August 4, 2021

Scalability of the Polkadot Economy

Polkadot (or Poppetto in Italian) is an open source project based on the Poincare HDL. Poincare is an open source software that was originally developed by Luca Marzocchi, with whom it is named after. This is one of several projects under this group of open source software. Polkadot was developed by Christoph Bock and Michael Schifter.


The original aim of Poincare HDL was to produce software that would enable the easy implementation of Byzantine Fault Tolerance (also know as TCFT), a financial concept that assumes that multiple networks will fail at the same time, and that there will be two independent consensus systems for every single failing network. This way, two different teams can agree on the outcome of a Byzantine Fault. One team is called the authors of TCFT, while the other team is called the testers of TCFT. The Polkadot developers worked closely with both groups and produced a software solution that uses a Byzantine Fault-tolerance algorithm called Zcash. In a way, the polkadot team did contribute to the development of zcash, as the software implements many of the ideas that were developed by the zcash developers.

Polkadot makes use of two main techniques for conducting Byzantine Fault tolerant operations: Zcash and Fabrics. Zcash is an extremely efficient protocol that ensures high security for data transfers. However, the problem with using Zcash for purposes of general blockchains is that not all people are willing to give up their private keys, and therefore some transactions cannot go through. In contrast, a general purpose protocol such as Polkadot allows transactions to go through regardless of who owns the relevant currencies. The second technique used in Polkadot, Fabrics, is designed to improve upon the durability and scalability of the relay chains. The problem with these two problems is that they present problems for scalable solutions that can be deployed on a global scale.

Polkadot’s core mission is to provide a scalable choice for validators. Validators in this case refer to those individuals who sign the consensus on all transactions that enter the main network. Validators can be anyone who signs the consensus but typically include business operators, network administrators, and other decision makers within the organization. These individuals need to be trusted enough to ensure that all of the validations are accurate and complete.

The two approaches adopted by the Polkadot team to address scalability issues involved two major choices. One approach was to add more transaction slots on top of the ones that are already in place in traditional proof-of-work (POW) based chains. This would allow for additional growth, but it would also increase the amount of energy required to maintain the system. The polkadot team opted instead to introduce a series of amendments to existing blockchains, known as “superblocks.” These added superblocks, or chains, would add transaction slots and make up the basis of a true scalping platform.

Adding more transaction slots doesn’t raise a lot of concerns because the additional slots will be used for all kinds of things. The additions aren’t going to be immediate. Over time, the new superblock will add more transaction capacity, and thus, more value for each polkadot token that is obtained. Because of this, the power of the ripple effect that occurs when a change is made to any existing chain is amplified. In a way, this expansion of the network will allow for more value creation within the polkadot ecosystem.

While this is an interesting approach to solving some of the problems faced with Proof-of-Work (PoW), it isn’t the only one available. The moonbeam protocol, proposed by Chain Consortium CEO Greg Maxwell back in 2021, solves many of the same problems. He has proposed an upgrade to the existing PoW algorithm, called “proof-of-work.” This upgrade would allow users of the existing centralized chain to swap their assets to the decentralized moonbeam chain. With the addition of more users, the overall network size can increase, leading to an increase in transaction revenue.

One of the ways that the scalability of the decentralized network is increased is through parachain transactions. When a customer spends money on any of the chains, he transfers his transaction to the main chain immediately and his transaction is recorded along with all of the other parachain transactions that he has transferred through the other participants in the decentralized network. Since all of these users are sending their transaction details over the same channel, the total number of parachain transactions that have been recorded must match the total number of block transfers. This way, the block transfer rates remain consistent and the network remains efficient.