A detailed interpretation of the 10 major misunderstandings of Polkadot from the outside world
Produced by the Polkadot Ecological Research Institute, it must be a boutique
(The article is very long, it is recommended to bookmark it before reading)
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Produced by the Polkadot Ecological Research Institute, it must be a boutique
(The article is very long, it is recommended to bookmark it before reading)
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In 2016, after Gavin Wood left Ethereum, he wrote the Polkadot white paper. After a long period of research and development and exploration, the cross-chain project Polkadot finally ushered in its historic moment. In December 2021, Polkadot’s first round of five parachains was successfully launched, which means that Polkadot has completed the start-up phase . Polkadot, which lasted five years, finally confirmed the vision outlined in the 2016 white paper.
Unlike the large-scale Ethereum, Polkadot's development process is relatively slow, and indeed many users and teams who have expectations for Polkadot have the same feelings.
But Gavin Wood, as the person who pushed the implementation of Ethereum technology on the right track, his ability is beyond doubt, and he left Ethereum because he wanted to realize a new vision, that is, to build a truly free and open platform.
Therefore, the long and stable rhythm has also caused Polkadot to not maintain a high level of enthusiasm. All research and development and preparations will take time. Coupled with the fact that most countries have entered winter, the epidemic continues to affect the global economy. In the context of the market downturn, some misunderstandings about Polkadot have inevitably been triggered.
Therefore, we have organized according to the most concerned and questioned questions in the community, hoping that through our answers, readers can have a clearer understanding of Polkadot.
Ten misconceptions about Polkadot
1. Polkadot inflation is 10% per year
The initial circulation of Polkadot DOT is 10 million pieces. In August 2020, the denomination of DOT was split. Therefore, the initial total issuance of the new version of DOT tokens is now 1 billion, and additional issuances will be made every year thereafter, with no upper limit on the total amount.
Because of the earlier description, many people interpret Polkadot's inflation as 10% per year, but is this really the case? In order to understand this problem, first we must understand how Polkadot is inflationed.
In general, Polkadot generates some DOTs through inflation, and distributes these DOTs to specific groups of people in order to support the participants who maintain the Polkadot network and ecological construction.
Since Polkadot uses NPoS nomination proof of rights and interests to reach a consensus, there are two roles: nominator and verifier. By staking (Staking) tokens, you become a nominator and then nominate your own trusted verifier. The verifier runs the node and confirms the area. Blocks are used to obtain rewards. This reward comes from the additional issuance of tokens, thus forming inflation.
The complete Polkadot inflation is mainly composed of the following parts: (i1) Inflation to reward verifiers and nominators through additional issuance of tokens, (i2) Inflation caused by additional issuance of tokens for the treasury, (i3) Deflation caused by misbehavior, that is, deflation caused by Slashing, (i4) transaction fees.
The formula is: inflation rate=i1+i2-i3-i4, and i1 means that the inflation caused by the need to issue additional tokens to reward verifiers and nominators accounts for the largest proportion, and is the main factor of overall inflation.
To understand this consensus more clearly, you need to understand the mechanism of the treasury more clearly. Inflation funds mainly go to the i1 and i2 parts, but the i2 part of the treasury includes i3, i4, and the treasury meeting in addition to inflation funds. Some unused funds are destroyed (this is also the only burning mechanism of the entire Polkadot), but i3 and i4 are not originally part of inflation, so i1+i2 is equivalent to double counting i3 and i4, so here we need to reduce Go to i3 and i4.
In summary, we found that the inflation rate of Polkadot is less than 10, because a part of DOT is burned through the treasury mechanism. According to official data: https://polkadot.js.org/apps/?rpc=wss%3A%2F%2Frpc.polkadot.io#/staking, the current inflation rate of Polkadot is 7.8%.
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2. Polkadot inflation is too high and there is no deflation mechanism
First of all, Polkadot has a destruction mechanism. In the design of the Polkadot treasury, the treasury will destroy a certain percentage (Polkadot is 1% now, Kusama is 0.2%) of the balance funds.
Secondly, inflation is not a scourge. It is a very necessary mechanism in the development process. Appropriate inflation is conducive to economic development.
