in early May and 21Shares AG earlier this year, have proven popular with big actors like Goldman Sachs and JPMorgan. The price has went up eightfold since last year, and this is all before auctions for side chain slots have even opened.
The idea of multiple blockchains on one network has seemed to gain traction, with Ripple announcing an update to the XRP that would allow smart contract functionality on a new Federated Sidechains system.
The white paper for Polkadot is available on GitHub.