Polkadot: Incoming Market Takeover?
By Daman Rao | Crescent City Capital Market Analyst Intern
What is Polkadot?
Polkadot, launched in 2020, is a blockchain platform that incentivizes a global network of computers to run a main network (relay chain) and user-created networks (parachains). Polkadot is the brainchild of Ethereum (ETH) co-founder Gavin Wood. The platform is now run by the Web3 Foundation (W3F), and developed by Parity Technologies, both co-founded by Wood. This aims to enable more private and efficient transactions without disclosing user data to the public network. Polkadot has raised approximately $200 million from investors and is considered one of the most well-funded blockchain projects. Its unique design and features make it a notable competitor among blockchain ecosystems, alongside Ethereum, Solana, and Polygon.
How does it work?
Polkadot is a blockchain platform that facilitates secure and efficient transactions between digital wallets using public and private key cryptography. It operates on a sharded multi-chain network, with a central Relay Chain coordinating parallel processing on individual chains called Parachains. This sharded architecture enhances transaction throughput and scalability. Polkadot’s governance system, managed by native DOT token holders, enables automatic upgrades without hard forks. The network employs a Nominated Proof-of-Stake (NPoS) consensus mechanism, rewarding users for staking DOT tokens instead of traditional mining. Different roles, such as Validators, Collators, and Fishermen, contribute to the network’s functionality, offering scalability, interoperability, and enhanced security.
Recent Updates
DOT as of November 16th is trading at $5.46 with a 24-hr trading volume of $351,233,742. The total circulating supply is approximately 1.2 billion tokens.
Looking at the screenshot above, Polkadot is overall is up 96% all time. It’s all time is $55 over two years ago.
If we were to look at the past month above here, Polkadot has managed to be up 45% in the last month. A huge part of this would most likely be due to the increase in the spending seen in the Q3 2023 Polkadot treasury expenditure, as reported by Polkalytics researchers “Alice und Bob,” it indicates a notable uptick compared to the previous year. According to their findings, the allocated funds for 2023 amount to $21 million or 3.9 million DOT, a significant increase from the $13 million or 1.7 million DOT spent in 2022. Such an increase and an upswing in development activity, earning it the second position among leading blockchains in the past week, according to Polkadot Insider. This surge in development work is an encouraging indicator for the network’s prospective long-term expansion.
Polkadot has also revealed a partnership with Energy Web, a global non-profit energy firm, for the development of a blockchain using Polkadot’s infrastructure. The decision to build on Polkadot was driven by the platform’s recognized enterprise-grade security and smooth upgrade capabilities, as stated by Energy Web’s CEO, Jesse Morris. The bidding process for this collaboration involves the use of the DOT coin. Given the limited availability of parachains, this collaboration has the potential to significantly boost the price of DOT in the upcoming quarter.
Summary
Looking at it on a broader side, this would be an ideal time to enter despite Polkadot (DOT) experiencing modest price gains recently, its prolonged sluggish performance remains a dominant factor in the short-term outlook. Nevertheless, the positive signals of heightened development activity and increased spending suggest potential promise for the platform’s future.
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. Please conduct your own due diligence before making any investment decisions.
References:
https://kriptomat.io/cryptocurrencies/polkadot/what-is-polkadot/
https://www.forbes.com/advisor/au/investing/cryptocurrency/what-is-polkadot-how-does-it-work/