Originally launched in 2020, Polkadot promises to be an integral part of building the infrastructure for Web 3.0. It’s a next-generation blockchain protocol that offers the ability to connect multiple chains into a central network.

Or, to break it down further, the goal is to allow blockchains that have been designed for different and specific purposes to work together efficiently and securely.

This guide will break down the following topics

  • Current issues with blockchains
  • how does Polkadot work?
  • Polkadot infrastructure
  • How Polkadot address major blockchain issues
  • DOT token
  • Polkadot weaknesses

Current issues with blockchains 

Blockchains are the underlying technology of all cryptocurrencies. The first blockchain created was the Bitcoin blockchain.

While they’re instrumental to the cryptocurrency system as a whole, this does not mean they’re without faults.

As it stands, blockchains remain impractical for many, if not most, real-world cases. As networks are also combined with a single blockchain, they can experience delays when too many processes try to run at once, creating a bottleneck and significant increases in transaction fees.

Other issues that Polkadot tries to solve with blockchains are interoperability, scalability, governance and data privacy.


Interoperability is the ability to see, share and access information across different blockchains.

The entire blockchain ecosystem is made up of siloed chains.

One of the most common desires is to exchange value of one blockchain to another. this can be done via an exchange but it has also meant that certain blockchains have accumulated a disproportionate amount of wealth.


DApp usage and development largely depends on tokens created off certain blockchain protocols.

Naturally, then, developers typically make these off chains that have the largest user base which is problematic for two reasons.

One: it makes it harder for new chains to scale and grow and two: it puts increasing strain on existing networks.


Decisions on the operation of a blockchain are typically made by a small group of stakeholders.

While these decisions should be transparent, they also affect the entire network who has little to no say in decisions.

Data Privacy

All data transacted across a blockchain network is public. You can already see where this presents issues.

One way around this is for organisations to create and manage their own blockchains but, again, this creates interoperability issues.

How does Polkadot work?

The concept for Polkadot was initially thought up by Web3 Foundation president, Gavin Wood, who perhaps is better known as a co-founder of Ethereum and founder of Parity Technologies.

According to their own website, Polkadot “unites [an] entire network of diverse blockchains into a single ecosystem.”

They go on to state the goal of Polkadot is to make it easier for software developers, startups and enterprises to make use of blockchain technology efficiently, in a way that specifically benefits their products.

Polkadot is referred to as a “multi-chain” network, simply meaning it connects different chains into one. 

Polkadot’s network standardises data across its relay chain so it can be understood across every system.

Individual blockchains connect to Polkadot and work parallel to it in what is referred to as “parachains.” Parachains are able to access the Proof-of-Stake (PoS) validation of the network.

Polkadot infrastructure

Relay chain

The relay chain is the main Polkadot blockchain where transactions are finalised. The main responsibility of it is to coordinate the entire Polkadot network including parachains, parathreads and bridges. The relay chain helps create interoperability, consensus and shared security across the network. Validators, nominators, collators and fishermen are the names of various roles that help secure and maintain the network.


Parachains are independent chains that act as custom blockchains. They rely on the relay chain’s computing resources to validate transactions. These chains can be optimised for different use cases and can each have their own individual tokens.


Parathreads act similar to parachains except with more flexible connectivity. They provide different projects with pay-as-you-go access which lowers the economical barrier to entry.


In Polkadot, bridges connect to the relay chain and allow the Polkadot network to communicate with external blockchains like Ethereum.

Polkadot structure

How does Polkadot address major blockchain issues?

Interoperability is one of the major issues that sparked Polkadot’s inception. The idea is that any kind of data or data structure can be transferred across blockchains. So coins from one blockchain could hypothetically be fed through an oracle network and be transferred to a DApp to be used to purchase in-app items.

Parachains themselves also help spread out the load of transactions across multiple nodes. This means less energy (and cost) executing smart contracts.

On that note, the ability to spread transactions across nodes means more can be executed at a time, helping address the scalability issue.

Unlike standard blockchains, Polkadot is governed by any and all stakeholders who want to participate. They propose and vote on referendums using the native token of the Polkadot network, DOT.

In regards to data security, running permissioned chains on top of Polkadot should be fairly straightforward. Parity, which allows individuals on the Ethereum network to run nodes publicly, has worked on permission chains and private transactions to help address data concerns.

How do DOT tokens work?

DOT is the native token of the Polkadot network.

It can be used in a variety of ways, for instance, it provides network governance by granting the DOT holders rights to propose and vote on decisions within the network. 

The tokens also help with network consensus through staking and bonding, further incentivising holders of the DOT token to abide by the rules. If they don’t, they can lose their staked tokens.

Weaknesses of Polakdot

Of course, Polkadot isn’t without its own issues.

It has been hacked twice now, resulting in millions of dollars of loss. 

It also isn’t entirely in a league of its own. Other proof of stake or smart-contracting blockchains that address many of the same issues as Polkadot exist.

With so much competition, this does mean Polkadot and DOT tokens can be volatile – though the same could be argued of any cryptocurrency.


Polkadot was created to address issues relating to interoperability and scalability with cross-chain communication. It also promises more transparent governance with a diplomatic approach to its operation, including voting rights for DOT holders.

Whether Polkadot will maintain its position as a market-leader in this space or one of the various PoS or smart-contract blockchains overtakes it, remains to be seen but it continues to be an interesting space to watch.

Written by Ted

Written by Ted

Quick, easy, secure & seamless

Create Your Free Account

Take advantage of our low fees, low spreads, low prices, and feature-packed app to unlock your trading & investing potential today.

Signup Now