A big piece of news was announced in early May - Polkadot’s “XCM,” which stands for cross-consensus message, fell into place. As developer Joe Petrowski said, “the first DOT landed on Statemint via Polkadot teleport.” Statemint, a “common good” parachain, or a general utility chain to be used by all in the ecosystem, can now communicate with other chains. Notably, Web3 Foundation does not control this common good parachain.
XCM gets to the heart of Polkadot’s raison d’etre - to act as a general, use-case agnostic, highly secure, Layer-0 metaprotocol, which allows all different types of blockchains to communicate with each other in a completely decentralized way. Polkadot builders, the second largest developer community behind Ethereum, comprise roughly 550 teams, and they have spent more than five years in the trenches working on the most difficult problems to solve. Many in the blockchain industry refer to a well-known triangle of ideals - security, scalability, decentralization - and believe that only two are solvable at one time. Polkadot finally solves all three. We thought this was a good opportunity to review the progress since the final launch of the network, parachains, which occurred in December 2021, through April 2022.
Polkadot Decoded is the largest annual conference on all things Polkadot, hosted online and in person in Berlin, New York, Buenos Aires, Mexico City, and Shanghai on June 29th and 30th. Register here.
As a quick refresher, Dr. Gavin Wood architected the Ethereum Virtual Machine (EVM) and the Solidity coding language when he was acting as CTO and Co-Founder of Ethereum. We have highlighted many of the technical challenges that Dr. Wood set out to resolve when he left Ethereum to launch Polkadot. Many of these challenges have since surfaced in the press in the form of hacks or extremely high transaction (i.e., “gas”) fees, which generally result in a loss of funds for users or network outages.
Polkadot is most often criticized for its “lack of marketing,” as is regularly reflected in the press and social media. However, this is simply because in a sea of hype, Polkadot aims to attract a network of builders; according to Electric Capital, Polkadot has the second largest developer base globally, behind Ethereum, growing 60% YoY in 2021.
Going down a different path was intentional. Polkadot is foundational software which operates as a Layer-0, or one layer below Layer-1s like Bitcoin, Ethereum, and its own native “parachains.” Polkadot aims to provide all blockchains with the ability to communicate with each other and to rely on shared, robust security. Polkadot is a vertical agnostic, use-case agnostic, highly secure software platform for blockchains and is scalable to hundreds of millions, if not billions, of users.
On a technical level, there have been many reasons of late to highlight Polkadot’s key differentiators: its security and its ability to conduct transactions without the need for a token. This means gas fees can be paid in any token, as opposed to a network like Ethereum that only allows users to pay fees with the network’s ETH token. Also, recent hacks indicate the need for a blockchain like Polkadot, which delivers a superior way for blockchains to communicate and send assets to other chains (“cross chain interoperability”).
In recent months, there have been several large hacks of bridges that connect different blockchains to Ethereum; these events highlight that many popular blockchain ecosystems today have overlooked critical components of a scalable, sustainable, and secure network that Dr. Wood, Co-Founder Rob Habermeier and the entire Polkadot developer community have spent five years building.
Just these two examples add up to almost $1 billion in total losses:
Axie Infinity (bridge) $625m loss due to a 51% network attack. Five of the network’s nine validators were hacked, and four of these five were controlled by the company.
Wormhole (bridge) $325M loss due to a security bug that was exploited.
The reason these bridges are so vulnerable to hacks is that they rely on their own validator sets, not the underlying security of the Ethereum network.
This was a big challenge that Gavin Wood set out to solve.
Web3 Foundation and Web3.0 Vision: “Web3 Foundation” is a Swiss Stiftung with the express purpose of supporting the “Web3.0 Vision” - the advancement of a decentralized and serverless internet, wherein each user will have sovereignty over their own data and virtual identity. The Web3 Foundation was the Issuer of the DOT Token. Web3 Foundation led the open source development of the Polkadot Network between 2017 and 2020, but gave up its administrative privileges (aka its Sudo Key) over the network in July of 2020. Web3 Foundation currently seeks to continue its research and funding efforts on other aspects of its Web3.0 vision, which may or may not be built on the foundation provided by the Polkadot Network ecosystem as illustrated in the Web3 Stack Image which follows this section.
“Events of today in crypto just go to show that genuine decentralization and well-designed security make a far more valuable proposition than some big tps numbers coming from an exclusive and closed set of servers. If you can't run a full-node yourself then it's just another bank.” -Gavin Wood, Polkadot Founder
SGC’s 2022 Year-to-Date Polkadot Recap
Polkadot’s software that enables cross-chain communications is broadly referred to as “XCM.” April marked a major milestone when XCMv2 passed its 2nd Audit, meaning the protocol is now ready for Polkadot deployment.
