Polkadot: A Discussion from an Investment Perspective

Recently, Polkadot has continued to attract attention, not only because of the rise in its token price and the upcoming slot auctions, but also due to renewed discussions about the "value network." Many believe that Polkadot could be the key to wealth in the cryptocurrency space in 2021.

Let’s take a look at the market performance of Polkadot since its launch:

In July 2020, the Polkadot token DOT began listing on major exchanges.

From August to December 2020, the DOT price remained around $5, and the total market capitalization did not exceed $5 billion until December 28.

On January 7, 2021, DOT reached a high of $10.6788, with an increase of over 100%, and then began to pull back.

On January 11, DOT dropped to $7.15.

On January 15, after a brief correction, DOT broke through new highs again, surpassing XRP in total market capitalization and rising to fourth place in the overall cryptocurrency market capitalization ranking.

On January 17, the second wave of DOT's rise ended, reaching a historic high of $19.3939.

As of the time of writing, the DOT price is $18.12.

These two waves of price surges are somewhat related to the overall bull market atmosphere.

Slot vs Node: Capital Struggle

The rise of Polkadot is more directly reflected in its robust technical architecture. Polkadot aims to build a scalable blockchain architecture that enables the coexistence and interoperability of different functional blockchains through the establishment of a shared security system.

Polkadot founder Gavin Wood once stated: "Bitcoin pioneered a foundational scripting language, Ethereum expanded financial transaction methods, and Polkadot aims to create a more universal model. We also hope to address scalability issues, such as how to handle more transactions and network operations. Therefore, universality and scalability are two interdependent themes."

Compared to EOS, Polkadot seems to have followed a similar path in certain aspects. The EOS supernode election in 2018 attracted numerous big names from the global digital currency industry. Now, the Polkadot slot auctions have similarly garnered attention from all parties in the industry. In the top 10 projects within the Polkadot ecosystem, many have backgrounds from Chinese teams.

The difference between EOS and Polkadot lies in the distribution of governance rights for the former and the distribution of usage rights for the latter. However, the commonality is that, whether in elections or rankings, capital remains key.

Polkadot uses a "candle auction" rule for slot auctions, randomly selecting the end time to avoid sniping. The goal of the auction is to maximize the amount of DOT bound within two years.

The rise in market demand will inevitably drive up the price of DOT. However, Polkadot's ambitions are clearly not limited to this.

Slot auctions occur once every 6 months. If the original holder does not renew the auction, it may result in cashing out, with new bidders taking over. This could lead to a situation where later participants end up paying for the earlier ones, allowing whales to profit from it.

Performance Competition

The fundamental need for cross-chain is to solve congestion and improve performance. Both BM and Gavin Wood have stated that they aim to achieve "one million TPS."

However, from the current data, the daily trading volume of Polkadot is far lower than that of Ethereum. On January 20, the trading volume of Ethereum was 1,213,930, while Polkadot was only 10,926. At its peak, Polkadot had 6 transactions per minute, while Ethereum averaged over 850 transactions per minute in December 2020.

In terms of market capitalization, Polkadot accounts for about 10.94% of Ethereum, but the trading volume is only 0.7%.

Currently, the title of "King of Performance" is not related to technical complexity; market choice is the key.

The Direction of Blockchain 3.0

The DeFi boom in 2020 has made the demand for the performance of underlying public chains more urgent. Balancing performance and decentralization has always been a challenge.

The Polkadot white paper proposes to provide a method for natively supporting kernel scalability, achieving global commercial-grade scalability and privacy.

From Blockchain 1.0 to Ethereum smart contracts, and then to the 3.0 phase, innovative concepts continue to emerge. We look forward to a more diverse blockchain ecosystem, but addressing transaction congestion and performance issues remains fundamental to current technological development.