Vitalik Buterin</strong></a> <strong>and Joseph Poon</strong> <strong>presented Plasma as a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-scaling-solution/">scaling solution</a> for Ethereum</strong>. However, the concept might also be adapted and integrated into other blockchains. Joseph Poon was also a proponent of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-lightning-network/">the Lightning Network</strong></a> (created for Bitcoin). This explains the scaling parallels between Plasma and Lightning Network. However, note that their techniques and procedures still differ.</p>\n<p>In a nutshell, Plasma is an off-chain solution. It aims to substantially improve the performance of the Ethereum network. Plasma does that by shifting the majority of tasks from the main chain to a series of smaller chains.&nbsp;</p>\n<p><strong>The Plasma structure is developed to work as a blockchain tree</strong>. It has numerous \"child chains\" constructed on top of the \"parent chain.\" The Plasma framework is based on <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</strong></a> and <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-merkle-tree/">Merkle Trees</strong></a>. This allows for the creation of an infinite number of <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-sidechain/">side chains</a></strong>.</p>\n<p>The child chains are developed to run a customized smart contract. Because of that, businesses are able to tailor the Plasma structure to their own requirements. This allows users to build different Plasma smart contracts for distinct use cases.&nbsp;</p>\n<p><strong>Plasma leverages the security provided by the main chain</strong> to set up multiple child chains to work in a predetermined way. 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It's done specifically to raise funds for certain projects.</p>\n<p>Polkadot is an open-source protocol. It allows data and applications to be shared between different blockchains. There are two types of blockchains in the Polkadot ecosystem &ndash; the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-relay-chain/">Relay Chain</strong></a> and<strong> <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-parachain/">parachains.&nbsp;

/n

Relay Chain can be thought of as <strong>the core of Polkadot.</strong> Essentially, it connects different parachains. Parachains, on the other hand, are similar to <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-plasma/">Ethereum Plasma chains</strong></a>. Basically, they can conduct transactions without relying on the Relay Chain. As a result, parachains can significantly <strong>improve blockchain scalability.</strong></p>\n<p>Parachain projects need to lease a slot for their parachains through the <strong>Parachain Slot Auction</strong> if they want to connect to the Relay Chain. Projects stake <strong>DOT</strong> tokens to bid for a spot in the auction. The ones that stake the biggest amount of DOT tokens become the parachains of Polkadot. They can lease a slot for around 3 to 22 months.</p>\n<p>The staked DOT is locked into the project's slot auction bid once the users engage in the crowdloan. The tokens stay locked in the parachain slot until the lease of a slot ends.</p>\n<p>You might be wondering how to get the DOT tokens. <strong>This is where Polkadot Crowdloan comes in </strong>since it can be used to obtain these tokens. Essentially, crowdloan is a <strong>crowdsourcing system.</strong> In a crowdloan, users stake DOT to support the parachain projects they favor. For doing that, they get various rewards, including tokens from the parachain they support.</p>","level":"easy","meta_title":"What is Polkadot Crowdloan? Definition & Meaning | Crypto Wiki","meta_description":"Polkadot Crowdloan meaning: Polkadot Crowdloan - the process of staking DOT tokens in the Polkadot Slot Auction to support specific projects.","meta_keywords":null,"language":"en","created_at":"2022-05-20T13:32:43.000000Z","updated_at":"2022-06-07T11:49:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-polkadot-crowdloan"},"prevSection":{"id":1009,"original_id":null,"author_id":42,"translator_id":null,"title":"What is Passive Management?","slug":"what-is-passive-management","section":"P","keyword":"Passive Management","status":"published","definition":"an investment strategy that tracks an existing economic index rather than relying on active market exposure.","content":"<p>Passive management, also known as <strong>indexing</strong>, is an investing method. It isn't dependent on active exposure. It rather aims to <strong>mimic a market index.</strong> <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-sandp-500-standard-and-poors-500/">The S&amp;P 500 index</a> </strong>is an example of an index that passive management could mimic. With passive management, there are no attempts to profit from market inefficiencies as it is with active portfolio management. Thus, passive management doesn&rsquo;t rely on subjective human judgments.</p>\n<p>The basic premise of passive management is that <strong>humans cannot really outperform the market.</strong> Instead, they should &ldquo;go with the flow&rdquo; of the market. This concept also correlates with <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-efficient-market-hypothesis-emh/">the efficient-market hypothesis (EMH)</strong></a>. The theory states that current market prices reflect all available data. Thus, it implies that, in the long term, humans cannot outsmart the market.</p>\n<p>The primary benefits of passive management include <strong>cheaper fees and operating costs.</strong> In addition to that, it decreases investing risks. A passive management strategy usually constructs a long-term portfolio. The main task of such a portfolio is to track the performance of a stock market index. <strong>Mutual and <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-exchange-traded-fund-etf/">exchange-traded funds (ETF)</a> </strong>are common examples of investment funds that employ this method.</p>\n<p>Thus, a much larger market performance affects the success of passive management. Market performance is usually measured with a certain index. Basically, this implies that, when it comes to asset selection, <strong>human error isn't a problem with passive management. </strong>Besides, due to their reduced expenses, passive portfolio management solutions usually outperform active management.</p>","level":"easy","meta_title":"What is Passive Management? Definition & Meaning | Crypto Wiki","meta_description":"Passive Management meaning: Passive Management - an investment strategy that tracks an existing economic index rather than relying on active market exposure.","meta_keywords":null,"language":"en","created_at":"2022-05-20T08:06:40.000000Z","updated_at":"2022-06-07T11:49:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-passive-management"},"currentChapter":"P","currentSection":"what-is-plasma","chapterTitle":"P","readingLevel":"easy"},"url":"/crypto/learn/crypto-terms/what-is-plasma","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0">

Crypto Terms: Letter P

What is Plasma?

Plasma MEANING:
Plasma - an off-chain scaling solution created for the Ethereum blockchain that seeks to increase the efficiency of the network.
Easy
1 minute

Let's find out Plasma meaning, definition in crypto, what is Plasma, and all other detailed facts.

In August 2017, Vitalik Buterin and Joseph Poon presented Plasma as a scaling solution for Ethereum. However, the concept might also be adapted and integrated into other blockchains. Joseph Poon was also a proponent of the Lightning Network (created for Bitcoin). This explains the scaling parallels between Plasma and Lightning Network. However, note that their techniques and procedures still differ.

In a nutshell, Plasma is an off-chain solution. It aims to substantially improve the performance of the Ethereum network. Plasma does that by shifting the majority of tasks from the main chain to a series of smaller chains. 

The Plasma structure is developed to work as a blockchain tree. It has numerous "child chains" constructed on top of the "parent chain." The Plasma framework is based on smart contracts and Merkle Trees. This allows for the creation of an infinite number of side chains.

The child chains are developed to run a customized smart contract. Because of that, businesses are able to tailor the Plasma structure to their own requirements. This allows users to build different Plasma smart contracts for distinct use cases. 

Plasma leverages the security provided by the main chain to set up multiple child chains to work in a predetermined way. As a result, the main Ethereum blockchain is less likely to become clogged.

The public repository of Plasma can be acquired on their GitHub page. Besides being an improvement for Ethereum, Plasma can be a great starting point for other networks. It could provide them with scaling solutions that they might need. However, keep in mind that Plasma alone is not a project. It’s a framework for developing scalable applications. The applications can be deployed in a variety of ways by various research groups or businesses.