Deflation seems to be verified on Bitcoin and can increase its value, but on the other hand, deflation means that money will gradually increase in value, which will make people more reluctant to sell and unwilling to use money, and the circulation rate of money will drop. If From the perspective of currency, this will reduce the money flowing into the economy, reduce economic activities, and reduce the vitality of the entire economy, which is not conducive to the development of the economy.
Of course, for Bitcoin, deflation makes it value-added, and it is closer to a value-stored collection than a currency, and fluctuations in value will inhibit circulation.
However, the logic of Polkadot is different from that of Bitcoin. Bitcoin itself is positioned as a pure digital asset, while Polkadot’s DOT is an important resource in Polkadot’s ecology. It needs to be circulated and used, so for Polkadot To say that deflation is not conducive to its ecological development.
But on the other hand, inflation will make people feel that the money in their hands will gradually depreciate. Of course, the situation of inflation should be discussed on a case-by-case basis. Excessive inflation will also cause the economy to collapse. In reality, Zimbabwe, Venezuela, etc. have explained this problem well. In the field of Crypto, excessive inflation will cause the tokens held to depreciate sharply, and no other economic activities can If it is higher than this inflation rate, then naturally no one wants to hold it for a long time.
Appropriate inflation will encourage money to turn to more profitable economic activities, and will accelerate the circulation of tokens in the economy, which means that the overall volume of the economy will increase, which is conducive to economic development.
In the Polkadot ecology, a more profitable solution has been given in terms of mechanism design. For example, Polkadot’s Staking rewards exceed its inflation. Secondly, there are tokens similar to obtaining ecological projects through slot auctions. These It is also possible if the return of tokens can outperform inflation.
Therefore, if some people feel that Polkadot’s inflation is too high, they can outperform inflation by participating in Polkadot’s mechanism. Therefore, this mechanism is also a disguised form of incentive for those who hold DOT to participate in Polkadot’s mechanism. Either supporting Polkadot's network or Polkadot's ecological construction is a better design idea. But I believe that after seeing this, there will still be friends who think that Polkadot’s inflation rate of 7-8% is still very high, so let’s give a real example.
my country's consumer price index CPI in the past 10 years, although the official data is about 3% on average, but our actual perception is definitely not the case, because the real estate is excluded from the CPI calculation, and the prices of different commodities and elements The degree of increase is inconsistent.
Of course, some friends will ask a question. DOT will fluctuate. If it falls, even if the financial management method such as staking can resist inflation, the total value will still lose. What should I do? This will test the problem of specific operations. In fact, through position management and some hedging operations, the problems caused by the decline of DOT can be completely hedged. This is not counted as a bonus for ecological development.
Finally, Polkadot's inflation rate is adjustable. Polkadot is a decentralized public chain with governance functions. In Polkadot's design, many parameters can be adjusted through governance referendums. For example, the Polkadot treasury will destroy a certain percentage of surplus funds, and this ratio can be adjusted.
Just as in our reality, countries will issue more currency on the one hand, and on the other hand adjust the currency situation through some monetary policies such as raising interest rates and reducing interest rates, increasing reserve ratios and reducing reserve requirements, so that the national economy can develop in a relatively benign state.
Similarly, in the design of Polkadot, there are both additional issuances to stimulate the development of Polkadot’s ecological mechanism, as well as a destruction mechanism, and these mechanisms can be regulated through governance, so that Polkadot can develop well, so this is considered A more thoughtful design.
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3. Polkadot is played by Asians, and there will be no progress once the policies in some regions are tightened
In the feedback from the community, many fans also questioned the users of Polkadot. They think that only Asians play Polkadot. In fact, this point can be verified from a lot of relevant data.
Previously, Gavin Wood made an annual summary of Polkadot in 2021. According to official data, so far, about 350 teams have obtained investment and financing, which has increased by 3.5 times compared to last year; In 2021, about 50 people alone raised a total of more than $670 million in early-stage financing (seed and A rounds).
Secondly, the number of users of the official Element (chat platform) in the Substrate and Parachain channels has increased from 2,500 to 10,000, an increase of more than three times; and as shown in the Electric Capital report, the Polkadot developer ecosystem is leading, with a large number of active personnel, which also means that there are more potential users in the Polkadot ecosystem.
