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Polkadot – What’s The Secret Sauce For Its Meteoric Rise?

Did you hear of Polkadot a year back?

There’s a high probability you might not have had. It’s evident that Bitcoin and Ethereum have been majorly dominating the crypto space. But who knew, a cryptocurrency with no forking background and hype will emerge to be the world’s 4th largest in terms of market capitalization!

Polkadot connects other blockchains into a single network and uses sharding to enable increased network usage and tackle scalability issues. As the creator of Polkadot, Gavin Wood, said, “Polkadot is, in many respects, the biggest bet in this ecosystem against chain maximalism. Even if there were one perfect chain, I don’t think it would stay perfect for very long. I would argue that it’s really not such a good plan to be so focused on backing one winner above all others.”

Until August, this Blockchain interoperability project wasn’t even a part of the top 100, and now it has outperformed the major cryptocurrencies with a market capitalization of over $14 billion USD. But what led to this magical prominence?

Let’s find it out.

Redenomination is partly responsible for what Polkadot is today. A jargon as it seems, it is nothing but similar to a stock split, which means the value of the stock takes a steep rise suddenly after an event, and it becomes accessible to small investors. The Redenomination event inflated DOT’s circulating supply by 100 times. So what happened is one old DOT got divided into 100 new ones, wherein the total supply also multiplied considerably in a 1: 10 ratio, i.e., 10 million at Genesis became 1 billion. But that doesn’t mean it will multiply the investors’ total holdings as well

To simplify this, while redenomination increases the circulating supply, its market capitalization remains unchanged. So, for a DOT investor who has 1 token previously will hold 100 now. But, the total value will be the same, while the outstanding shares would have multiplied.

Gavin Wood even mentioned the decision for redenomination was taken so that it’s easier to calculate and hence buy “more ergonomic”.

Tesla also conducted a five-in-one stock split the very same day, where its share price went up 12% when trading resumed after 10 days. Before the redenomination took occurred, DOT was trading at $2.92, and since then, its price surged exponentially to $15.77 (more than 1000% increase in 5 months)

Polkadot is exactly not a new token, as it was actually launched in 2017, but has been under development for around three years. In May 2020, after its mainnet launch, Polkadot started grabbing eyeballs.

Another plausible reason for its stardom can be transferability. Before Polkadot became operational, transferring tokens were not possible without the interference of IOUs and ‘over-the-counter’ exchanges. Once the transferability issue got fixed by the Polkadot community, its visibility amongst the exchanges sprung up. Popular exchanges like Binance and Kraken became so competitive that they listed the token three days before the intended date.

DOT’s transferability feature was a great add-on, as it not only raised its market capitalization but also propelled it into the top ten cryptocurrencies, even before its redenomination date.

Towards the end of December 2020, DOT rose to over 40% after votes of confidence by Binance, the world’s largest exchange. Previously, Binance even announced a 10 million USD support to fund Polkadot projects. The Polkadot community was surprised when on December 28, the ETH/BUSD pair was replaced by DOT/BUSD.

As incredible as it sounds, some Asian traders believe DOT follows the EOS’ 2017 trend when many claimed that EOS and Bitcoin prices were correlated.
As per Terry Wilkinson, chief executive officer at the Tokyo-headquartered investment firm Anchor Value – EOS “was the latest greatest pie-in-the-sky protocol at that time and as such garnered a lot of hype during that cycle. The bull run did not end because EOS stopped pumping. It was kind of the poster child for that run.”

Similarly, Polkadot is looked upon as a promising blockchain that may replace Ethereum’s dominance as DOT followed BTC’s footsteps of ATH in less than a week.

It looks like the sky is the limit for Polkadot as 21Shares, the Switzerland-based investment product provider, is launching the world’s first exchange-traded product (ETP) for the Polkadot very soon.

Considering its fast and steady growth, what do you think?

Will it go up the ranking order and surpass Ethereum anytime soon?

This blog was originally published here
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The post Polkadot – What’s The Secret Sauce For Its Meteoric Rise? appeared first on NASSCOM Community |The Official Community of Indian IT Industry.

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