The Number
Polkadot (DOT) is a new generation blockchain protocol that greatly simplifies cross-chain communication and interoperability by connecting multiple blockchains into one unified network. It was founded in 2016 by Gavin Wood, former co-founder of Ethereum and the inventor of the Solidity smart contract language. Upon launching in August 2020, DOT had been floating between $4 to $5.5 but suddenly soared over 130% to $10.23 from the December lows of around $4.5. This article aims to analyze the driving forces behind the rapid acceleration of Polkadot and predict what the future holds for this novel protocol.
Behind the Surge
Polkadot Features
The revolutionary fundamental advantages offered by Polkadot has sparked the recent upswing. At the heart of Polkadot is the concept of “parachains” which denotes that it can process many transactions on several chains in parallel, eliminating the bottlenecks that occurred on legacy networks that processed transactions one-by-one. Moreover, each blockchain on Polkadot is optimized for a specific use case, which implies that unlike other blockchain protocols, no tradeoff on features is required to support different use cases. What is more, networks and applications on Polkadot can share information and functionality that opens the door to innovative new services and allows users to transfer information between chains. All the above practical features can maximize the full potential of blockchain for real-world use cases, giving rise to new applications and markets. Thus, it is no wonder that Polkadot is adopted by more developers and getting more prevalent among investors, thereby triggering the upsurge.
Votes of Confidence by Binance
The key driving force behind the recent bullish wave, though, is the two votes of confidence by Binance. On 23 Dec 2020, Binance announced to establish a $10M fund to empower innovative projects to be built around the Polkadot ecosystem. The fund is part of their broader commitment under Binance Launchpool to bring the DeFi experience to Binance users. Being endorsed by Binance is a big vote of confidence to Polkadot, approving their project values and culminating in the year-end bullish trend. Following the $10M fund’s announcement, the Binance team featured DOT on their homepage instead of ETH for some time. This worked as a free yet most effective advertisement for Polkadot, grabbing the attention of the entire crypto community and fueled the recent massive price surge.
What the Future Holds
Ethereum Killer
Known as the rival to Ethereum, Polkadot envisions to take things to the next level. The team is working hard to solve the bottlenecks and throughput capacity that proved to be an issue for Ethereum. They crave to build a systemized version of governance instead of solely centering around the leader like Ethereum did. Besides, the team will be constructing more interchain bridges in 2021 to bridge between Polkadot and other blockchains. Given the ambitious visions, it is expected that Polkadot will take away some economic activities from Ethereum, thereby eliciting another wave of price surge in 2021.
More Projects Onboard
It has been just a few days in 2021 but some of the projects are already set to launch on Polkadot. Apart from Chainlink and Gitcoin that joined earlier, Frontier, Moonbeam and Acala announced to kick off their projects on the platform, taking advantage of the cross-chain communication and data exchange. They believe that Polkadot can create a pleasant and convenient environment for development of new startups. This new wave of startups onboarding implies that perhaps we should gear up for a more thriving DOT ecosystem in 2021.
Conclusion
At the time of writing, DOT is ranked 7th by market capitalization with a 24-hour volume of $2.5B. Aside from the investor support, the achievement is only made possible with the massive effort from the DOT community who either works on Polkadot itself or develops solutions built on top of Polkadot. With the strong team and community that contribute around-the-clock, DOT will undeniably remain to blossom in 2021, continuing the sparkling story of 2020.
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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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