Data Sources:

Date: November 2021

Data Sources:Footprint Polkdot Dashboard

Polkadot officially launched the auction of the first batch of parachain slots on November 12 this year, and Polkadot-related ecology and other agreements emerged, causing another upsurge and becoming a hot spot in the market.

Polkadot is valued by industry insiders for two reasons. One is its founder Gavin Wood. As one of the founders of Ethereum, Gavin Wood wrote the "Yellow Book" of Ethereum technical specifications and is a leader in the technical development level of the blockchain.

Another highlight of Polkadot is its token DOT. According to Footprint Analytics, in the past half a month, the relevant data of the token DOT has increased significantly, as follows:

• The price of DOT hit a record high of $54.98 on November 4th, and the current price is $42.3, an increase of 2.4% in the past 24 hours;

• Polkadot’s current trading volume is $1.762 billion, down 37% in the past 24 hours;

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Polkadot TokenPrice_Growth by Day data source: Footprint Analytics

About Polkadot

Polkadot, established in 2015, is positioned as a new generation of blockchain protocols that can connect multiple dedicated blockchain networks into a common network, allowing them to operate seamlessly at scale. It is a public chain that can be composed of multiple chains, using a scalable heterogeneous multi-chain system.

Polkadot tries to solve the problems of scalability, speed, and fees, allowing more personalized blockchains to exist, interoperability and upgrades between chains, and self-governance of chains. In addition to supporting token transfers, Polkadot also supports data transfer between different chains.

Polkadot also includes the following three main network infrastructures:

• The relay chain, called the main chain of Polkadot, is responsible for network sharing security, consensus and cross-chain interoperability, which can be regarded as a plug-in strip with 100 slots;

• Parallel chains are mainly responsible for data calculation and transaction information processing. They are regarded as different electrical appliances on the socket. Through multiple parallel chains, the horizontal expansion of the blockchain can be completed and the performance problems of the blockchain can be solved;

• A transfer bridge that allows parachains and parathreads to connect and communicate with external networks such as Ethereum and Bitcoin.

Cross-chain bridgeCross-chain bridgeresemblance.

How Polkadot is Different from the Ethereum Network

Throughout the development history of the entire blockchain, the predecessors were optimistic about the business prospects and quickly researched and established, while the later generations saw loopholes in the previous projects and aimed at the market to quickly fill the holes.

Similarly, "Blockchain 1.0" provides computing power to keep accounts, but there is no ecology. Therefore, the birth of "Blockchain 2.0", Ethereum's programmable attributes, and smart contracts, there are problems such as Ethereum network congestion and high transaction fees. Question, after, claims 'Blockchain 3.0' emerges from EthereumLayer2, side chain Polygon and other public chain ecology to solve problems.

And Gavin founded Polkadot, created a central core, and created public chains with different consensus and different characteristics into the core through parallel links, so that data between different public chains can interact. issues of information exchange, etc.

So what are the main differences between Polkadot and Ethereum:

• in sharding technology. Ethereum has 64 shard chains, but the structure of the chains is the same, like the relationship between "computer host" and "computer extension", which means isomorphism; while Polkadot has 100 heterogeneous shard chains, that is, 100 There are 100 parachains in the slot, and the parachain provides a clear, upgradable and scalable parachain standard;

• In terms of system upgrades. Ethereum follows the conventional hard fork (simple understanding means that the old and new versions are incompatible) process, while Polkadot uses the Wasm (WebAssembly) meta-protocol, which is the first to implement chain upgrades without hard forks;

• governance mechanism. Ethereum mainly relies on off-chain governance, while the development of the Polkadot network is decided by DOT holders. Compared with the governance mechanism of Ethereum, the overall scope is narrowed;

• consensus mechanism. In order to improve efficiency and save resources, Ethereum adopted the PoW mechanism and then switched to the PoS mechanism. In fact, it required a lot of computing power and a lot of resources. The verifier is selected from the set, so the cost is lower and the efficiency is higher than that of Ethereum.

Whether it is the iterative update of the Blockchain version or the emergence of Polkadot, it is to improve the entire ecology of the blockchain, so that more users can have a better experience and good projects.

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Polkadot Token Price Trend Chart Data Source: Footprint Analytics

From the price trend of DOT tokens, it can be seen that Polkadot became hot again in early August. Through the slot auction method, a large number of DOTs need to be pledged to bid for parachain slots, which has driven the rise of the Polkadot ecosystem as a whole, and the emergence of Polkadot ecological projects. According to the statistics of Polkaproject, there are currently more than 510 Polkadot ecological projects, covering various aspects such as infrastructure, tools, wallets, stable coins, DeFi, and DApps.

The current hot ecological projects are Kusama, Acala, Moonriver, Phala Network, Parallel Finance, etc. This article will select Kusama and Acala for analysis.

Kusama is Polkadot's Pioneer Network

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Kusama Market Cap data source: Footprint Analytics

According to Footprint Analytics, the total lock-up volume (or TVL) suddenly increased from US$580,000 to US$2.03 million on September 22, an increase of 250% within one day, and the current TVL remains above 3 million. Since the beginning of April, the market value has risen again in August, and the current market value is 3.3 billion US dollars. The growth of Kusama has a lot to do with the development of the Polkadot ecosystem. Heterogeneous cross-chain information interaction is becoming more and more popular.

Kusama serves as a "testing ground", where participants can build and deploy parachains or test Polkadot's governance, equity pledge and verification functions in the Kusama network. On the one hand, it allows future Polkadot network participants to practice in advance; on the other hand, new projects on Polkadot have certain unknown risks, and all projects involving protocols and operating environments will be tested on the Kusama network first. Therefore, Kusama has endowed its project Pioneer with value.