In addition, Twitter is the world's largest social media platform (mainly overseas users), and Twitter's data is also one of the important indicators.
At the end of 2020, the official number of Polkadot fans on its platform was less than 100,000, but after just one year, the number of fans on the Twitter account has grown to more than 1 million, and even the number of fans on Kusama's account has increased from 30,000 to 100,000. grew to 200,000. Not only Twitter, but also Reddit, Discord, Youtube, etc. These overseas social media platforms all have Polkadot, and his number of fans has maintained a steady growth.
To sum up, these large amounts of data are enough to dispel the rumor that "Poca is all played by Asians".
4. Polkadot is the same as EOS
First of all, we need to make it clear that the goal of EOS is to become a standard Layer 1 public chain, and enrich its development by building an ecology under the public chain. On the other hand, Polkadot itself is a Layer 0 concept, aiming to create a multi-chain ecology rather than building a certain chain , Such a starting point also makes its development trajectory completely different.
Secondly, the issue of "everyone knows" about EOS seems to have become a joke for believers back then. Although the amount of financing was huge, the funds obtained were not used for ecological construction, and even caused the EOS community to freeze through DAO Interesting tidbits from its official account.
Since Polkadot’s independent online launch, it has contributed a lot to ecological development through the treasury and the Web3 Foundation, such as technical training, Grant, Treasury, Hackathon, Substrate Builders Program, etc. Become the blockchain with the highest growth rate of developers in 2021.
Therefore, we judge from these fundamentals that at least the current development of Polkadot and EOS is completely in two lines, rather than one-sidedly thinking that they are the same product because of market factors.
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5. There is a problem with Polkadot's economic model, and DOT is useless in cross-chain scenarios
The origin of this problem is mainly because during the cross-chain process, for example, when Bifrost crosses to Acala, it will consume the initiator Bifrost’s token BNC, and this process will not consume DOT. Many friends here have raised questions. Polkadot The token DOT has not been used in these cross-chain scenarios. These scenarios will not generate demand for DOT, and it is difficult to capture value. Is this a problem with Polkadot's economic model?
First of all, we need to be clear, it is not. We should look at Polkadot's economic model from the perspective of the development of things.
First of all, Polkadot is Layer0, while other public chains such as Ethereum are Layer1, so it is normal for value capture methods to be different. Secondly, although Ethereum is now the largest blockchain platform, its economic model is not user-friendly, and every operation needs to pay expensive gas fees to the Ethereum network. This is a model that collects taxes on all users, just like every time we buy a product on Taobao, we have to pay an extra fee to the Taobao platform.
The founder of Polkadot, Gavin Wood, is himself the former CTO of Ethereum, and he was also the person who initially realized Ethereum from the concept to the engineering level. The economic model of Ethereum, but such an economic model is unreasonable in his later view.
So when he designed Polkadot, he abandoned this kind of design thinking that would be limited by the Bitcoin framework, but from a lower level logic to think about what functions the blockchain needs to achieve normal operation, and can also avoid Ethereum. Problems with the square economic model.
Combined with the goal of Polkadot is to create a Layer0 meta-protocol, which is a larger platform and network, so our value judgment on Polkadot should be based on platform thinking. In addition to its own economic volume, the value of the platform also depends on the value of its network effect, which is why JD.com is still favored by capital despite years of losses.
Looking at the big platforms in the Internet field, none of them can become giants by charging everywhere. They are all free for the C-side, and then charge for the B-side by network effects.
The Polkadot we see now is only a very early stage, and it is still far from a relatively complete state of Polkadot.How does Polkadot achieve value capture from the economic model?》
When Polkadot has already connected dozens of parachains and multiple parallel threads, and there are many public interest parachains operating normally, the demand for DOT in the Polkadot ecology will really be reflected at that time. We use Polkadot It would be too hasty to draw conclusions on the initial situation of the card. However, the development of Polkadot is indeed still in its early stages and it will take some time.
For more analysis on the economic model of Ethereum and Polkadot, please refer to our article: "
How does Polkadot achieve value capture from the economic model?
