Polkadot guide

The Complete Introductory Guide to Polkadot

In 2008, Satoshi Nakamoto created blockchain technology and took the world by storm. Since then, worldwide spending on blockchain solutions has grown from $90 million to $1.5 billion in 2018. According to recent reports, the blockchain industry is expected to reach an estimated $15.9 billion valuation in 2023. Clearly, blockchain solutions are all the rage in the business world. For a long while, Ethereum was, by many standards, considered the best platform for building blockchain-based solutions — Bitcoin itself belongs to a different class of blockchain solutions. Well, Bitcoin is popular as a cryptocurrency asset, but when it comes to harnessing the limitless possibilities blockchain offers, Ethereum has always taken pole position.

Until recently…

There’s a new blockchain platform on the block: Polkadot.

Polkadot offers so many features that are unachievable with your traditional blockchain platforms. Even more, it’s a credible project; many thanks to its renowned creator, Gavin Wood.

Wood, alongside Vitalik Buterin and several others, famously founded the Ethereum blockchain. He invented the widely used smart contract language Solidity and wrote the Yellow Paper with technical specifications for the EVM. Wood also served as the first CTO of the Ethereum Foundation.

The Finvesting.net team created this guide to introduce the Polkadot blockchain and help you understand how this blockchain platform works.


What Is Polkadot?

In the simplest term, Polkadot is a network of blockchains. It aims to be the connecting chain between several blockchain networks and promote interoperability, value transfer, and pooling security between several blockchain networks.

This is done by unifying different blockchains into one while allowing seamless communication between them.

By unifying several blockchains, you gather their strengths and sort out weaknesses to create a unique blockchain network: Polkadot.

Projects hosted on the Polkadot network benefit from Polkadot’s advanced security network.

How Polkadot Works

Let’s say you created a smart contract on the Ethereum network, this smart contract has no idea about the transaction happening on the Bitcoin network and vice versa.

There’s simply no way to share information between blockchains. The vision for blockchain was a network of decentralized solutions. Sadly, that hasn’t been the case with every blockchain network operating independently.

If you compare how the internet works to the blockchain, you’ll see there’s a disconnect with blockchain: the landscape remains largely fragmented. If for example, you request a website or Google search engine, it loads information from many sources and presents the most suitable answer to you.

Having this structure where different networks can interoperate makes it easy to create valuable products without reinventing the wheel while doing so. To build better products, you’d only need to leverage third-party protocols and endpoints.

Polkadot aims to promote interoperability in blockchain and solve other problems. Scalability remains a major issue faced by many blockchain projects.

The aim is to be a link between any chain and encourage value transfer between blockchains.

How did Polkadot achieve this objective? By using three components: relay chain, parachain and bridges.

Relay Chain

The relay chain takes on a role almost similar to the beacon chain on Ethereum 2.0. That’s why many think there’s a similarity between Polkadot and Ethereum 2.0.

The relay chain acts as a record keeper. It looks over the “parachain” which shares a similar design and mode of operation to Shards on the Ethereum blockchain.


This is the second component of the Polkadot network. Like I said earlier, it’s similar to Shards on Eth2.

However, unlike shards, not all parachains are the same because Polkadot wants to be heterogeneous. This means it can facilitate interoperability between blockchain of different types and different protocols.

This is one of Polkadot’s unique selling points and why it’s poised to become a major force in the DeFi sector and the larger blockchain industry.


Bridges are the third component of the Polkadot blockchain network. Bridges are used to connect some of the more difficult or established blockchains. Let’s say you want to connect a protocol on the Ethereum network to Polkadot’s blockchain.

You’ll use something called a ‘break-in’ or ‘break-out’ contract deployed on the Ethereum blockchain so the protocol can communicate with the Polkadot parachain.

Building dApps with Substrate

More than 130 teams are building over 18 projects on Polkadot using the Substrate framework. You can build any solution you want using Substrate. Even more, it comes with a palette that acts as a visual drag-and-drop builder on WordPress Elementor. This makes it super easy to design, develop and deploy your blockchain.

Substrate allows you to write your blockchain logic in any language and compile it, thanks to cross-language support with WebAssembly.

Building projects on the Polkadot blockchain removes the risk of a hard fork during upgrades and seamless integration between data and blockchain logic.

Polkadot’s Native Token, DOT

Polkadot’s native token, DOT serves three main purposes: as a governance token, for staking and bonding.

As a governance token, it allows holders to vote on potential changes and upgrades to the network.

As a speculative asset, DOT has done well on cryptocurrency exchanges. It has risen from $2.69 a year ago to over $26, at the time of writing.

Polkadot’s Role in DeFi Adoption

As the DeFi sector grows, the need for a blockchain system that allows seamless interoperability between different protocols cannot be overemphasized.

Ehtereum has played its part in the rise of DeFi, but a network that offers better interconnectivity and lower transaction fees is a better option for DeFi users. This is why major DeFi projects like Curve.Finance are branching over to DOT.

According to the Curve Finance creators, it cost so much to swap assets on Ethereum. A cross-chain version on DOT looks like a better option for DeFi users.

Transaction fees on Ethereum continue to soar in recent months, a platform that offers low DeFi transaction fees is good news for the community. This will help DeFi in many ways, one of them being mainstream adoption.

Top Projects on Polkadot

You can think of Polkadot as the developer’s blockchain. Many projects have been developed on Polkadot using the Substrate framework.

Some of the popular projects on the platform include:

  • Chainlink
  • Ocean Protocol
  • Akropolis
  • Celer Network
  • IM Token
  • 0x Protocol
  • Ankr

Some new, exciting projects you should anticipate on Polkadot include:

  • Cala
  • Moonbeam
  • Centrifuge
  • Edgeware

Polkadot FAQs

The similarities between Polkadot and Eth 2.0 are in the relay chain which acts as a record keeper for Polkadot. Ethereum 2.0 also shares the same feature but with a different name.
Another similarity between these two high-performance blockchain networks is that they are both smart contract platforms that allow developers to create Decentralized Applications (dApps).
Sharding on Eth 2.0 is referred to as the Parachain on Polkadot. These are the similarities between these two networks.

You can purchase DOT from any of the top exchanges. This includes Binance, Kraken, Huobi global, and many medium-sized blockchain exchanges.