Polkadot Q2 2022 Developments Decoded
We are excited to publish our 2022 Q2 Polkadot update following Polkadot Decoded, a week of collaboration and announcements at the first in-person Polkadot Decoded conference. In the spirit of decentralization, the conference took place simultaneously in cities around the world, including New York, Buenos Aires, Hangzhou and Berlin. Polkadot Co-Founder, Gavin Wood, gave a keynote presentation on day one in Buenos Aires, and on day two in New York City. During his keynote in Buenos Aires, Wood announced a key milestone in the evolution of the Polkadot Network: Governance v2 (Gov2).
The Polkadot Network is built to be composable and upgradable, including its governance structure. Gov2 increases decentralization from the current Polkadot governance process, Gov1. Gov1 did include a fully on-chain treasury, which already distinguished Polkadot from other major protocols. We are only aware of one other which operates at a similar level of decentralization, which is Tezos. Gov2 will remove the Network Council (note: Network Council is different from the Foundation Council) and replace it with "referendum," a voting system that will optimize the process of making proposals and voting for DOT holders.
A Brief Refresher on Polkadot’s Governance (Gov1)
Polkadot’s governance processes give DOT holders further control over Polkadot, as on-chain governance is used to determine the direction of the Polkadot Network and for allocating the on-chain treasury. All aspects of the Polkadot protocol are malleable. This means they can be upgraded over time if the community provides enough support for proposed upgrades. DOT stakers are able to propose, sponsor, and vote on proposals; elect entities to a representative network council; and determine how capital in the network treasury gets allocated. Governance participation is driven in large part by token holdings: users with more stake in the network have a proportionately greater say in its direction. A critical concern in token based voting systems is that a few whales will have an outsized control of the network. To mitigate the risk of a few large holders controlling the network, or a plutocracy, further mechanisms are in place to allow smaller holders to amplify their vote, up to a factor of six times, by committing to prolonged lock up periods on their DOT. So the longer a builder fixes her DOT in place in the network, the longer-term they can be presumed to be, which is rewarded with an increased vote.
In addition to DOT holders, there are two other stakeholder entities within Polkadot Governance: the Network Council and the Technical Committee.
The Network Council is an on-chain collective that exists to represent passive stakeholders. It does this by proposing important changes and canceling dangerous proposals. Any DOT token holder can run for Council, but their reputation is at stake to act in good faith for the network.
The Technical Committee serves as Polkadot’s last line of defense against software errors. Unlike the Council, the Technical Committee is not elected by vote, but rather selected by the Council based on having provided a formal specification or client implementation of the Polkadot protocol. The Technical Committee cannot make proposals themselves, but rather can fast track existing proposals to happen in a shorter time frame than normal. Although the Technical Committee is not elected, they have a limited scope, and the proposals that they fast track still need to go through a public referendum. They can only accelerate governance for critical bug fixes, but they cannot control the network.
Decentralized Governance System (Gov2) Announced at Decoded on June 29, 2022
Dr. Wood referred to the following as his learnings from more than two years of using Gov1 and its potential improvements:
Good:
Conviction voting: Token holders can lock their tokens on the protocol for longer lengths to increase their voting power.
Delegation: Allow holders to participate without direct voting
Bad:
Slow: 28 lead in period and 28 days of voting and enactment for every referendum
Clunky: Only one referendum running at once; alternating council and public
Inaccessible: Low chance that a proposal will ever reach a vote
Ugly:
Centralization: Council and Technical Committee
As we are experiencing the onset of the new internet, there is still a lot of trial and error involved in creating a sustainable and fair governance process. Polkadot’s Gov1 restricts activity and trust for the sake of security, but this makes it slower and more centralized. Gov2, on the other hand, uses many more elements to ensure an adaptive balance between safety and agility.