Acala is the center of DeFi

Acala is a Polkadot parachain optimized for DeFi. It is the economic center of Polkadot. It is also highly recognized by the market and won the first place in this auction. In terms of financing, Acala has conducted two rounds of financing, totaling $8.5 million. The investment was led by Polychain and Pantera Capital respectively.

Acala is positioned as a decentralized financial center and stable currency platform, providing a lot of support for cross-blockchain liquidity, stability and applications.

Acala has currently completed three sections:

• Decentralized over-collateralized stable currency system: Based on the Honzon protocol, the stable currency AUSD is generated through multi-asset over-collateralized, and its principle is similar to MakerDAO's DAI;

• Release pledge liquidity: For DOT/KSM pledge mining users, DOT/KSM can be exchanged for Liquid DOT/ Liquid KSM through the Homa protocol, a token that can carry out financial activities such as free transactions, for example, in pledge When the currency price plummets during the period, the opportunity cost brought by pledged tokens is alleviated;

• Decentralized exchange of automatic market maker mechanism (AMM DEX): similar to Uniswap and Pancakeswap.

Acala's vision is actually very big. Like MakerDAO, it started to specialize in the stable currency application of decentralized finance as early as the beginning of 2019. It will take some time for Acala to build a complete DeFi ecological chain.

Polkadot’s Unique Parachain Slot Auction Method

After the slot auction was officially launched on November 12, the price of Polkadot’s token DOT broke through a new high. Why is there an auction of parachain slots? First, because the parachain allows both Bitcoin and Ethereum networks to link and cross-chain information interaction through the relay chain, so if you want to obtain the right to use on the parachain, you will participate in the auction.

Second, according to the official data released by Polkadot, the number of parallel chain slots is limited. At present, it can only support 100 cross-chain communications at most, which means that this kind of cross-chain service can only have 100 public chains. In fact, the Polkadot parallel chain has a limit , it needs to consume some resources to ensure the security and availability of each public chain.

Then, in this limited parallel chain, only a large number of DOTs can have the opportunity to enjoy the service of communicating with other public chains.

In addition, Polkadot adopts a random candle auction method, and the organizer will open the auction within a specified time. For example, the highest bidder will win the auction at the moment before the "candle" is extinguished, which is different from the traditional auction method of the highest bidder. Not the same, the candle auction method is more fair and reduces the occurrence of oligopoly effects, but this method has uncertainties, and there may be disadvantages such as that the "candle" will be extinguished after the first person bids, making the entire auction revenue low. .

According to the rules officially disclosed by Polkadot, the usage period of each slot varies from 6 months to 2 years. Once the time is up and there is no renewal, Polkadot will cut off the communication rights between the parachain and other public chains. However, Polkadot will lock the funds of the final winner of the parachain slot auction and return them to the bidder after the slot usage period is over, which is equivalent to the bidder providing a deposit and using the parachain slot service for free. Of course, this is also The opportunity cost of DOT needs to be considered. When the price plummets, there will still be certain losses.

In short, although the parachain slot has its innovations, allowing projects or users to obtain heterogeneous communication cross-chain services at low cost, there are also certain risks and defects.

Summary of Polkado’s Advantages and Disadvantages

Advantages of Polkadot:

• Created a central hub to allow data interaction between public chains with different characteristics, bringing great convenience and innovation to projects on the chain;

• At the same time, it improves efficiency, saves a lot of resources and costs;

• Provide a method close to the real environment to allow projects to be tested in advance, to ensure the security of the network operation and to give new projects unknown risks in advance test.

Examples of Polkadot's disadvantages:

• Parachain slot auctions need to provide a large number of DOT tokens as pledges, during which the lock-up period is longer, and when the price plummets, certain risk losses will occur;

• Polkadot also needs to improve all aspects of technology and loopholes in the ecology;

• Introducing stablecoins as the foundation of DeFi: Stablecoins are an important factor in determining the success of all public chain ecosystems including Polkadot. Whether it is the generation of stablecoins by mortgage or cross-chain introduction, Polkadot can occupy a place in the DeFi market.

It has been six years since Polkadot was launched in 2015. Compared with other public chains such asSolana, its ecological development is not considered rapid, because the recent parallel chain slot auction has attracted attention again. The improvement of Polkadot's entire ecology requires more native and cross-chain projects to join in, in order to realize its beautiful vision of "running cross-chain projects more efficiently, on a larger scale and seamlessly".

For more data dynamics and content of blockchain ecology, clickFootprintFootprint Analytics is a one-stop visual blockchain data analysis platform. Footprint assisted in solving the problem of data cleaning and integration on the chain, allowing users to enjoy a zero-threshold blockchain data analysis experience for free. Provide more than a thousand tabulation templates and a drag-and-drop drawing experience, anyone can create their own personalized data chart within 10 seconds, easily gain insight into the data on the chain, and understand the story behind the data.

The above content is only a personal opinion, for reference and communication only, and does not constitute investment advice. If there are obvious understanding or data errors, feedback is welcome.

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About Footprint Analytics:

Footprint Analytics is a one-stop visual blockchain data analysis platform. Footprint assisted in solving the problem of data cleaning and integration on the chain, allowing users to enjoy a zero-threshold blockchain data analysis experience for free. Provide more than a thousand tabulation templates and a drag-and-drop drawing experience, anyone can create their own personalized data chart within 10 seconds, easily gain insight into the data on the chain, and understand the story behind the data.