Ethereum co-founder Gavin Wood’s attempt to knock his creation off its pedestal as the blockchain that runs almost all DeFi, non-fungible tokens (NFTs) and many other decentralized applications was launched this weekend.
Five Polkadot “Parachains” went live on Saturday (December 18), the first of 100 that will call the “Blockchain of Blockchains” home. Parachains are essentially full blockchains with a couple of differences: They can communicate with each other and are much faster and cheaper than Ethereum.
Polkadot is one of the most creative of the top five “Ethereum Killer” projects attempting to overthrow the number 2 blockchain Ethereum, which has been overwhelmed by its success as decentralized finance and NFTs enter mainstream consciousness.
Unable to handle the sheer number of transactions that the booming Decentralized Financial Industry (DeFi) has piled on its back, Ethereum transactions can create lengthy delays and incurring fees that can go as high as $ 20 and even $ 50 per transaction at peak times can – as in contrast to the seconds and cents promised by the blockchain boosters.
Continue reading: PYMNTS DeFi Series: What is DeFi?
This is where Ethereum collapses, especially as a platform for inexpensive real-time payments.
Inexpensive real-time transactions are the main reasons for using cryptocurrency for payments. If DeFi can’t deliver it because Ethereum is overwhelmed, there is little point in using it for transactions.
But it’s not just payments. Who will spend $ 10 on an NFT when the cost to buy is double the cost? Or invest a few hundred dollars in a DeFi lending platform for a fee of $ 50?
A better mousetrap
All of Ethereum’s main competitors, including Binance Smart Chain, Solana, Cardano, and Avalanche, are focused on building blockchains that are much faster – with up to 50,000 transactions per second on Ethereum’s 15-25 – and are less polluting. Hindered by the same power hungry system as Bitcoin, Ethereum now uses as much electricity as Norway.
But polkadot is more ambitious. Unlike its competitors, Polkadot is an attempt to reshape the entire industry, turning it from a collection of walled projects into a single ecosystem where all of the decentralized apps can work together.
“No single blockchain design works optimally for every use case,” said Wood. “Every chain has tradeoffs that they make good for some uses and not for others. Blockchains must be able to provide a variety of services. Parachains solve that. “
What does that mean? Well, all 100 polkadot parachains will be full-fledged blockchains that can communicate with each other. This means sending data back and forth, completing transactions on one blockchain started on another, and even transferring some value – with a token from one parachain to buy something on another.
If you have bitcoins right now but want to invest in a DeFi loan and credit platform like Compound Finance or Aave by providing money to a pool of liquidity to borrow them from, the first thing you need to do is go to an exchange and sell your bitcoins (BTC) for Ether (ETH) or the DeFi project’s own token, such as COMP or AAVE.
See more: PYMNTS DeFi Series: What is Yield Farming and Liquidity Mining?
Why? While almost all tokens of the DeFi projects are based on the Ethereum standard, Bitcoin is not compatible. Many DeFi projects also do not accept the cryptocurrencies of the others.
Polkadot does this by separating the way new information is added to a blockchain – the transaction – from the product or service that the blockchain provides, such as media platforms or building a metaverse.
Polkadot can easily be thought of as a hub with spokes. The hub is the Polkadot Relay Chain, which takes on the core function of a blockchain: the permanent collection of data in a decentralized database.
The spokes are the parachains, which are otherwise full blockchains – except that they can all work together.
NEW PYMNTS DATA: AUTHENTICATION OF IDENTITIES IN THE DIGITAL ECONOMY – DECEMBER 2021
About:More than half of US consumers believe that biometric authentication methods are faster, more convenient, and more trustworthy than passwords or PINs – so why are they using less than 10%? PYMNTS, in collaboration with Mitek, surveyed more than 2,200 consumers to better define this perception and usage gap and to find out how companies can increase usage.