Will Polkadot, which has skyrocketed against the trend, be the starting point of a new bull market?

In 2020, the cryptocurrency market ushered in a small bull market, and blockchain technology also made breakthroughs in application. DeFi has become the closest direction for blockchain to land, and various DeFi projects have seen a surge in prices. Filecoin, represented by the cloud storage track, and Polkadot, represented by the cross-chain track, will also take over the market's hot spots.

The implementation of the cross-chain protocol will be an important turning point in the development of blockchain technology , so Polkadot has attracted much attention from the market. Various good news about Polkadot have also followed: listing on the three major exchanges, fundraising, transfers, 1:100 token split, and the auction of parallel chain slots is about to begin.

The full-featured mainnet is about to be launched, and the era of one-click chain launch is coming... What opportunities will Polkadot bring us? Is it expected to surpass Ethereum?

01
Market frenzy, Polkadot becomes the direction pursued by new users

"Having missed EOS, will you also miss Polkadot?" This is a sentence that many new users have often heard recently.

The start of the 2020 bull market attracted many new users to enter the market, and Polkadot happened to be listed on the exchange. As a result, many new users bought DOT, and DOT continued to rise amid various favorable factors.

On August 22, Polkadot successfully completed a 1:100 token split and quickly became a hot topic in the market.

Before the Polkadot split, the total number of tokens was only 10 million, with a high unit price, which was not conducive to market circulation. After the split, the number of tokens became 1 billion, 100 times the original number.

In addition, after the split, the token price rose directly from the previous US$2.8 (calculated by dividing a single token by 100) to a maximum of US$5.76, surpassing EOS and entering the top 10 in market value.

Faced with such a crazy market, we can’t help but wonder why Polkadot is so popular among new users?

Cross-chain is now an important track in the blockchain field, and it has not yet fully exploded. It has great potential and attracts various investors to rush in.

Forrester Research Company once stated in its "2020 Predictions" that this year "the focus of blockchain will be on integration and interoperability." However, the proposition that "cross-chain is a pseudo-demand" is still being debated. The biggest bottleneck is that there is no universal cross-chain communication protocol, and any beautiful idea of ​​cross-chain is difficult to develop.

However, Polkadot will likely break through this bottleneck and attract the attention of various investors, especially new users.

Polkadot is a heterogeneous multi-chain technology project developed by Parity and the Web3 Foundation, led by Gavin Wood.

Polkadot is a network protocol that allows any data to be transmitted through the blockchain. Currently, different blockchains are like isolated islands in the sea, unable to transmit any information. Polkadot wants to use the protocol to connect different public chains and enable them to exchange data and information.

If this grand vision can be truly realized, it will become an important milestone in the history of blockchain development.

02
Polkadot has its own halo and a fully functional mainnet is coming soon

The most attractive thing about Polkadot is its founder Gavin Wood (Lin Jiawen). Gavin Wood is an early co-founder and CTO of Ethereum, the author of the Ethereum Yellow Paper, and the creator of the smart contract language Solidity.

But he believes that Ethereum is not perfect yet, and he wants to create a more complete Ethereum, so he started the Polkadot project in 2017.

Polkadot came with its own halo, a grand vision, and unprecedented technological innovation. The future is expected to be great, and the total amount of tokens is small, so it attracted a group of fanatical fans and was also called the "King Project".

However, due to the high technical difficulty, the project progress has been delayed. The mainnet was originally planned to be launched in 2019, but it was postponed for a full year.

Fortunately, Polkadot just avoided the bear market and performed well after being listed on the exchange.

Before the mainnet was launched, Polkadot launched its sister chain Kusama, which had not been audited, to provide a testing environment for developers. Many new features will be tested on Kusama and eventually implemented on Polkadot's mainnet. Polkadot pays great attention to the security of the project, and the mainnet was launched only after a strict code audit.

The Polkadot mainnet has a phased rollout plan with important milestones in each phase. The six phases are: PoA, NPoS, governance, removing Sudo, enabling transfers, and core functionality. Balance transfers are currently enabled, and a fully functional mainnet is coming soon.

Then we will have a question, why DOT could not be transferred before, but DOT tokens can already be traded in exchanges.

In fact, these are tokens obtained by early users through fundraising. For example, the tokens of more than 1,400 participants in the first Dutch auction were locked on the Ethereum chain. Before the transfer is enabled, the ERC-20 tokens can be converted into mainnet tokens through mapping. Therefore, there is no need to worry. The exchanges that support DOT mapping contain real coins, and some exchanges already support deposits and withdrawals.

03
From one-click coin issuance to one-click chain issuance

Recently, projects on Uniswap have been very popular, with various skyrocketing projects appearing every day. This is because many projects have achieved one-click coin issuance through Ethereum's smart contracts, but this situation may change in the future.

Polkadot's development tool Substrate already supports one-click chain issuance. It only takes 15 minutes to issue a chain of your own, and you can also issue tokens on your own chain. In the past, Ethereum's one-click coin issuance brought a wave of ICOs in 2017, so the era of one-click chain issuance will also have such opportunities.

