Polkadot (DOT) vs Chainlink (LINK): On-Chain vs Off-Chain

If you’re someone with any amount of experience in handling crypto, you’ll know that blockchains can often be a little limited regarding how users can spend their tokens. 

This is because blockchains are isolated and restricted to their own devices; but two platforms which are attempting to change that are Polkadot (DOT) and Chainlink (LINK). 

These networks allow blockchains to communicate outside of their usual comfort zone, both on the web (on-chain), and in the real world (off-chain). Both have already proven to be some of the biggest players for ushering in a new wave of decentralization, but what exactly makes them unique? 

Today, I’ll be breaking down the most important differences between both that you need to know about when deciding which platform suits your needs the most. 

Polkadot & Chainlink: Overview

Before jumping in, let’s briefly cover where Chainlink and Polkadot came from, and why they’ve become so popular since their debuts.  

What is Polkadot (DOT)?

Polkadot was founded by Ethereum co-founder Gavin Wood in 2016, just a few months after he stepped down from his position at the Ethereum Foundation earlier in the year. 

With help from the Web3 Foundation, the project was designed to allow greater freedom to investors and developers by allowing them to connect blockchain networks together as part of a collective network. Its purpose is to negate the issue we mentioned earlier of blockchains being in isolation by letting them share and borrow data between one another.

It’s viewed as an ambitious platform because being able to connect the wider blockchain ecosystem could eventually see Polkadot becoming the standard for value and data exchanges going forward. Polkadot is still in its infancy, so though it’s already generated plenty of buzz, there’s still time to prove what it’s truly capable of. 

How Does Polkadot Connect Blockchains?

The Polkadot network revolves around the relay chain, a data hub that verifies and approves transactions that are delivered to it through parachains. These parachains, and the bridges connected to them, are what enable blockchain networks to send data between one another through cross-chain communication. 

Parachains can be customized and altered to suit specific needs by the user who creates them as part of Polkadot’s week-long parachain auctions. 

What is Chainlink (LINK)?

Launched in May 2017 by Sergey Nazarov and Steve Ellis, Chainlink’s existence revolves around fixing the ‘Oracle Problem’ which has been plaguing cryptocurrency since its inception. 

Previously, blockchains would be incapable of extracting data from off-chain systems from the real world, forcing them into isolation. 

What is the oracle problem? It refers to the issue of blockchains not being able to extract data from the real world (off-chain) due to them being isolated. 

Chainlink uses an Ethereum-based decentralized oracle network to pull in real-world data that can be used for smart contracts and DeFi apps. It’s a flexible platform that appeals to those interested in utilizing non-blockchain resources within the world of crypto, so it could be seen as a bridge between the real and the digital world. 

How Does Chainlink Interact With Off-Chain Data?

Chainlink users will first need to request the data they need to be extracted from a node with LINK tokens, which is then verified by multiple Chainlink network nodes to ensure that it’s accurate, reliable and safe for the user. 

When someone requests an agreement from an off-chain computation, they will trigger three types of sub-contracts:

• Aggregation Contract: Collects data from oracles and matches the results with appropriate smart contracts. 
• Order-Matching Contract: Matches the best possible oracle with a smart contract’s service level agreement (SLA).
• Reputation Contract: Verifies the authenticity of an oracle by analyzing its functionalities. 

The whole system essentially relies on the existence of the nodes who are deeply integrated into Chainlink’s infrastructure due to their LINK value and overall reliability. 

Polkadot vs Chainlink Differences: Off-Chain or On-Chain Operability?

Now, let’s dive deeper into the unique features of the two to understand how different they really are, and why they are considered ideal for different types of investors and developers. 

Available Transactions

Most transactions that occur on the Polkadot network are signed transactions, which also come with a transaction fee. Unsigned transactions don’t carry any information about the sender and don’t require a signature, but are only allowed in special circumstances since they don’t carry a fee. 

Inherents are smaller transactions which add certain types of data to a block. They don’t require verification since they are assumed to be “true” due to being agreed upon by several validators. 

Chainlink allows users to interact with industries and businesses that utilize smart contracts, NFTs, or digital products in general. A few popular examples include esports where Chainlink offers seamless interactivity between brand and client, or real estate where hybrid contracts are being regularly used. 

While Chainlink offers more reach and versatility in terms of its transactions, it primarily comes down to where you want to spend most of your time; on-chain or off-chain? 

Scalability

Chainlink relies on the Ethereum network in terms of stability and maximum scalability, which can often be bogged down by gas fees and slow transaction times. 

Polkadot’s extensive outreach and communication networks make it much more scalable, and capable of registering more than 1,000 transactions every second. For comparison, individual blockchain networks such as Bitcoin is only capable of approving 7 transactions in a second, making Polkadot a faster and more fluid option by quite a large margin. 

Security

Alongside full encryption, cryptographic proofs, and a reputation system, Chainlink also has node operators who stake LINK to prove their reliability as safe extractors of data feeds into the blockchain. Validators can lose LINK assets if they make a mistake, so it incentivizes them to be extra sure that data involved with a smart contract or dApps are accurate and safe. 

Polkadot’s validators are nominated rather than specifically chosen, but they largely serve the same purpose. Validators, collators and fishers all work in tangent to seep out any invalid or faulty transactions from the network. Because the relay chain connects to all parachains, it grants Polkadot a shared-security model which is difficult for any deviants to crack into. 

They both also come with bug bounty programs where users can point out faults in the system for rewards. 

Both are very safe and secure, and I would say their tight and organized infrastructures means one cannot be considered objectively better than the other this time around. 

Token Use Cases

Polkadot’s DOT is primarily used for staking, participating in auction fees, crowdloans, and transaction fees. 

