Polkadot Benefits from “Shared Security” and “Forkless Upgrades,” Major Threat Remains – CoinShares

DOT price chart. Source: Coingecko.com

According to digital asset research and investment firm, the main strength of the Polkadot (DOT) blockchain protocol is its “shared security,” combined with fork-free upgrades and blockchain interoperability. CoinShares. However, the protocol is still threatened by what could be seen as a lack of decentralization, they added.

In their report, CoinShares stated that “shared security,” which comes from stakeholders such as developers, investors, and team members all using DOT tokens to “bind” and “sting” their Parachain (other chains attached to the main Polkadot chain), is Polkadot’s most important strength.

Second, forkless upgrades are also a big strength of Polkadot, CoinShares said. Instead of forking, protocol upgrades happen through a “simple, decentralized process” by adding a proposal to a queue, which is backed by token holders, and voted on at Referendum.

“There’s no human intervention or centralization, and if the vote doesn’t pass, nothing happens,” the report describes as the key feature of the forkless upgrade system.

Third, the CoinShares report states that interoperability is “essential and fundamental” to the design of Polkadot, with an increasing number of Parachains tethered to the mainchain. “This scalability for Parachains acts as a positive feedback loop and will only drive network adoption,” the report predicts.

However, he also found significant weaknesses for Polkadot, one of the key aspects being the lack of decentralization.

One of the main reasons for this is the way the protocol is governed. The governance structure includes a 13-member Council who have the power to control the protocol treasury, make proposals for referendums and elect members of a technical committee who, in turn, can veto proposals. , explains the report.

The power wielded over Polkadot by this fairly small group of people is, according to the report, “clearly a threat to its decentralization.”

Polkadot was developed by Dr. Gavin Wood, who deliberately coded the protocol without any particular use cases in mind. Instead, Polkadot simply provides a toolkit for developers to create their own channels, which can be customized for things like privacy, security, speed, scalability, and governance as needed. of the user.

Meanwhile, CoinShares has identified two other blockchains, Cosmos (ATOM) and Avalanche (AVAX), as the biggest threats to Polkadot.

“Overall, Polkadot is more consistent and comprehensive and emphasizes shared security, which is partly reflected in its adoption,” the report said. Still, he added that compared to Cosmos and Avalanche, Polkadot is “arguably less scalable or decentralized.”

“Polkadot has yet to find market dominance, especially as the interoperability landscape is fiercely competitive with Cosmos and Avalanche,” CoinShares wrote.

Still, the report adds that with more hedge funds, traditional asset managers, and high net worth individuals allocating capital to the crypto space, market liquidity is expected to increase while volatility will decrease, to the benefit of all.

Eventually, Polkadot’s success as a “fully stacked framework” will be reflected in developments such as more blockchains moving into the Polkadot ecosystem. This will bring improvements in “interoperability, security, and freedom from forks” for all blockchains involved, the report concludes.

As of 14:53 UTC, DOT, ranked 11th by market capitalization, was trading at $18.64 and down almost 3% in one day and 15% in one week. It also fell by 38% in one year.
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