Polkadot Next Stop $ 5 billion TVL pending auctions
While the spotlight has shone this year, the interoperable blockchain platform itself has reached several notable milestones.
Not only has the network allocated its first parachain slots this year via the Canarian Kusama network, but it has also announced the creation of several trusted bridges to connect substrate-based chains. A full code audit of Polkadot has now finally been completed. Unsurprisingly, the price of Polkadot’s native DOT token reacted in the same way, hitting a new high of $ 55 on November 4th after starting the year below $ 10.
A billion reasons to be bullish
Against this optimistic backdrop, the first round of the Polkadot Parachain auctions recently began with nearly $ 3.5 billion raised by ten promising projects. The cross-chain defi hub Acala Network was the historian and ousted the Ethereum compatibility layer Moonbeam to claim the coveted maiden slot. When Acala finally gets into block # 8179200 on December 18, it will of course be alongside five other lucky auction winners.
Parachains are specialized blockchains connected to the main Polkadot relay chain, and they represent the final piece of core technology described in the Polkadot whitepaper. By March next year around 11 of these parachains will be fully functional, with each slot being “leased” for 96 weeks. This lengthy commitment supposedly ties users to the ecosystem, and everyone is speculating that the value of DOT will increase over the lease term. So far, almost 200,000 people have participated in crowdloans to support their favorite projects.
With around $ 3.7 billion currently on hold, it’s not inconceivable that the number will be closer to $ 5 billion by the end of the first series of auctions. That’s a hell of a lot of crowdloaned DOT promised by fanatical supporters with skin in the game.
Of course, Polkadot’s success will ultimately depend on the applications and use cases developed by projects like Acala and Moonbeam. With the 96 week clock ticking, no slot owner can afford to hold up or disappoint the community that funded their auction campaigns. Not least because they will almost certainly be relying on the same community to win another Parachain slot once their lease expires.
DOT’s tokenomics
The tokenomics from DOT should be emphasized. Unlike some other crypto assets, DOT has numerous uses within the Polkadot ecosystem, variously serving as governance tokens, staking tokens, and for binding purposes to link a chain with Polkadot as a parachain.
Interestingly, those who assign their DOT to a crowdloan will affect the APR for staking, as only unbound DOT can be used to participate in the former. Thus, separating DOT from staking reduces the supply of DOT included in staking contracts as APRs get higher. This could increase the demand for DOT and with it the price, with subsequent compensation for the crowdloan participation. That’s the theory.
Of course, we can already see this dynamic in action as the number of DOT missions has decreased and the stake premiums are increasing.
One thing is for sure, the momentum Polkadot has gained so far looks likely to continue through 2022 as the rolling auction schedule picks up pace.
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