XCMv2 is the first production-ready version of 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 (i.e., DOT) and whose logic and security is trusted by both sender and receiver. Real assets are held in the reserve, and forms of the assets are transferred to the receiver, or the sender can instruct the reserve to move its assets to a receiver. This is unique in that the sender and receiver 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.
Polkadot has three unique systems for communicating XCM messages between chains:
Upward Message Passing: Parachains send messages to the relay chain
Downward Message Passing: relay chain passes messages to their parachains
XCMP: Parachains send messages between themselves
As we start to see various cross-blockchain bridges and messaging protocols compete for market share and demand for interoperability continues to grow, many are starting to see the problems that cross-parachain communication leveraging common security can help solve. Bridges have been the target of a number of hacks, but Polkadot offers a secure way for its parachains, L-1s and L-2s launched on its network, to securely interoperate. This is a key benefit to securing a slot on the Polkadot network.
Key Highlights
As of April 2022, Polkaproject reported 544 projects in the ecosystem, up 29% from 423 a year ago and 126 in January of 2020.
So far, since the final launch of the Polkadot Network in December 2021, the 15 parachains below have launched through the crowdloan auction mechanism, along with the first common good parachain, Statemint. As a reminder, the term crowdloan does not refer to lending or a traditional loan; crowdloan refers to a blockchain’s community coming together to immobilize the DOT token to provide security to its blockchain.
Key Metrics Dec 2021 Launch - April 2022
2022 Web3 Grant Recipients: 40
# On-Chain Treasury Grants Awarded: 26
Treasury Grants Distributed (DOT): 67,624
Governance Proposals Approved: 7
Projects in the Ecosystem: 544
Key Events Dec 2021 Launch - April 2022
Below is a list of certain key developments within the Polkadot ecosystem. Polkadot provides the underlying technical infrastructure for developers to build on top of the decentralized and open-source network. None of the below information is an endorsement of any project or network mentioned.
April 2022
Litentry won the 15th Polkadot parachain auction, with 3463 contributions totaling 943,842 DOT locked to secure the slot. Litentry is a decentralized, cross-chain Identity Aggregator that aims to help link identities across multiple networks. Litentry provides a secure vehicle through which users can manage their identities and dApps can obtain a real-time reputation score of an identity owner across different blockchains. While much of the crypto-world wants to maintain a level of anonymity, some applications can benefit from a form of identification. For those that may not require full KYC/AML, a platform like Litentry could allow dApps to more confidently offer a breadth of services.
Unique won the 14th Polkadot parachain auction, with 3592 contributions totaling 822,943 DOT locked to secure the slot. Unique is an NFT marketplace and provides the infrastructure for others to launch NFT marketplaces. Unique offers solutions that allow non-blockchain developers to quickly deploy dApps to mass markets with scalability on par with non-blockchain solutions. The platform is built on substrate and thus can provide a scalable and interoperable ecosystem.
To advance the vision of Web3.0, the Web3 Foundation published that it will consider on-chain treasury proposals by teams to build a “Social Recovery Wallet” that will provide a decentralized way for crypto users to recover a wallet should they lose their private key. Such a team might build this by allowing wallet owners to appoint three “guardians,” a majority of which could sign a transaction that would recover the lost private key and the tokens held in the wallet.
The Moonbeam Foundation has announced that Fireblocks, the custody technology and liquidity network for institutional customers, now supports MOVR and GLMR tokens. Fireblocks is an enterprise-grade digital asset and crypto technology company that offers its customers the easiest way to build crypto products and services such as in-house custody solutions, NFT marketplaces, trading services and more. The integration with Fireblocks will make development and usage of the Moonbeam ecosystem easier, more secure, and more compatible with the greater crypto ecosystem.
The first Kusama Parachain slot lease period came to an end on May 16, meaning that the network successfully launched and sustained parachains through its first cycle! Companies that won slots during the first lease period are now reengaging their communities to build support for their projects. As a reminder, users lock their DOT or KSM tokens to help companies get access to the full security and scalability that comes with being a parachain on the Polkadot or Kusama networks. At the end of the lease period, the locked tokens are returned to the individual contributors.
Phala World is the first NFT system that fully implements the Soulbound theory and creates the “Play to Build” (P2B) metaverse game mode, which is a brand-new concept based on the Phala Blockchain. Instead of P2E, P2B is a type of metaverse game that brings traditional communities into the metaverse and encourages players to play and build out the ecosystem. Phala is also integrating Litentry’s aggregated identity solution mentioned above.
March 2022
Phala won the 13th Polkadot parachain auction, with 1685 contributions totaling 610,759 DOT locked to secure the slot. Phala is a trustless computation platform that enables scalable cloud processing without sacrificing data confidentiality. Built around TEE-based privacy technology, Phala Network’s distributed computing cloud is versatile and confidential. It will be able to provide computing power to other blockchain applications while protecting their underlying data.
