Polkadot: An In-Depth Discussion from an Investment Perspective

Recently, the popularity of Polkadot has remained high. In addition to the continuous rise in its token price and the upcoming slot auctions, the concept of "value networks" has once again become a focal point of discussion. Many analyses suggest that Polkadot could be key to wealth growth in the cryptocurrency sector in 2021.

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

In July 2020, DOT began to be listed on major trading platforms.

From August to December 2020, the price of DOT basically remained around 5 USD, and by December 28, its total market capitalization had not exceeded 5 billion USD.

On January 7, 2021, DOT first broke through the $10 mark, reaching a high of $10.6788, with an increase of over 100%, and then began to correct.

On January 11th, DOT fell back to $7.15.

On January 15, after a brief adjustment, DOT once again continuously broke new highs, surpassing XRP in total market capitalization and rising to fourth place in the total market capitalization rankings of cryptocurrencies.

On January 17, the second wave of DOT's rise ended, reaching a historical high of $19.3939.

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

The two waves of surging markets are somewhat related to the overall bull market environment.

The rapid growth of Polkadot is largely attributed to its robust technical architecture. Polkadot aims to build a scalable blockchain architecture that enables the coexistence and communication of different functional blockchains through the establishment of a shared security system.

Gavin Wood, the founder of Polkadot, once stated: "Bitcoin pioneered the basic scripting language, Ethereum expanded more financial transaction methods, and Polkadot aims to create a more universal model. Based on this, we also hope to address some fundamental scalability issues, such as how to handle more transactions and how to manage a large amount of work on the network. Therefore, universality and scalability are two symbiotic themes."

Compared to other projects, Polkadot seems to be repeating the path of previous public chain projects in certain aspects. However, Polkadot's slot auction appears to be more valuable and competitive due to its complex architecture and technology. Unlike other projects, Polkadot's slot auction is a distribution of usage rights rather than a distribution of governance rights.

Polkadot uses a modern variant of "candle auctions" for slot bidding. During the auction process, the program randomly selects an end time to avoid auction sniping. It is worth noting that the goal of Polkadot's slot bidding is to maximize the amount of DOT bonded over a two-year period, which means that the necessary condition for a successful bid is the optimal combination of the longest period and the maximum number of tokens.

The rise in market demand will inevitably lead to an increase in the price of DOT tokens. However, Polkadot's vision is clearly not limited to this.

Polkadot divides its slot auctions into four six-month terms. While only a certain amount of DOT needs to be staked, and it will be returned after the term ends, this also means that there will be a campaign every six months. If the original slot holder does not renew the auction, there may be a situation where DOT cashing occurs, and this part of the asset may be taken over by new bidders.

Polkadot is hailed as the king of performance and is believed to have long-term value for the overall ecosystem development of blockchain networks. However, what is the fundamental need for cross-chain? To resolve congestion and improve performance. Cross-chain technology still aims to address the biggest bottleneck of current blockchain technology - the efficiency issue, simply put, it is to solve transaction congestion.

From the current trading data, Polkadot still has a significant gap compared to Ethereum. According to the data, Polkadot's daily trading volume is far lower than that of Ethereum, and although its market capitalization is about 10.94% of Ethereum's, the trading volume generated is only 0.7% of Ethereum's.

With the rapid development of DeFi technology, the demand for performance in underlying public blockchains has become more urgent. The balance between performance and decentralization has always been a challenge faced by blockchain technology. The Polkadot whitepaper mentions that it will provide a feasible approach that natively supports kernel scalability, capable of practically supporting global commercial-level scalability and privacy.

From the development of blockchain 1.0 to the smart contracts of Ethereum, and now to the current 3.0 phase, the evolution of blockchain technology is replete with innovative concepts. We have reason to expect a more diversified blockchain ecosystem, but the core technologies addressing transaction congestion and performance issues remain fundamental to the current development of blockchain technology.