Moreover, the issued chain can be plugged into Polkadot’s main network to exchange various information with other chains. Speaking of this powerful function, we have to mention Polkadot’s exquisite network structure.

Figure: Polkadot’s network structure

Relay Chain: A main chain that connects and validates parachains, provides security for parachains, and passes messages between them.

Parachain: Independent and distinct blockchains, each parachain can have its own architecture.

Bridge chain: connects the Polkadot network with external blockchains such as Ethereum.

Figure: Polkadot information exchange flow chart

It is precisely because of the Polkadot network structure that information can be exchanged between parallel chains, and the unlimited expansion of the network is achieved.

External blockchains can also be connected to Polkadot’s mainnet through bridges, such as Bitcoin, Ethereum, and EOS. Currently, teams are developing bridges for these three projects, and this theory may be realized.

There are many high-quality parallel chain projects on Polkadot, such as the common ChainX, Edgeware, Darwina, etc., which are all waiting for Polkadot's cross-chain protocol XCMP to go online and complete subsequent progress.

As of March this year, Polkadot has sponsored 129 projects to develop on Substrate. It can be seen that most of the funds raised by Polkadot, in addition to project development and operation, 6.45 million US dollars were directly given to ecosystem developers.

Popular projects on the Ethereum chain, such as ChainLink, Aragon, and Ocean Protol, have chosen to develop on the Polkadot chain in addition to being developed on Ethereum. In the future, Polkadot's ecological projects will be very large.

The progress of Ethereum 2.0 is very slow, with "Phase 0" to be achieved in 2021 and "Phase 1" to be achieved in 2022. However, the complete version of Ethereum 2.0 is still very far away from us. The most difficult point of Ethereum's sharding is that the information solution between shards has not yet been released. Therefore, as long as Polkadot builds a good ecosystem in the next few years, it is very likely to overtake others.

04
Distribution and function of Polkadot token DOT

Polkadot has completed three fundraisings, with a total fundraising amount of US$228 million. It is one of the projects with relatively high fundraising in the field of cryptocurrency. The team still has a portion of DOT waiting for fundraising.

The main functions of Polkadot tokens at present are: network governance, operation and binding.

Network governance: Polkadot token holders can control the protocol. Privileges will be given to relay chain participants (DOT holders), including managing abnormal events such as exceptional protocol upgrades and repairs.

Operation: The game incentivizes token holders to act in an honest manner. Good participants are rewarded by this mechanism, while bad actors lose their stake in the network, which ensures the security of the network.

Bonding: Bonding tokens to add new parachains. Unbonding tokens to remove obsolete or useless parachains is a form of proof of stake.

Figure: Lin Jiawen responds to the Polkadot parachain slot auction information

Regarding the auction of Polkadot’s parachain slots, Gavin Wood also said that it will be coming soon, and at that time the application scenarios of DOT will increase.

Currently, most users stake DOT on Polkadot, with an annualized rate of 15% and an annual inflation rate of 10%, which is a high-inflation project. As time goes by, the number of tokens will increase, and the selling pressure on the market will also increase.

05
Regarding Polkadot, do we still have a chance to get on board?

The current market price of Polkadot is $5.41, which is at a relatively high price. After a brief impact of $5.76, it began to slowly fall. However, we can look at three points of the Polkadot project that are worth our attention:

1. Providing cross-chain infrastructure. The technical architecture design of the cross-chain infrastructure solution is highly complex and sophisticated. From the perspective of scalability, interoperability, developability and governance, the platform has the potential to help realize the vision of Web3.

2. Application value. True interoperability supports the transmission of any type of data or assets across blockchains, not just tokens, especially cross-chain calls of smart contracts, which attracts many Ethereum projects to deploy in Polkadot.

3. Easy-to-use blockchain building framework. You can create a blockchain in a few minutes on Substrate and connect it to Polkadot, so that interoperability and security can be achieved from day one. There is considerable potential for commercial implementation. The current ecosystem is already quite active. The Web3 Foundation allocates funds to high-quality projects for development. It is very likely to become an ecosystem with a large user base.

Polkadot is the leader in the cross-chain track, and it is difficult for a project to shake Polkadot's position in the market. Although the Cosmos mainnet, which is also a cross-chain project, was launched earlier, it is still stuck in the development bottleneck of IBC1.0. As of now, only 80% of it has been completed, and it will take a very long time to fully develop it.

There is a huge technical gap between Polkadot's cross-chain protocol and Cosmos' cross-chain protocol. Polkadot can cross all information, but Cosmos can only complete cross-chain assets, which will be very unfavorable for subsequent application scenarios, such as cross-chain calls of smart contracts.

Therefore, Polkadot has made great innovations in technology and brought the concept of cross-chain into the blockchain world. It has considerable potential in terms of ecological scale and application scenarios and is still worthy of attention.

However, due to the overvaluation, there are many uncertainties in the project. Instead of waiting for the full-featured mainnet of Polkadot to come out and truly experience the implementation of the project before making a judgment, it is better to focus on the projects in the Polkadot ecosystem, which may bring us more opportunities.

Risk warning : The content of this article is only the author’s personal opinion, does not represent the views or position of Zhikuang University, and does not constitute any investment opinion or recommendation.