Dot Pulse #6 — Polkadot common good & consensus deep dive
Learn about BABE, GRANDPA, Validators and Collators. Plus new farms, common good chains and governance watcher! 📣
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We return with Dot Pulse after a brief break to continue the dive into Polkadot’s core concepts and architecture. In this edition we will focus on Polkadot consensus and validation, which are arguably some of the most important concepts of any blockchain. Polkadot’s consensus mechanism is a bit trickier than others, so we recommend reading Dot Pulse #1 to get the low-down first.
First, it’s important to understand that there are three main types of participants in the validation process: Validators, Nominators and Collators. Each have different roles formalized in the blockchain’s architecture.
Validators are the ones who define consensus and create blocks for the Relay Chain.
Nominators delegate their stake to Validators, choosing the ones they trust with consensus execution.
Collators can be considered as the parachain block producers, as they execute the computations and generate proofs for Validators to include in the blocks.
Who are Polkadot collators?
Collators are a unique piece in Polkadot’s architecture as they don’t quite have counterparts in other chains. The collator’s role is to gather transactions for a particular chain, order them, execute them and send the proofs of the resulting state transitions to the Relay Chain validators.
Collators are conceptually closest to a rollup’s Sequencer — they execute and order the transactions, but they take no part in deciding which block gets added to the chain. This effectively separates block creation from validation, which is the key to Polkadot’s concept of shared security. Parachains don’t need to defend against 51% attacks as the Relay Chain does that for them, but they probably do need to attract at least a few Collators to make sure they produce blocks at all! Usually Parachains will pay their Collators via inflation of the native token, but Polkadot itself doesn’t have any reward for Collators.
NPoS, BABE and GRANDPA
Polkadot runs on a version of Proof of Stake dubbed Nominated Proof of Stake, or NPoS. The “Nominated” part refers to the fact that the process of stake delegation is done entirely on-chain, which minimizes some of the centralizing forces seen in other PoS systems.
Hardware-wise, Polkadot’s standard validator configuration requires 64 GB of RAM, an NVMe SSD and an Intel I7-7700K processor. Not quite node-on-a-laptop level, but there are definitely faster gaming PCs than this!
As for the specific consensus algorithm, Polkadot uses a combination of two systems for two different purposes: BABE, Blind Assignment for Blockchain Extension, and GRANDPA, or GHOST-based Recursive ANcestor Deriving Prefix Agreement.
BABE creates blocks probabilistically to make sure the blockchain keeps on going even without complete agreement on the canonical chain. It uses a Verifiable Random Function to assign validators to particular slots, who create “primary” blocks. If for some reason the assigned validators fail, a round robin election guarantees that someone else creates a “secondary” block. If the primary block creator eventually wakes up, its block will still be preferred even if it comes later.
The GRANDPA mechanism then finalizes BABE’s blocks to make sure they can’t be reverted without creating a new chain (which is different from PoW finality, where with enough hash power you could technically rewrite the blockchain’s entire history). Basically, GRANDPA cleans up after BABE and throws away any unwanted forks.
Basilisk ended up winning the 8th Kusama slot last week (becoming the 9th parachain), and now the race suddenly became extremely heated! Literally overnight Kintsugi added around 55k KSM to reach 105k KSM, breathing down Parallel Heiko’s neck, now sitting at 112k KSM. Only 7k KSM are separating the two chains to win one of the two upcoming slots. It is likely that Altair will win this one, but the race for the last slot resembles what happened the last time around with Basilisk and Bifrost, which were going toe-to-toe as the last round was going ahead.
Seems like the Crowdloan Championships are getting exciting once more! From a game theory perspective it now makes sense to back any of the three leaders.
TL;DR: Centrifuge’s Kusama chain (brings real world assets to DeFi) combines crowdloan rewards with a 1:1 CFG snapshot for existing holders.
TL;DR: Parallel Finance on Kusama (leveraged staking, lending) distributes up to 5% of max supply in the crowdloan.
TL;DR: Interlay’s Kusama deployment (trustless BTC bridge) offers 10% of supply to crowdloan participants for its more experimental chain.
Earn KAR by staking into the KSM/kUSD and KAR/KSM pools on Karura DEX
Yields are now get 64% APR (or 90% with loyalty bonus) for KSM/kUSD farming, or 26% (51% with loyalty) for KAR/KSM.
Moonriver’s farms are now holding a few dozen million in TVL, but most projects are Uni V2 forks. As before, the following section is not vetted. Rug risk is high, fundamentals are basically absent. Proceed at your own peril.
Earn SOLAR in a classic Pool1/Pool2 arrangement, yield decreased below 1000% since the last few weeks.
Earn MOON in another Pool1/Pool2 set of farms. Yields fell below 1000% now.
A few more assorted UNI V2 token farms in this list.
This week we have the opportunity to highlight the common good enabled by Kusama and Polkadot. Encointer has submitted a temperature check to the Kusama council to be onboarded on as a common good parachain, a special type of “free” parachain that doesn’t require giving financial incentives for backers.
According to its initial application, Encointer is incompatible with the incentive structure of parachain auctions and cannot justify creating its own network tokens. As a common good parachain, it would use KSM as its transaction fee token.
Encointer is a very interesting experiment in grassroots UBI that aims to boost the economies of very localized and poor communities around the world. Its solution arises from the idea that some communities might simply not have enough of their national currency available to properly transact with each other. Imagine a village where there is literally no money — people can provide useful services to each other, but they can’t pay from them.
So they either need to resort to bartering (which is quite inefficient) or they need to create their own currency. Encointer aims to offer a kind of “build your own currency” kit to jumpstart these highly localized economies, with sybil-resistant airdrops that would distribute UBI to each person in the community.
Encointer’s idea has a strong parallel in post-war West Germany, which jumpstarted its growth only after re-denominating the Deutsche Mark in 1948 and “airdropping” 60 DEM to every person.
Polkadot is probably one of the only platforms where such a form of “humanitarian DeFi” could have been built, as otherwise it would’ve needed to share block space with aggressive DeFi gas guzzlers, or maintain its own security budget. The Kusama council seems likely to approve Encointer’s bid, so hopefully we’ll be able to see the outcome of the experiment!
TL;DR: Potential contributors can sign up to be the first in line for the main Acala Network crowdloan, presumably coming up quite soon!
TL;DR: Shiden is close to releasing EVM support on mainnet, and it’s launching a celebratory NFT for the occasion.
TL;DR: Moonriver deployed several runtime upgrades in September, and offered a deep dive into when its performance will be increased.
TL;DR: Karura launches liquid staking for KSM, letting you use bonded KSM in DeFi.
TL;DR: Calamari aims to bootstrap usage of privacy-enabled KMA with bridges to Ethereum and its DeFi platforms.
TL;DR: Gavin Wood released more technical details for XCM, the upcoming cross-chain communication framework.
TL;DR: The project’s team held a deep AMA answering questions like why they chose Polkadot, its LBP pools and more.
(Polkadot) Motion 110, funding request for Subscan for three months of operation, executed.
(Polkadot) Referendum 34, executed to increase minimum nominator bond to 120 DOT.
(Kusama) Motion 357, a funding request by Encointer from Kusama treasury, just proposed.
(Kusama) Motion 356, a funding request for virtual Kusama conference, disapproved (likely due to high costs)
All info in this newsletter is purely educational and should only be used to inform your own research. We're not offering investment advice, endorsement of any project or approach, or promise of any outcome. This is prepared using public information and couldn't possibly account for anyone's specific goals or financial situation. Be careful and keep up the honest work!