The Polkadot network is most watched by blockchain enthusiasts that its valuation hit $1 billion even before the launch of its mainnet. Web3 Foundation, the blockchain’s managing non-profit company, hopes to raise about $60 million through a private token sale since January of this year.
The company only managed to secure investments from three Chinese investors who placed $15 million for the DOT tokens. As a result, the target $1 billion valuation is still far from reality. Although, it is unknown how much tokens went to the Chinese investors. According to Polkadot, they sold only 70% of the 500,000 tokens.
What is Polkadot?
Polkadot is a blockchain platform that features low barriers that allow the entry of flexible and autonomous industries. These industries then work together within the platform’s shared security umbrella. The technology hopes to revolutionise not only the blockchain technology but also provides a more equitable peer-to-peer digital ascendancy.
The project, led by Swiss non-profit Web3 Foundation claims to offer what other blockchains fall short.
What Does Polkadot Offer?
Followers of this technology tout Polkadot as the next big thing in blockchain or the blockchain of blockchains because it aims to resolve the common issues and challenges of what existing blockchain technologies face today. Its features include:
Users of Polkadot can interoperate across a wide variety of blockchains within the Polkadot network. Cross-blockchain transfers of any asset, token, or date are possible through Polkadot.
Transactional and Economic Scalability
One of the common challenges of blockchains is its scalability. Polkadot purports that they can provide economic scalability through the use of a set of validators that will secure several blockchains. Spreading transactions across a number of parallel blockchains will secure transactional scalability.
Ease of Blockchain Innovation
Through the use of Substrate, a blockchain building framework, users can create blockchain within minutes. By connecting it to the Polkadot network, the blockchain can become interoperable right away. As a result, Polkadot’s network will grow exponentially.
Polkadot claims that the platform is a resilient network. Its adaptability and ability to upgrade itself without forking enables it to provide better technologies.
Polkadot features a “pooled security,” where Polkadot’s validators secure multiple chains. This security is available as soon as users connect their blockchain to Polkadot.
User-Driven Network Governance
Polkadot uses an open governance system where coordination of network upgrades are done. This ensures that the network will not stagnate and that each development mirrors the core values of the community.
The DOT Token
The Polkadot network is powered by the DOT token, which has four distinct purposes:
As mentioned earlier, Polkadot is an open governance platform. Through the use of DOT tokens, stakeholders can have control of the protocol. This is what differentiates it from other platforms. Instead of giving an exclusive right to miners, DOT holders have relay chain operators that allow protocol upgrades and fixes.
To address the issue of fraud, game theory gives incentives to token holders who behave honestly. The mechanism will award good actors whereas bad actors will lose their access to the network. This way, the network remains safe and secure.
The creation of new parachains occurs through the bonding of tokens. This bonded parachains remains within the network until the end of the lease or arbitrarily unbond DOTs.
One of the main features of Polkadot is its interoperability or the ability to send messages from one blockchain to another. Whilst not required, DOTs may be used to pay fees.
How is Polkadot’s Market Reception?
Polkadot’s claims of providing interoperability of blockchains within their network is not a novel idea. In fact, Cosmos Chain, which claims to be the Internet of blockchains, was launched in March of this year.
In October 2017, Polkadot has a total of 10 million tokens but only half or 500,000 DOT tokens were sold for $145 million, selling each token for $30 each. However, some people with direct knowledge of the project claim that the price paid by the three Chinese investors do not reflect the market valuation. This is because investors can get massive discounts should they choose to buy in bulk. Investors often record tokens at full value even though they did not pay the full price for it.
Although market reception is not what they expected, its founder and Ethereum co-founder Gavin Wood is pleased with how things are going.
“I have been struck by how much interest there is in Polkadot – many of us have sensed an immense hunger for something new to explore,” Wood said in a statement. “With this success, I look forward to seeing the W3F team put these resources to good use, supporting both Polkadot and the broader Web 3.0 ecosystem.”
From the 500,000 left after the private sale, 300,000 or 30% is reserved for Web3 with the remaining to be distributed at the mainnet launch. All in all, the foundation only has 15% of the total supply and even if they sell it all, it will still fall short of the expected $1 billion valuation.
Launching of Kusama Network
Web3 Foundation is reportedly focused on launching Kusama, an “early, unaudited and unrefined release of Polkadot.”
In their blog post, Wood claimed that “Kusama will serve as a proving ground, allowing teams and developers to build and deploy a parachain or try out Polkadot’s governance, staking and validation functionality in a real environment.”
Wood suggests that the said network will provide to high-risk functionality projects that are already creating products for Polkadot. As to how many Kusama (KSM) tokens will be available for distribution, the numbers are still unclear. However, those close to the project claim Web3 Foundation has 3 million DOTs. KSM tokens are convertible to DOT tokens at a fixed rate set by the foundation. A spokesperson claims that the participation reward could be equal to 1 DOT for every 100 KSM tokens. The mechanics of the reward scheme are not yet set and are still undergoing final touches according to the spokesperson.