Nodle won the 11th Polkadot parachain auction, with 4723 contributions totaling 2,475,528 DOT locked to secure the slot. Nodle leverages Bluetooth Low Energy (BLE) via millions of smartphones and routers to allow enterprises and smart cities to connect IoT devices to the Internet at a low-cost while maintaining privacy and security. Nodle's decentralized wireless network consists of 5M daily active smartphones with 30 million IoT devices discovered daily in over 100 countries, moving approximately 100 GB of data.
Acala announced its on-going integration with Wormhole, a multi-chain bridging platform connecting high-value blockchain networks. This will be the first integration with Acala’s Ethereum development environment, EVM+, and will enable Acala users to move assets to and from other leading layer-1 networks like Ethereum, Avalanche, Solana, Polygon, Terra, and more.
Polkadot’s second batch of parachain slot auction winners–Efinity, Composable Finance, Centrifuge, HydraDX, Interlay, and Nodle– officially connected to the Polkadot Relay Chain on March 11th.
February 2022
Interlay won the 10th Polkadot parachain auction, with 11,644 contributions totaling 2,751,954 DOT locked to secure the slot. Interlay is a decentralized network dedicated to connecting crypto-currencies like Bitcoin with platforms like Polkadot and Ethereum. The Interlay network will be connected to Cosmos, Ethereum, and other major networks.
Astar announced a partnership with GraphQL API service provider, Subsquid. The partnership enables dApps on Astar to use Subsquid for managing raw on-chain data while vastly reducing the complexity of fetching and transforming blockchain data. Structured data solutions have long lagged behind in the Polkadot ecosystem, and this will help provide builders and users with more accessible means to understand network activity.
Astar Network—a dApp hub on Polkadot that supports Ethereum, WebAssembly, and layer 2 solutions like ZK Rollups—has announced the Astar Boost Program, a $100M fund to help build out the Polkadot and Astar ecosystems.
RMRK announced the sale of 20 facemasks on its Kanaria NFT marketplace in partnership with the hide.me VPN. Holders of a Kanaria NFT can equip the facemask on their Kanaria NFT, and will receive a lifetime subscription to the hide.me VPN for as long as they hold this NFT in their wallet.
Polkadot founder Gavin Wood followed through on his promise to donate $5 million in DOT to Ukraine to support its efforts in its war with Russia.
January 2022
Composable Finance partners with RMRK to expand the functionality of RMRK’s NFTs using Composable’s cross-chain infrastructure. Composable also announced plans to work with Osmosis, to execute a proof of concept (PoC) of Centauri, its bridge between Cosmos and Kusama, before moving on to a larger-scale launch.
Kilt launched SocialKYC, a service for regaining control over your digital identity using KILT Protocol. SocialKYC issues credentials to users confirming the ownership of their email address or social media accounts after the user proves that they control the account. Unlike sign-in processes on the internet to date, SocialKYC then forgets about the user and the credential as soon as the credential is issued. The credential, the personal information, and the control remain with the user.
Octopus Network has delivered its first milestone of a bridge implementation with Astar to connect the Cosmos and Polkadot Ecosystems. The Octopus Network is a NEAR-based, multichain crypto-network for launching and running Substrate-based, EVM-compatible blockchains.
In accordance with Swiss Law, the Web3 Foundation is required to periodically disclose its grant recipients, which are batched for publication to avoid preferential treatment or the perception of marketing. The Q4 2021 list of 21 grant recipients was released in January.
Astar released an ecosystem roadmap for 2022.
Parallel Finance released a roadmap for 2022.
What’s to Come?
In a report released at the end of 2021, Polkadot Co-Founder, Robert Habermeier, stated that while the network is live, there are several upcoming releases that will serve to optimize the speed, scalability, and interoperability of the network–namely, parathreads and asynchronous backing.
Parathreads
Added to the Polkadot Network after the original Whitepaper, parathreads are a lighter, pay-as-you-go option to be used in lieu of parachains for certain applications that require less frequent processing. While applications like gaming would require very fast and frequent processing, others do not need lightning speed. For some use cases, processing one block in every 10 might suffice. To avoid an application using one of the processing slots even if it doesn’t have many transactions to process, parathreads can be used to process transactions as needed. Users of parathreads pay for each instance of processing in a “pay-as-you-go” model, in contrast to parachains which lock DOT to acquire their access to processing.
Asynchronous Backing
'Asynchronous Backing' is a set of optimizations for parachain consensus to increase the throughput of parachains substantially and reduce the blocktime from 12 to 6 seconds. This change could theoretically make the network up to 12x faster.
Polkadot Decoded
Polkadot Decoded is the largest annual conference on all things Polkadot, hosted online and in person in Berlin, New York, Buenos Aires, Mexico City, and Shanghai on June 29th and 30th. Last year's speakers included Gavin Wood, Aeron Buchanan, and Robert Habermeier, as well as founders and developers from many of the leading parachain teams and companies building in the network. Those interested can register here.