CRYPTO MOVERS AND PRICES
Assets in the Top 10 are for the most part higher this morning with Litecoin (LTC) and Chainlink (LINK) leading 24-hour gains in that group. Spot volumes have deflated with the move and are a fraction of levels seen over the past 2 weeks.
CRYPTO STORY OF THE DAY
Since launching and becoming available for trading in August, the Polkadot network’s native DOT token has achieved a market cap of roughly USD 15.11 billion. Last week alone, the coin’s capitalization increased by about USD 8 billion despite competing in the saturated smart contract network subset of the crypto space.
The whitepaper for the Polkadot network was written and published by Ethereum co-founder and former Ethereum Foundation CTO Gavin Wood in November 2016. Wood conceptualized Polkadot while working on Ethereum sharding, a scaling solution that involves splitting the network into multiple blockchains using the main Ethereum blockchain as a final consensus layer. While still working on Ethereum, Wood founded Parity Technologies, a blockchain development firm that would go on to develop Polkadot and other Ethereum-focused technologies.
When revealed, Polkadot was meant to address scaling issues faced by blockchain networks. The network allows for the creation of so-called “parachains,'' blockchain sub-networks that have their own specific rules. Validators on the network, actors who process transactions, nominate blocks from the parachains to the relay chain, which serves as a final consensus for all associated networks. Holders of DOT are able to participate in on-chain governance and can use the token to facilitate the network’s transactions, either as a nominator or a validator.
A nominator is a DOT holder that provides their coin to a validator, who directly facilitates network activities such as adding parachain blocks to the relay chain. Both nominators and validators receive awards for their work in DOT tokens. As such, the network’s consensus mechanism is referred to as “Nominated Proof-of-Stake.”
Polkadot was created using the proceeds of an October 2017 ICO, during which USD 145 million was raised. According to material promoting the ICO, 50% of DOT tokens were sold during that offering, 20% were reserved for distributions ahead of the coin’s launch, and 30% were allocated to the Web3 Foundation, an organization supporting Polkadot’s development. The Polkadot network was launched in May 2019, however at that time, the Web3 Foundation acted as a single validator and controlled all governance.
In July, the Foundation’s administrative rights over the network were lifted. In August, previously purchased DOT tokens were unlocked, made transferable, and distributed to investors.
DOT’s recent gains come at a time when its main competitors have seen similar parabolic growth. Since DOT was made available for trading in August, ETH has added roughly USD 100 billion to its capitalization, Cardano (ADA) about USD 8 billion, and Stellar USD 4.2 billion.
Similar to competing smart contract networks, Polkadot has seen limited real-world adoption and the number of applications currently operating on the network is scant. Having said that— except for BTC, ETH, and USDt— the Top 10 cryptos have been transient, with dozens of tokens having enjoyed that status over the past 4 years only to be later relegated as attention shifts elsewhere.
DOT has an uphill battle to maintain its current success long-term, especially given the short-lived attention span of crypto investors and the overwhelming supply of smart contract platforms matched with paltry practical uptake.