The Future of Polkadot: Anticipating a 10x Growth Surge
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Friends, today we're diving into one of the most prominent projects in the cryptocurrency world, widely regarded by the community. If you share my enthusiasm for this initiative and are eager to learn more, stay with us as we explore its promising future.
Without further ado, let me introduce you to the one and only POLKADOT… Ta…DA…..
- What is the objective of the Polkadot project?
- What challenges is it currently facing?
- What technological innovations (Polkadot 2.0) are being proposed to enhance its ecosystem?
These intriguing questions will be thoroughly examined in this article.
Before we delve into the Polkadot ecosystem and its future advancements, let’s clarify what Polkadot is and its functionalities. While many of you are likely familiar with it, I’ll provide a brief overview for those encountering this cryptocurrency for the first time.
Polkadot was introduced to the market in 2016 by Gavin Wood, a co-founder of Ethereum and a key figure in its development alongside Vitalik Buterin.
While Vitalik authored the Ethereum whitepaper, Gavin produced the Ethereum Yellowpaper, a detailed technical document outlining the execution of the entire concept.
Only three people on the Ethereum team had coding expertise: Vitalik Buterin, Gavin Wood, and Joseph Lubin. Gavin stood out as the most skilled coder, possessing extensive knowledge on how to construct the Ethereum blockchain. He was responsible for developing key technological elements such as the Ethereum Virtual Machine and SOLIDITY.
Gavin Wood’s contributions to Ethereum were truly remarkable.
In 2016, recognizing the limitations within the Ethereum ecosystem, Gavin Wood proposed the idea of POLKADOT to address these challenges.
Polkadot was built by Gavin Wood utilizing a Proof of Stake consensus mechanism. While Ethereum operates at Layer 1, Polkadot functions at Layer 0.
Understanding Layer 0
To grasp the concept of Layer 0, consider this analogy:
Imagine a long, heavily monitored road that connects various cities, complete with traffic lights and essential services like water, electricity, security, and energy. Each city spans 2000 square feet.
Now, envision that there are 50 cities, all of which are vacant and up for lease. These cities must be leased for two years, and to secure a lease, you must stake DOT tokens.
What happens after securing a lease? You have the freedom to construct anything, be it Layer 1 chains, decentralized exchanges, high-yield projects, DApps, or smart contracts.
Layer 0 serves as the foundational infrastructure, offering advanced technology, rapid transaction processing, and robust security. Once you win a plot in Layer 0’s auction, the possibilities are endless.
Gavin Wood’s Layer 0 concept was incredibly powerful, leading to the blockchain's launch in 2022 and the commencement of auctions. However, challenges soon arose.
The Challenge
The issue is that all cities are identical in size, making it impossible for someone wanting to build a small application to do so without leasing an entire city. This scenario presents a significant hurdle.
Cities must be leased for two mandatory years, requiring substantial DOT token staking. Small developers found it challenging to engage with Polkadot’s framework due to these constraints. So, what’s the solution?
The Solution
Polkadot developers suggested a flexible plotting approach instead of leasing entire cities. Developers can acquire only the land they need, offering tailored services. The two-year lease requirement is eliminated through an auction system.
They introduced the PAY ON THE GO concept, allowing users to pay based on the services and area utilized during their rental period. This is an initiative Gavin Wood aims to implement.
Now, you should have clarity on how Polkadot operates today and how it plans to evolve into POLKADOT 2.0, which is expected to launch in the next 2-3 months.
Gavin Wood also shared insights about Polkadot 2.0 during a casual interview, likening it to offering a single packet of pancakes along with its ingredients instead of selling 10,000 pancakes.
The upgrade to Polkadot 2.0 will be a pivotal moment for the ecosystem as it seeks to improve adoption rates.
# Evolution Model
Alternate Chain
Polkadot Relay Chain — Polkadot Agile
Vision
Shared Infrastructure and Security — Transition to Blockspace
Working Model
Connecting Chain, Parachain — Centering Various System Chains, Parachains
Supercomputer
150 cores CPU — 1500–1000 cores
Revenue Model
Auction — Core Rental
Target
Multiple Chains — Hosting Applications
# The Crucial Question: Will the DOT Token Price Rise or Fall?
The principle is straightforward: the price of a token tends to increase in correlation with its utility.
Factors Influencing Price
- Previously, the DOT token had limited use, but with Polkadot 2.0, its utility appears to be on the rise.
- The supply of DOT tokens is unlimited, with a current circulation of 1.4 billion tokens, of which 1.3 billion are already in the market. (Like Ethereum, its supply remains unlimited.)
- Each year, 10% of new DOT tokens are generated, along with staking and validator rewards.
Conclusion
Considering these factors, it is crucial to enhance token usage while implementing strategies to manage supply. A proposal for a Burning Mechanism has been approved in Polkadot’s governance, where profits from rental income will be burned.
Ultimately, the level of adoption following the launch of Polkadot 2.0 will determine the token's fate.
Chart
The DOT token reached a near-all-time high of $55 during the previous bull run and is currently trading at $8. A price increase is likely post-upgrade.
The Polkadot ecosystem is set to become increasingly beneficial for developers, enhancing their chances of success. As more Web 2 and Web 3 projects integrate within its ecosystem, their potential to outpace competitors grows.
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Disclaimer
The information provided in this article is intended solely for educational purposes. I am not a financial advisor, and this article does not constitute financial or investment advice. I have no affiliation with any of the websites, coins, or projects mentioned herein.