Polkadot Blockchain Network arouses institutional interest

Multiethnic handshake on polka dot background

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As cryptocurrencies settled in the chaotic ride of the bull run and pullback in 2021, it’s becoming increasingly clear that investors are split into two camps. There’s the retail segment, which appears to be drawn to the massive short-term profits generated by memecoins like DOGE or its littermate SHIBA INU. As fun as it is to follow these stories, they are nonetheless driven by the hype. And as many will remember from the 2017 boom, the hype doesn’t keep the crypto markets going for long.

The other camp is where the big money lies with the professionals – venture, corporate, and institutional investors. In most cases, big money is often smart money. Despite the apparent success of dog-themed assets, professionals don’t necessarily want to move their money around every other week in the hunt for the next meme. You are looking for longer-term risk-adjusted investments.

A quick look at the current top cryptocurrency competitors by market cap shows that few are seriously considered by professional investors. BTC and ETH are already attracting professional money. DOGE is a meme coin and Tether is a stablecoin. XRP has been a long-time top ranker, but rightly or wrongly, Ripple is still under the shadow of an SEC lawsuit about it, at least for the time being. Cardano is a popular staking platform, but it does not yet have a functional mainnet that can support application development.

Perhaps unsurprisingly, Polkadot is one of those projects that is attracting great interest from professional investors.

Speaking recently about his belief that Polkadot is the right place for developers right now, Keld van Schreven, Managing Director at Digital Asset Investment Company KR1 said, “We are seeing talent move to Polkadot, which would be built on top of Ethereum […] I think it will be one of the winners in the next few years, and then maybe it will last 100 years. “

New DOT-based instruments

The DOT token is proving so attractive to professional investors that institutions are starting to bring DOT investment products to market. In early May, Osprey opened its Polkadot Trust, which offers accredited investors an opportunity to participate in the DOT awards.

At the beginning of this year, the Swiss issuer 21Shares AG launched its own DOT product, an ETP listed on the SIX Swiss Exchange. The crypto press quickly found that it had attracted investments from Goldman Sachs, JPMorgan and UBS, among others. Recently, Swiss digital asset company Valor launched its own ETPs offering exposure to Polkadot and Cardano.

Switzerland is a desirable jurisdiction for institutional investors in digital assets. The second tranche of the country’s so-called “Blockchain Act” goes live this August, paving the way for secondary market trading of crypto-securities and removing the final barrier to the regulated issuance and exchange of cryptocurrencies.

When investors needed to be convinced of the DOT token value, Moonrock Capital offers a blueprint for investing successfully. The fund started 2019 with just five-digit cryptocurrency investments and has grown to eight-digit within two years. The founding partners credit their early investments at Polkadot as the driving force behind these results.

Ethereum 3.0?

With a relatively high market capitalization, DOT is one of the few tokens with sufficient depth of liquidity to meet initial investor demand. However, the project has some impressive fundamentals that are likely to be a more important contributor to appetite.

Polkadot is the brainchild of Dr. Gavin Wood, one of the original co-founders of Ethereum and author of the Solidity programming language. Dr. Wood invented Polkadot after realizing some of Ethereum’s limitations and left the project in 2016.

In the years in between, he and the Parity Technologies team in Berlin brought the vision to life. Polkadot goes beyond the Ethereum 2.0 vision to provide a platform that is both scalable and interoperable with other blockchains. The mainnet is already operational and is secured by around 300 validation nodes chosen by over 20,000 DOT holders as part of the Polkadot consensus model.

The mainnet has been in production since May 2020, almost a year in live operation during which the project tested its governance models. The next step is the upcoming parachain auctions. Polkadot works with a central relay chain and a number of sub-chains, called parachains, for which projects have to provide slots in order to run on the Polkadot mainnet. Once the parachains are up and running, Polkadot will host live applications for the first time.

Additionally, given the promise of the project, there is a queue of well-invested and high-profile projects waiting to get started, including the DeFi institution-focused infrastructure. One example is Acala, which aims to become Polkadot’s “DeFi hub”.

The exact date of the Parachain auctions will be announced, but the first round will take place on Polkadot’s “Canary Network” Kusama, a kind of sibling network for early stage experiments and deployments before going live on the main Polkadot chain. Kusama recently underwent an upgrade that enabled Parachain auctions. So it’s a fair bet that an announcement is imminent.

Against strong competition

All development efforts are now beginning to be noticed in the market. DOT prices have risen from $ 5 to $ 40 since a token switch last year, even before the Parachain slot auctions open. Polkadot now appears to be where Ethereum was in 2015, so investors seem to be seizing the opportunity to get into this project early.

Is the excitement justified? There are a couple of unknowns. For example, if projects do bid for parachain slots, they do so on a lease basis – and slots supply is limited, but demand is expected to be high. Hence, there is a possibility that the Polkadot ecosystem could experience upheaval in the first few months or years as long-term residents settle down. Since this “slot” model is new to the blockchain, it remains to be seen how this will develop.

Although Polkadot has impressive references, the years of building the platform mean that it is now in a competitive market for developers and users alike. Thanks to Cosmos, it’s not even the only interoperable platform, and others, including Binance Smart Chain and Polygon (formerly Matic Network), are rapidly gaining traction.

Despite a few bugs in the ointment, Polkadot has been in development for a long time and it now appears to be sparking a storm in the blockchain ecosystem when developers can finally get their parachains to market. Given the current level of interest, it’s definitely high on the watchlist for the rest of 2021 and beyond.