(2021-07-07) Polkadot/DOT Review: Worth It? What You Need To Know

Daniel Krupka: Polkadot (DOT) Review: Worth It? What You NEED To Know!!* What Dr. Gavin Wood is perhaps most famous for however is creating Solidity, the coding language used to build smart contracts on Ethereum.

In January of 2016, Dr. Wood left his position as Ethereum’s CTO and core developer. The exact reasons for his departure vary (even from Dr. Wood himself) but can be summed up as being due to his frustration about the slow development to Ethereum 2.0.

The DOT ICO took place in October 2017 and raised over 145 million USD in Ethereum

Half of DOT’s initial total supply of 10 million was sold in two rounds to public and private investors (2.25 million and 2.75 million, respectively). The price per DOT token for these funding rounds was 28.80$USD.

Less than 2 weeks later, over 90 million USD of the funds raised during the ICO were permanently frozen due an exploit of a vulnerability in Polkadot’s multisig crypto wallet code. One week after the attack, the Polkadot team confirmed that they still had enough funding to develop Polkadot and pressed onwards despite the lost funds. Although there have been efforts to retrieve the funds, over 500 000 ETH are still locked.

The post-ICO debacle marked the second time the team’s wallets had been hacked because of a code vulnerability

In January 2019, another private funding round was held by Polkadot in an attempt to make up for the lost (frozen) funds from the DOT ICO

In July of this year, a third private funding round was held, selling just under 350 000 DOT tokens at a price of 125$USD each. This raised another 43 million USD

the protocol is governed by those who hold DOT

the entire Polkadot network is accessed a simple browser plug-in called Polkadot.js

At a glance, Polkadot is an ecosystem of blockchains. The core Polkadot blockchain is called the Relay Chain. Blockchains that are connected to the Relay Chain are known as Parachains. These Parachains can have their own tokens, consensus mechanisms, and even their own governance structures

The Polkadot network uses a hybrid consensus mechanism. The consensus on the Relay Chain is a version of Proof of Stake (PoS) called GHOST-based Recursive Ancestor Deriving Prefix Agreement (or GRANDPA for short).

Polkadot’s hybrid consensus involves 4 key players: Validators, Collators, Nominators, and Fishermen.

Polkadot’s governance structure involves 3 key players: the Council, the Technical Committee, and regular DOT token holders

Council members change every era (24 hours).

The Technical Committee consists of 3 entities which must have experience with the Polkadot network and be actively involved in its development. The Web3 Foundation holds one of these three seats

Only the Council and regular DOT holders can table proposals (referred to as Referenda by Polkadot). These can range from implementing updates to the network to sponsoring real-life events. If a proposal requires the use of Treasury funds, the user tabling the proposal must also stake 5% of the total value of the funds required to make their proposal a reality. If their proposal is voted down, they lose their stake.

The value of a vote depends on how long a user stakes their DOT for the proposal in question. If you do not stake your DOT when voting for a proposal, it is worth 10% of one vote. If you stake your DOT for 32 weeks, it is worth 6 votes. This allows users on the Polkadot network to “vote with conviction”.

The target participation rate for Polkadot is 75% which corresponds to an inflation rate of 10% per year. The inflation rate can be as high as 100% per year if there is not enough network participation.

*If you are looking to store your DOT tokens, you are going to have a bit of a hard time. Since DOT is on its own native blockchain and is a brand-new cryptocurrency, you are effectively limited to two options: the Polkadot.js browser plug-in or the Polkawallet mobile app.

It is worth noting that the latter is developed by a third party. Many existing wallets are currently integrating support for DOT, including the Ledger hardware wallet and even the popular Metamask browser wallet.*

The most important milestones for Polkadot were arguably the launch of Kusama in August of 2019, the first phase of the Polkadot main net roll out in May of 2020, and the “final” phase of the main net on 18th of August 2020.

The recent August “launch” involved removing the Sudo protocol which can be conceptualized as a dam that, once removed, gave full control of the network to DOT holders. DOT tokens were made tradeable and the first proposal was passed to divide the valuation of DOT by 100.

Since that time, Polkadot is technically a decentralized autonomous organization (DAO)

On March 26th 2021, Acala announced that it had won the first slot auction on Polkadot’s testnet called Rococo, a Polkadot-based platform designed strictly for testing parachain functionality

On June 15th 2021, Polkadot’s sister chain and ‘canary network’ Kusama began rolling out its first parachain slot auction, which resulted in Acala’s sister chain Karura Network winning the first allocation on the KSM Network.

Parachains are currently being tested on the Kusama Network in order to study their application and behaviour in real-economic environments and, after a period of considerable auditing, testing and optimisation, parachains will be ready for deployment on Polkadot.

For those of you who watch Boxmining, you may have picked up on a detail he noted about Polkadot and Cardano in a livestream from August 2020. A substantial portion of investment into these cryptocurrency projects is apparently coming from China, specifically Chinese farmers (regular farmers, not yield farmers or crypto mining farms).

The story goes that many farmers in China are being offered substantial amounts of money, sometimes millions of dollars, to sell their land to state-owned businesses. Chinese brand ambassadors from various cryptocurrency projects including Polkadot and Cardano are selling substantial amounts of DOT and ADA to these rich farmers.

it is worth wondering what this means for a cryptocurrency such as Polkadot which punishes inactive DOT holders with insanely high inflation.