Safety is important for obvious reasons (read our post on the Axie Infinity hack), and agility is important in that the network needs to be able to respond to bugs, hacks, and changes in the environment in a timely manner—which is difficult to do without opening the door to malfeasance. An important part of this “agility” component is ensuring that the most important proposals are seen by those participating in governance, especially once anyone can make a proposal and there could be hundreds or more proposals open at a time. In Gov1, proposals take roughly two months to be decided on (28 days to select it as a proposal and 28 days to vote), and only one referendum can be run at once. In Gov2, if a proposal receives a significant number of "yes" votes with few "no" votes in a short period of time then it could pass in a few days or less. This is meant to accelerate votes that receive very quick support. While in Gov1 the centralized Network Council and Technical Committee would need to push through any urgent changes (like a code update in the case of a bug), Gov2 will allow DOT holders to enact these sorts of high priority, high impact votes in a decentralized manner.
So, how will the Polkadot Network determine which proposals are important?
Each proposal is an Origin (initiator of a transaction) that can go into a specific Track. An example of a proposal could be a request to fund a Polkadot hackathon (see below). Low impact origins have less stringent safety requirements, while higher impact origins have higher requirements, such as more participation among voters to pass. The following variables will change based on the impact an Origin:
Lead in period (Selecting which proposals to vote on)
Confirmation period (How long the public can vote)
Minimum enactment period (Time it takes for a successful referendum to be implemented)
Turnout and approval requirements
Maximum referenda being decided at once
Some of the tools that Polkadot developer’s have developed to automate this governance process include:
Adaptive-quorum biasing: This means that for each governance proposal, higher voter turnout means there are fewer “yes” votes needed as a percentage of the total vote. In Gov2, this is being replaced by the turnout/passing curves for each Track (see graphic below).
Conviction voting: Votes are weighted based on how long a user decides to lock the tokens associated with that vote
Delegation: Users that are more passive participants can delegate their tokens to active voters of their choice. Gov2 introduces multirole delegation–a new feature that lets DOT holders delegate their stake to a different voter for each Track
Conclusion
Gov2 will make Polkadot’s already decentralized governance process more decentralized and more efficient by replacing the network’s council. Bryan Chen, co-founder and CTO of Acala told The Block, “Polkadot’s Governance v2 offers new building blocks for parachains to craft their desired governance process while sharing a common infrastructure. This unlocks new possibilities to implement governance processes with the right balance between decentralization and efficiency.”
This new governance system is set to launch on Kusama, Polkadot's canary network, imminently. In the future, it will be deployed on the Polkadot mainnet but without the need of a hard fork, or the requirement for all network participants to move to a completely different chain, which integrates the changes.
The Polkadot Council was a necessary component of the initial launch of Polkadot’s governance, but now that the network is sufficiently decentralized with stakeholders around the world actively participating in on-chain referendums, a centralized body is no longer needed as a safeguard. Our fundamental thesis still holds that the Web3 space will move towards actual decentralization as technology evolves, and Polkadot continually reaffirms that it follows this ideology as well.
Ecosystem Highlights
Polkadot Decoded Presentation - Talisman
Talisman, a wallet provider for the Polkadot network, presented at Polkadot Decoded and demonstrated the way in which light clients allow users to connect to a blockchain faster, and more securely, than traditional crypto network processes. So much work, energy, and time has gone into creating a trustless, distributed consensus mechanism, but virtually all clients that wish to access it must trust the outputs from a few companies, such as Metamask and Infura, without any further verification. This results in an insecure environment. Imagine if every time we interacted with a website in Chrome, a request first went to Google before being routed to the destination and back. That is the situation with many blockchain networks today. Watch Talisman’s presentation here.
New Polkadot Project Announced at Davos - Project Liberty
Project Liberty is developing a decentralized social networking protocol (DSNP) that aims to give users a way to socialize online without sacrificing control of their data to a large technology company. Project Liberty will initially launch as a Parachain, and may transition to a common-good parachain in the future.