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6. It does not make sense to implement an Ethereum on Polkadot
It is undeniable that today's EVM has really supported the sky. Many emerging public chains have rapidly developed their ecology through compatibility with EVM, thus forming a huge EVM ecosystem. Most of the landing applications in the blockchain field are based on EVM operating in the ecosystem.
In the Polkadot ecosystem, Moonbeam, as one of the best Polkadot ecological projects for Ethereum’s EVM and various tool compatibility, is also considered to have implemented Ethereum on Polkadot. Although there are already many public chains compatible with EVM, it is still meaningful to implement another Ethereum on Polkadot.
The underlying architecture of Polkadot is different from other public chains. Although it seems that it is only compatible with Ethereum in new bottles, Polkadot’s underlying architecture has more advantages, and the resulting performance is far better than PoW’s Ethereum. Much higher and lower transfer fees.
In addition, the Ethereum implemented on Polkadot can also obtain other features of Polkadot, such as interoperability, scalability, upgrades without hard forks, and so on.
Now that Moonbeam has been successfully launched on the Polkadot network, its performance has also benefited users who support its slot auction. Seeing that Moonbeam started so smoothly, some friends also said that the success of Moonbeam proves the failure of Polkadot? Because the Polkadot ecology has played around and returned to the logic of Ethereum.
In fact, it cannot be said that returning to the logic of Ethereum is not good. We must follow some objective laws when we look at technological development.
Ethereum and the larger EVM ecology are indeed the best developed at the moment, with rich developers and users as well as massive funds. Polkadot has newer underlying technologies and more functions. Using EVM in the Polkadot ecology is equivalent to using new underlying technologies to be compatible with old technologies. It can not only avoid some problems with old technologies, but also integrate developers, Users and funds are introduced into the Polkadot ecosystem, and more functions of the Polkadot ecosystem are provided.
Isn’t it one of the common ways for new technologies to be implemented by being compatible with existing markets, and then gradually iterating and developing new technologies?
7. Polkadot has been online for so long and there is no ecology, and it cannot be done
Polkadot is a Layer 0 meta-protocol, and its development path is different from other Layer 1 public chains.
Generally, the Layer 1 public chain only needs some ecological developers to develop some mature DApps or DeFi, which can attract users and funds to enter, thereby activating the entire ecology. This kind of startup speed is really fast.
However, Polkadot is Layer0 and cannot directly carry smart contracts. This requires the construction of Layer1 parachains that support smart contracts before developing applications on these parallel chains and activating the entire ecosystem. Polkadot has more public blockchains than other Layer1 public chains. a construction phase.
Therefore, at the same time, other Layer1 public chains have already started running applications, and Polkadot has just established Layer1, which really makes people feel that Polkadot has no ecology.
However, some of Polkadot's Layer 1 has gradually matured, and we believe that the ecological development after Polkadot will be very rapid.
The Polkadot ecosystem can be compatible with EVM and attract many developers and projects in the EVM ecosystem. Moonbeam and its leading network Moonriver have expanded dozens of ecological projects in a few months, and it has been verified that this is a feasible path . And its TVL has surpassed many well-known public chains, so it is too fallacious to say that Polkadot has no ecology.
In addition, there are many EVM-compatible parachains in the Polkadot ecosystem. After a project has been successfully deployed on a parachain on Polkadot, since many of the architectures of the parachains are similar, the project can often be easily implemented. The rapid deployment on another parachain is like quickly opening chain stores in multiple cities. The parallel chains can be interconnected later, which is also a means of enhancing liquidity for these projects.
Therefore, it is easy to implement Polkadot ecological projects. In this case, I believe that there will soon be multiple parachains like Moonbeam and Moonriver with dozens of ecological projects. The rise of Polkadot ecology seems to be in sight.
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8. Also as Layer 0, Cosmos is better than Polkadot
We should look at each project with an inclusive attitude. Cosmos also has its own advantages and characteristics, and is good at solving problems in some specific scenarios. Gavin was indeed inspired by Cosmos when he designed Polkadot.
