Polkadot: An In-Depth Discussion from an Investment Perspective

Recently, Polkadot has continued to attract market attention. In addition to the rising coin price and the upcoming slot auctions, discussions about the "value network" have also heated up again. Many believe that Polkadot will be the key to wealth growth in the cryptocurrency sector in 2021.

A review of Polkadot's market performance since its launch:

In July 2020, DOT started to be listed on major trading platforms. From August to December 2020, the price of DOT remained around 5 dollars, and by December 28, its total market value did not exceed 5 billion dollars.

On January 7, 2021, DOT first broke through $10, with an increase of over 100%, and then retraced. On January 11, it fell to $7.15. On January 15, it once again broke a new high, surpassing XRP in total market capitalization, rising to the fourth position in cryptocurrency market capitalization. On January 17, DOT reached a historical high of $19.39.

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

These two waves of surging markets are not unrelated to the overall bullish market atmosphere.

Slot Auction VS Super Node

Polkadot aims to build a scalable blockchain architecture that enables the coexistence and interoperability of different functional blockchains through a shared security system.

Founder Gavin Wood once stated: "Bitcoin initiated a basic 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. Universality and scalability are interdependent."

Compared to EOS super node elections, Polkadot's slot auctions are more valuable due to their complex architecture. EOS is about governance rights allocation, while Polkadot is about usage rights allocation, but essentially it is still capital dominated.

Polkadot adopts the "candle auction" rule to avoid bidding sniping by using a random end time. The goal of the auction is to maximize the amount of DOT locked up for two years, requiring the longest duration and the most tokens.

The increase in market demand will inevitably drive up the price of DOT. However, Polkadot's ambitions go beyond this. Slot auctions occur every six months, potentially evolving into a new round where bidders from the previous round pay up, allowing whales to profit in the market.

King of Performance?

The fundamental need for cross-chain is to solve congestion and improve performance. Gavin Wood once stated that Polkadot will achieve "one million TPS".

However, the current 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. During peak times, Polkadot has 6 transactions per minute, and even fewer during off-peak times, 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 its trading volume is only 0.7%. At this stage, the title of "king of performance" is not related to technical complexity; market choice is the key.

Challenges of Blockchain 3.0

With the rise of DeFi, there are higher demands for the performance of underlying public chains. Balancing performance and decentralization remains a challenge.

The Polkadot white paper proposes support for global commercial-grade scalability and privacy. From Blockchain 1.0 to Ethereum smart contracts, technological innovations continue. We look forward to a more diversified blockchain ecosystem, but addressing transaction congestion and performance issues remains fundamental to current development.