In this supplement to the Polkadot (DOT) Coin Guide we will briefly discuss the chief similarities and differences between several cryptocurrency projects currently in the news. This article will focus upon two major considerations: 1.) what is the project attempting to address?; and, 2.) how is the project, from a non-technical mechanical standpoint, solving the problem it is addressing?
Specifically we will be looking at the following three projects: Polkadot (DOT); THORChain (RUNE); and Cardano (ADA). This presentation is not meant to be exhaustive but more of an overview and as such, before making any investment decision, do your own diligent research.
WHAT ARE POLKADOT, THORCHAIN, AND CARDANO ATTEMPTING TO ADDRESS
The major comparison between Polkadot, THORChain and Cardano is that all three projects have the same basic objective. All three projects are aiming to stretch the possibilities of blockchain technology by making absolute interoperability exist between all the various independent blockchains. [Interoperability is the ability of separate and independent blockchains to communicate with one another and allow the transfer of assets and data among them].
At this point, however, the similarities disappear as the three projects demonstrate vastly different approaches to achieving interoperability. Let's investigate these different approaches in the order of technical difficulty starting with the simplest first.
HOW DO POLKADOT, THORCHAIN AND CARDANO ATTEMPT TO ADDRESS THE ISSUE OF INTEROPERABILITY
THORChain is a cross-chain decentralized exchange using it's native token RUNE as medium of cross-chain exchange. In it's simplest form, THORChain is an advanced system of bridges permitting the exchange of assets cross-chain. THORChain allows it's users to swap tokens from different blockchains in their native form (without wrapping or pegging) all while maintaining an environment free from third party risk and being non-custodial in nature.
Using THORChain, a user who wants to swap let's say Bitcoin for Ethereum would not be forced to resort to a centralized exchange, nor would the user face the hassle of dealing with synthetic (wrapped) versions of the assets. The swap may be done on THORChain, all while sending and receiving native tokens. Graphically, this transaction would appear as follows:
How does THORChain achieve this high degree of interoperability within its ecosystem? The answer to this question lies in its use of the native RUNE token through it's vaults. Using the Bitcoin (BTC) to Ethereum (ETH) swap contemplated above, the transaction would be performed in the following manner. The THORChain protocol would break the transaction into two separate transactions automatically: 1.) It would first swap BTC for RUNE tokens; and, 2.) then swap RUNE tokens for ETH. By using this mechanism to conduct swaps the ability is present for THORChain to perform cross-chain swaps.
Cardano, because of it's history, has earned it's spot as the 'academic blockchain'. Cardano's intention has never been to reinvent the wheel - but rather Cardano wants to become the wheel. Many years of peer-reviewed research has gone on with respect to Cardano with the goal being to perfect all prior blockchain mechanics. Yet the greatest achievement in the development of Cardano has been in the subject area of interoperability.
The Cardano ecosystem utilizes an ERC20 Converter that bridges Ethereum assets over to the Cardano network. This leads you to believe that Cardano is not that different from THORChain, and you'd be correct to a point. In addition to the ERC20 Converter, Cardano provides an excellent scaling solution for the Ethereum network that has been plagued with slow speeds, network congestion and high transaction costs.
The scaling goal for Cardano is to be reached utilizing Hydra as a second layer scaling solution. By employing Hydra, Cardano has the potential to reach 1000 transactions per second. Then and in the event that 1000 Stake Pools are running simultaneously on Cardano's network, Cardano could reach an impressive 1,000,000 transactions per second, well in excess of the transaction speeds of the THORChain network.
The Polkadot protocol obtains interoperability on the next level of blockchain evolution. Protocols such as Polkadot seek to provide the various different blockchains with a system by which they can communicate with one another.
The Polkadot project is lead by Gavin Wood, who was a co-creator and co-founder of Ethereum. Wood has set out on a course to expand on Ethereum's capabilities. Now, how does Polkadot achieve interoperability?
The design structure of the Polkadot ecosystem can support hundreds of application specific blockchains in an interconnected fashion. These application specific blockchains in Polkadot terms are called 'parachains'. Each of these individual parachains must be built upon the Substrate framework [a programming language developed by Wood] to operate in the Polkadot ecosystem.
All of these individual independent parachains plug into a common base unit responsible for network system consensus and security, which is known as the Relay Chain. Inter-chain communication and cross-chain transactions are made possible through the parachain's interaction with the Relay Chain producing the desired degree of interoperability in the system.
As stated at the beginning of this article Polkadot (DOT), THORChain (RUNE), and Cardano (ADA) all share a common objective - blockchain interoperability. Each, however, approach their solution in a vastly different fashion. This article has attempted to demonstrate these differences in a simplistic manner as to fully discuss the technical mechanics behind each project would require a book - for each.
Nonetheless, an interoperable blockchain system is the end goal for all three of these projects. And each project provides yet another piece of the puzzle in turning the concept of a future fully interoperable blockchain into a reality.
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