On the status of the network, Coindesk interviewed DSNP creator, Braxton Woodham, who stated, “We started last year and looked deeply at over 30 different projects and ultimately concluded Polkadot has characteristics that make it particularly adaptable for social networking… We’re working with the Polkadot team at Parity Technologies designing for scale, latency and low cost volatility for messaging, which is essential for social networks. You don’t see that with other chains.”
At Decoded, the team behind Project Liberty’s Decentralized Social Network Protocol launched Frequency, a truly decentralized social network built to scale. Frequency states that “it gives developers low-cost, low-volatility access to continually replenishing capacity to build predictable, sustainable business models.”
XCM (Cross-Consensus Messaging)
In May, we detailed the launch of Polkadot’s Cross-Consensus messaging protocol, or XCM, a messaging format that allows for communication between different chains and smart contracts. XCM’s main purpose currently is to allow for several forms of asset-transfers between chains. XCM allows for the movement of assets between chains in two ways:
Teleporting: For chains that trust each other, destroying an asset on the sending side and minting it on the receiving side
Reserves: A reserve is the place which stores the “real” assets (e.g., DOT) and its logic and security is trusted by both sender and destination. The sender places the assets in the destination's reserve (at this stage, "destination" is usually a parachain), and then sends a message to the destination that says, "FYI, some assets landed in your reserve." Then, the destination has to decide how to act on that message, which would usually be to look for some added instruction, like to mint a token in a beneficiary's account on the destination chain. This is unique in that the sender and destination are interacting with the reserve, but not each other, and therefore only need to trust the underlying security of the chain itself. The protocol is fully upgradeable, making it future-proof and forward-compatible. It solves for lack of compatibility between chains, shifting messaging to one protocol can create an efficient ecosystem.
XCM messages are actually programs that run on XCVM, Cross-Consensus Virtual Machine, an ultra-high level non-Turing-complete computer whose instructions are designed to be roughly at the same level as transactions. The MultiAsset data type allows for managing multiple assets, including different fungible and non-fungible tokens. Payment of a fee for messaging is optional, but fees can be used to deter bad actors or excess activity. XCMv3 is currently in the final stages of development.
Network Update
Builders
549 known projects building on top of Polkadot on November 18, 2021
1988 GitHub repositories tagged with Polkadot
Network
297 validator slots available to ~1023 competing validators
22,500 nominators at any one time, up from ~1,000 in August 2020
Governance
46 Governance proposals have passed, autonomously enacting upgrades on-chain
On-chain treasury via governance differentiates Polkadot Network on decentralization
1,585,891 DOT allocated via on-chain treasury since July 17, 2020
Other Q222 Polkadot Ecosystem Highlights
(July 4, 2022) Parity Technologies added 3 executives: Eran Barak (COO), Peter Ruchatz (CMO) and Fahmi Syed (CFO).
(June 28, 2022) Acala, theCHIVE and Project Venkman announced their first blockchain project, in partnership with Bill Murray.
(June 30, 2022) Prime Protocol announced a cross-chain connected lending & borrowing app, which will be deployed on multiple blockchains using Moonbeam as the nexus point for unifying functionality across the many chains.
(June 8, 2022) Moonbeam Foundation & Arrington Capital have announced the launch for a new $100 million ecosystem fund dedicated to supporting projects building on Moonbeam Network. The Arrington Moonbeam Growth Fund is the first ecosystem fund for Moonbeam.
(May 29, 2022) RMRK released an article detailing its Soulbound 2.0 NFTs.
(May 25, 2022) Klaytn has announced a partnership with Parity to build a Substrate-based Klaytn chain, which will be called Klaytn-Substrate. The chain will initially function as a Klaytn sidechain before bridging to Polkadot. Once bridged, the Klaytn Substrate chain will be used as a canary network to help Klaytn experiment with new applications and to work on porting apps from Klaytn to Polkadot and then other ecosystems. Klaytn is a public blockchain developed by internet giant Kakao Corp. that aims to be the blockchain of choice for gaming and metaverse projects, as well as the creator economy.