But it didn’t say who can subvert who. Just as the market value of Bitcoin accounts for a smaller and smaller proportion of the total Crypto market value, the Ethereum ecology’s proportion of DeFi’s lock-up volume is also getting smaller and smaller. We are entering a multi-community In the multi-chain era where a hundred schools of thought contend, multi-chain coexistence and interconnection will be a development trend in the future. In fact, many parachain projects in the Polkadot ecosystem are also taking the development direction of multiple chains. They choose Polkadot as the base, and then expand the layout horizontally to different public chains.
For example, Astar and Composable Finance of the Polkadot ecology are both researching cross-chain virtual machines to cross-chain with many existing public chains. Astar has also initiated a proposal to build an Astar/Shiden&Cosmos cross-chain bridge. Interlay’s Bitcoin anchor currency InterBTC Has also been deployed on Cosmos.
Cosmos Zone has no other choice but to use the same consensus mechanism Tendenmint. Developers cannot innovate on the consensus mechanism and have to use the Cosmos SDK; Cosmos is not scalable enough. To achieve scalability, a system must It is necessary to support multiple blockchains without adding new nodes or adding additional security. And this is the current Polkadot.
Of course, in the future, many teams will choose Cosmos or Polkadot as the public chain carried by the project according to their own needs, but this does not prevent Cosmos and Polkadot from adopting certain methods for interconnection. Therefore, do not look at these two projects with the concept of either one or the other.
Now Cosmos has some first-mover advantages, including star projects such as Terra, but Cosmos has fewer developers than Polkadot as a whole. However, Polkadot started later and has more ambitious goals, so the development speed is slower. Fortunately, Polkadot’s parachain slot auction has now started, and Polkadot’s ecological projects can finally get rid of their arms and seek development.
Now is the best time to pay attention to the Polkadot ecology and produce some star projects. You may wish to spend more time paying attention to the development of the Polkadot ecology, and you may have unexpected gains.
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9. The Polkadot ecology is all ecology done on other chains, and there is no innovation
Some functions are necessary for each public chain, just like a city, it will always need public infrastructure such as hospitals and schools, so it is also necessary for Polkadot ecological projects, and there are some logics of demand It is very simple, and the feasibility has been verified on other public chains, and it should be implemented on Polkadot first.Polkadot Ecological New Track Different from Parachain: Distributed Blockchain Network ApplicationWith these foundations, some innovations will happen quietly.
For example, Moonbeam in the Polkadot ecology is called Ethereum on Polkadot because of its excellent compatibility with Ethereum. Moonbeam supports the classic NFT standards on EVM such as ERC721 and ERC1155, but at the same time, Moonbeam is Polkadot’s technical framework, so some innovative NFT standards such as RMRK can also be implemented on Moonbeam, so that it can be compatible with the old Technology can carry innovative technology again.
These projects similar to RMRK belong to an innovative track - distributed blockchain network applications. In addition to RMRK, there is also Zenlink, the first native cross-chain DEX project on Polkadot. In our previous article "
Polkadot Ecological New Track Different from Parachain: Distributed Blockchain Network Application
"It has already been introduced in detail, so I won't go into details here.
10. Cross-chain is a false demand
Look at the increase of WBTC on Ethereum. Its market value just reached 100 million U.S. dollars a year and a half ago, and now it has a market value of more than 12 billion U.S. dollars. The number of Bitcoin assets has increased by about 25 times in the past year and a half.
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This also proves that the assets of a certain public chain will want to participate in value-added economic activities in the ecology of another chain. This is the real cross-chain demand.
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Since the Polkadot mainnet was launched, many people like to compare Polkadot with Ethereum. Of course, there are a lot less now. We might as well look back at the analogy between the two. From the timeline alone, Ethereum is earlier than Polkadot. It has been born for 2-3 years, so it is reasonable that the ecological development lags behind. If you just compete on a different starting line, the latter is the truth only if you are still under the early pessimism and catch up. Therefore, we need to be more patient .
*The information provided by the Polkadot Ecological Research Institute does not represent any investment hints. The published articles only represent personal opinions and are for reference only. Since there are no policies and regulations related to digital assets in China, users in mainland China are requested to pay close attention to the development of Crypto.
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