In contrast, Uphold users require LINK tokens to compensate a node operator for acquiring appropriate external data sources that the requester asks for. 

A quick disclaimer; both tokens are considered quite volatile, so investors should remember that there’s always a risk involved when handling them in markets. Overall though, polkadot allows users to do more with their tokens, while also raising their profile within the ecosystem itself.

Staking

Thanks to the Chainlink 2.0 update, non-validators on the platform can now stake, but it’s also a crucial aspect of becoming a node operator. These validators will stake their LINK to obtain new data contracts, which they are then rewarded for. 

This not only ensures that the validators themselves are trustworthy since they have a lot to lose, but it also keeps Chanlink’s oracle infrastructure healthy in the long-run. 

For Polkadot users, staking can either be used to become a validator, or nominating one, which also comes with its own rewards, depending on how many DOTs are staked. 

Staking is a central pillar that holds these two platforms up, and both therefore provide plenty of reasons to hold DOT or LINK tokens over time. 

Any developments made to the Polkadot platform are proposed by DOT holders who are at the core of the program’s ecosystem. They can do this through votes and proposals, or simply by bringing a topic up in the OpenGove Polkaseembly chat room. 

The only drawback is that true decentralization means users with more DOTs could begin overshadowing those with fewer tokens, if the system isn’t kept in check, that is. 

Chainlink too offers decentralized governance, and its major decisions are agreed upon by LINK holders, node operators, and the Chainlink team. This means everyone gets a say, and though the community for Chainlink is smaller than Polkadot, this only makes it easier for people’s voices to be heard. 

Both incentivise their communities to get involved in enhancing the platform, but I would say Chainlink wins this round due to being less concerned with a users’ native token amount. 

Ease of Use

The complexity of establishing parachains and requesting data from external sources can take a bit of getting used to, but luckily, these platforms offer several resources to help ease newcomers into the experience. 

For investors, the Polkadot Wiki features plenty of information on all the platform’s major functionalities including security measures, blockchain compatibility, and the Kusama network.  Polkadot also offers substrates for developers to use as a framework when building a blockchain, allowing them to focus on its quality rather than the basics. 

Chainlink has its own set of supportive tools too though, including plenty of in-depth case studies, and tech talks which cover a range of topics including DeFi, Web3 gaming, and even crypto energy solutions. There’s also the grant program which funds individuals for participating in ambitious smart contract developments which will have a beneficial impact on the wider smart contract economy. 

Overall, they both have plenty of resources to help users grasp their systems and mechanics, but Chainlink’s educational tools also cover a wider array of topics that reach outside of the platform itself. 

The Benefits and Drawbacks of Polkadot and Chainlink

As we have seen, Polkadot and Chainlink, despite both being blockchain platforms, possess a range of unique features and systems. When taking these into account, here’s how they stack-up in terms of pros and cons:

Polkadot Pros

• Blockchain Interoperability: Polkadot’s multi-chain framework allows individual blockchains to share data and assets. This is convenient for investors with hands in multiple markets, and developers who want to blend systems together.
• Scalability: There’s no limit to the amount of parachains that can be made on Polkadot’s network, allowing it to remain fast and fluid without sacrificing its security thanks to the relay chain. 
• Staking Options: DOT holders can nominate or become a validator, and participate in crowdloans. 
• Security: Polkadot’s common shared-security network across all chains makes the network resilient against attackers. 
• Wallet Variety: DOT tokens can be held by various software wallets, or the cold-storage Polkadot Vault which can be set up with an old mobile phone. 

Polkadot Cons

• Complexity: Creating a parachain can take a lot of technical know-how, which can often turn away newcomers due to the complexity of the platform. 
• Reliance on Demand: Polkadot can only grow so long as demand for the network stays strong, and since it’s so early on, this isn’t exactly a guarantee. 

Chainlink Pros

• Off-Chain Data Functionality: Chainlink users can incorporate external real-word data into their apps and smart contracts through Chainlink’s oracle network. 
• Security: Node operators ensure all data being transferred is safe and reliable. 
• Cost Effectiveness: Since there’s no need to interact with a centralized infrastructure, Chainlink’s prices are cheaper than many individual blockchain networks. 
• Educational Resources: Chainlink’s tech talks and case studies provide an easy gateway for newcomers to learn more about the platform. 

Chainlink Cons

• Limited Scalability: Chainlink is based on the Ethereum blockchain, restricting its scalability potential. 
• Unpredictable Regulations: The regulation of decentralized finance through blockchain-based platforms like Chainlink is still in its infancy. Future regulations could vastly change how this operates, and its overall effectiveness. 

How to Choose Between Polkadot or Chainlink 

This entirely comes down to whether you’re more concerned with using multiple blockchain as one, or you simply need an easy way to access external data to trigger smart contracts and apps. 

Going forward, Polkadot is aiming to further its blockchain technology through features like the Snowbridge and Polkadot 2.0, which appeals to investors and developers keeping a close eye on several networks simultaneously. 

Chainlink is all about enhancing projects with real world data that can’t be acquired any other way, and is ideal for people looking to create apps and sign off smart contracts, rather than contributing to the larger crypto network. 

On The Flipside

• The innovation of these platforms means that they now face some serious competitors.
• In the case of Chainlink, platforms like Band Protocol and Midpoint are slowly becoming viable oracle alternatives, and Polkadot is facing fierce competition from multi-chain platforms like Polygon and Avalanche.

Why This Matters

Polkadot and Chainlink are allowing crypto users to broaden their horizons when it comes to managing their digital assets. Using them can help to expand far beyond simply trading crypto on a single network, so they’re well worth learning about. 

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