Polkadot: Capital, Performance and Blockchain 3.0

Recently, the popularity of Polkadot has remained high. In addition to the continuous rise in coin prices and the upcoming slot auctions, discussions about the "value network" have once again become the focus. Many analyses suggest that Polkadot could become an important investment opportunity in the cryptocurrency space in 2021.

Reviewing the market performance of Polkadot since its launch:

In July 2020, DOT tokens began to be listed on major trading platforms. Until the end of December 2020, the price of DOT remained around 5 dollars, with a total market capitalization not exceeding 5 billion dollars.

In early January 2021, DOT experienced its first wave of explosive growth, with the price exceeding $10. After a brief pullback, DOT once again broke new highs, with its total market value briefly surpassing XRP, ranking fourth in the total market capitalization of cryptocurrencies. On January 17, DOT reached a historical high of $19.3939.

This round of bullish market, in addition to benefiting from the overall bull market atmosphere, is more importantly derived from Polkadot's powerful technical architecture. 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 that Polkadot aims to create a more versatile model while addressing scalability issues. Compared to Bitcoin's basic scripting language and Ethereum's extended financial transaction methods, Polkadot's goal is to "make Blockchain greater."

However, the development path of Polkadot seems to have some similarities with EOS. Just as the EOS supernode election attracted global attention from the digital currency industry back in the day, the slot auctions of Polkadot have also garnered widespread attention in the industry. Among the top 10 projects in the Polkadot ecosystem, many have a background with Chinese teams.

Unlike the EOS supernode election, which is the distribution of governance rights, the Polkadot slot auction is more about the allocation of usage rights. However, what is the same for both is that capital strength remains a decisive factor. Polkadot adopts a variant form of "candle auction" aimed at maximizing the number of DOTs bound within a two-year period.

This auction mechanism may lead to an increase in the price of DOT tokens, but there are also potential risks. The six-month election cycle may trigger cash-out behavior, creating a new round of capital relay.

Regarding performance issues, Polkadot is regarded as the "king of performance", but actual data shows that its transaction volume still lags significantly behind Ethereum. According to Polkascan data, Polkadot processes about 6 transactions per minute during 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's total market capitalization, but its trading volume is only 0.7% of Ethereum's. This indicates that the true title of "king of performance" does not solely depend on the complexity of the technical structure; the choice of market users is key.

With the rise of DeFi technology, the demand for the performance of blockchain underlying public chains has become more urgent. The Polkadot white paper proposes to provide a method that supports kernel scalability to achieve global commercial-grade scalability and privacy.

From Blockchain 1.0 to the smart contracts of Ethereum, and now to the current 3.0 phase, innovation has been continuous. We look forward to a more diversified Blockchain ecosystem, but the core technologies that solve transaction congestion and performance issues remain key to current development.