What are Cross-chain swaps and why Polkadot?
Decentralized exchanges are paving the future of digital assets, no less due to the explosive growth of DeFi. At Polkastarter, we strongly believe that the future of DeFi won’t be limited to a single exchange.
Buying and moving assets between blockchains with ease will become a necessity rather than a nice-to-have. This is why we’re building a permissionless DEX for cross-chain token pools and auctions.
When we envisioned Polkastarter, our key goal was to define the impact that our platform can have on the industry. In short, Polkastarter will enable projects to raise capital in a decentralized and interoperable environment. To achieve this, our platform needed to have the right mix of speed, scalability, interoperability, upgradeability, and governance.
We explored various options during Polkastarter’s prototype phase. During the Web3 Summit in 2018, our CEO Daniel Stockhaus was fascinated by Gavin Wood’s presentation of Substrate. It was a Polkadot project developed by Parity which enabled the founders to create custom blockchains with a simple framework.
Polkadot’s purpose is also aligned with our vision and mission. Our founder believes that:
“The best projects in the [crypto] space share a common goal of wanting to make the world a better and a fairer place. And that’s what we set out to achieve at Polkastarter.”
Scalability and Speed
Popular blockchains such as Bitcoin and Ethereum process anywhere between 7 to 15 transactions per second (TPS). This is extremely slow compared to real-world networks (i.e. credit card networks) which have a speed of 20,000 TPS. Moreover, gas fees can spike to extreme levels in peak periods, making it difficult to scale to mass adoption.
Polkadot solves the issue of scalability in two ways;
a) Horizontal scalability in the form of Parachains
b) Vertical scalability via it's GRANDPA consensus mechanism. GRANDPA enables parallel pipelined processing of blocks (also known as asynchronous block formation)
Interoperability
Polkadot also allows for interoperability, not only from a programming perspective by enabling cross-chain composability via EVM compatibility + Web Assembly, but also by enabling cross-chain value transfers via Asset Bridges, as illustrated by the ChainX project below:
Polkadot also provides a framework to build a new blockchain, called a Substrate. Substrate seamlessly connects all the parts of a new chain, making existing blockchains easily scalable by reusing existing scaffolds of features. Think of it as adding new pieces to a toy house.
Our platform will also have the ability to interact with external blockchains like Ethereum, Bitcoin, and many others. This is powered by Polkadot’s bridges, a technology that allows parachains to seamlessly communicate both internal and external-wise. These features allow us to realize our mission of building a truly interoperable, cross-chain DEX.
Governance & Upgradability
It becomes difficult to upgrade blockchains when on-chain issues arise due to complex governance structures. The blockchain industry has witnessed such issues in the past with Ethereum’s hard fork, Bitcoin’s block size fiasco, and other notable events.
Traditional blockchains have complicated rules built into the network which makes it difficult to select the key components that need to be altered. Moreover, when changes have to be made, node operators and engineers need to closely monitor the platform, making forking difficult and time-consuming.
Polkadot uses a sophisticated governance mechanism that allows it to evolve gracefully over time at the ultimate behest of its assembled stakeholders. The stated goal is to ensure that the majority of the stake can always command the network. This prevents for "forks" which are commonly seen in the blockchain space and provides for a sustainable way of improving the protocol code base over time.
We plan to achieve the following values on our project with Polkadot:
Governance: Governance infrastructure that enables community voting using POLS.
Staking: We are launching several types of staking mechanisms, including staking for pool access, staking for governance, and staking for pool rewards. All this will be achieved with the use of POLS.
Liquidity Mining: Liquidity providers can claim rewards in POLS for contributing to the network.
Polkadot enjoys the advantage of eliminating entry barriers by making it easy to build a blockchain within its ecosystem while maintaining a standardization for all the chains. It serves as a force of standardization and democratization that is revolutionizing the blockchain world.
We are convinced that Polkadot is the perfect blockchain for Polkastarter. We truly believe that Polkadot’s vision, the one that we share, will shape the future of blockchain.