Polkadot Investment Analysis: From Popularity, Market Performance to Technical Architecture

Recently, Polkadot has been receiving widespread attention. In addition to the continuously rising coin price and the upcoming slot auctions, the discussion of "value networks" has once again become a hot topic. Many analysts believe that Polkadot could be one of the investment opportunities in the cryptocurrency space in 2021.

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

In July 2020, the Polkadot token DOT began to be listed on various trading platforms.

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

On January 7, 2021, DOT reached a high of $10.6788, with an increase of over 100%, before pulling back.

On January 11, DOT fell to $7.15.

On January 15, after a brief pullback, DOT continuously broke through new highs, surpassing XRP in total market capitalization, rising to the fourth position in the total cryptocurrency market capitalization.

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

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

The two waves of price surges are partly due to the influence of the overall bull market environment.

The technological architecture of Polkadot is another important factor for its rise. Polkadot aims to build a scalable blockchain architecture that enables the coexistence and interoperability of different functional blockchains through a shared security system.

Polkadot founder Gavin Wood once stated: "Bitcoin initiated a basic scripting language, Ethereum expanded the methods of financial transactions, and Polkadot aims to create a more general model. We also hope to address scalability issues, such as increasing transaction throughput and handling a large amount of work on the network. Generality and scalability are symbiotic."

However, Polkadot seems to have repeated EOS's path in certain respects. The EOS supernode election attracted attention from the global digital currency industry, and the Polkadot slot auctions have similarly sparked interest from various teams. The difference is that the EOS supernode election is about the allocation of governance rights, while the Polkadot slot auctions are about the allocation of usage rights. But the commonality between the two is that capital always dominates.

Polkadot uses a variant of "candle auctions" for slot auctions, aiming to maximize the amount of DOT locked in a two-year period. This mechanism may lead to an increase in DOT prices, but it could also trigger a cycle of cashing out and taking over.

In terms of performance, Polkadot is regarded as the "king of performance," yet its actual transaction volume still lags significantly behind Ethereum. Data shows that Polkadot's daily transaction volume is far below that of Ethereum, with only 6 transactions per minute during peak times, while Ethereum averages over 850 transactions per minute.

In terms of market capitalization, Polkadot accounts for about 10.94% of Ethereum's total market cap, but its trading volume is only 0.7% of Ethereum's. This indicates that the title of "king of performance" does not solely depend on the complexity of the technological structure; the choice of market users is the key.

With the development of DeFi technology, the demand for the performance of underlying public chains has become more urgent. The Polkadot white paper proposes to provide a method to support kernel scalability in order to achieve global commercial-level scalability and privacy.

From Blockchain 1.0 to Ethereum's smart contracts, and then to the 3.0 phase, innovation continues. We look forward to a more diverse blockchain ecosystem, but addressing transaction congestion and performance issues remains the core task of current blockchain technology development.