What is Polkadot (DOT)?

Written by Evgenia Sidorova
Written by
Investing reporter
ECOS brand manager....
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Polkadot (DOT)

In less than a year (since August 2020), the Polkadot token has grown in value by 1,238%. In this case, the token is not distributed by a regular blockchain network, but by a multiplatform, the main purpose of which is to connect individual blockchains into a common decentralized Web3 network.

Polkadot connects all blockchains with each other

First of all, Polkadot is not a cryptocurrency, but a multiplatform designed to unite all currently existing blockchains into a single global ecosystem. DOT’s mission is to create a completely new Web3 network based on dinner blockchains, where information exchange is completely decentralized.

DOT creates a platform within which new blockchains can be created and to which existing blockchains can be connected. This system can run cross-registries and cross-computing. It will also allow blockchain systems to process and transfer data quickly and securely while avoiding system-wide updates or hard forks. Cryptocurrency mining is not a big thing with Polkadot.

In doing so, DOT can transfer data both across public, permission-free blockchains and across private blockchains by interconnecting them.

The founders are Ethereum co-founder and CTO Gavin Wood, Web3 Foundation CTO Peter Chaban, blockchain technology researcher, and developer Robert Habermeyer.

Polkadot cryptocurrency

Since 2017, the Polkadot has been using a personal cryptocurrency of the same name labeled DOT. As noted on the Polkadot website, the token works for 3 different purposes:

  1. Governance: Users have absolute control over the Polkadot. Privileges that are considered only for miners will become given to members of the token holders, covering the management of exceptional activities, these as protocol updates and tweaks.
  2. Workability: The Game Doctrine encourages token holders to produce themselves frankly. This device rewards non-bad members, while bad members lose their own share in the network.
  3. Connectivity: Parachains can be connected by linking tokens. Obsolete or useless parachains can be removed by deleting the linked tokens.

DOT issued a total of 10 million tokens. But after trading began, the token was «denominated» 100 times. Thus, the 10 million initial tokens turned into 1 billion, which is now used in the network. The denomination did not affect DOT’s market capitalization, as the new coins were worth about 1/100 of the old ones, but it made the token easier to use.

Unlike other cryptocurrencies, the Polkadot network has not voiced any information about token issue limits. Thus, DOT is not protected from inflation in case new tokens are issued.

Investments and the value of the cryptocurrency

Since its launch in 2017, DOT has raised funding three times by issuing new coins. The project raised $145 million in 2017, the Web3 Foundation sold another 500,000 DOTs in June 2019 (amount not disclosed), and Polkadot held a private token sale in 2020, raising $43.6 million.

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