Polkadot: An In-Depth Discussion from an Investment Perspective

Recently, Polkadot has been in the spotlight, not only because of its rising price and the upcoming slot auctions but also due to renewed discussions around the "value network" concept. Many believe that Polkadot could be the key to wealth in the cryptocurrency space in 2021.

A review of Polkadot's market performance since its launch:

In July 2020, DOT began to be listed on major exchanges. From August to December, the price of DOT remained around 5 dollars, and the total market value did not exceed 5 billion dollars before December 28.

On January 7, 2021, DOT first broke through $10, with an increase of over 100%. After a brief correction, on January 15, DOT continued to reach new highs, surpassing XRP in total market capitalization and jumping to the fourth position in cryptocurrency market value. On January 17, DOT reached its historical peak of $19.39.

The technical structure of Polkadot is an important factor in its price increase. Polkadot aims to build a scalable blockchain architecture that enables the coexistence and communication of different functional blockchains through a shared security system.

Founder Gavin Wood stated that Polkadot aims to create a more universal model to address scalability issues, enabling more transactions and higher network processing efficiency.

However, Polkadot seems to have repeated EOS's path in certain aspects. Similar to the EOS supernode elections, the Polkadot slot auctions have also attracted attention from various parties in the industry. The difference lies in the fact that EOS is about the distribution of governance rights, while Polkadot focuses on the distribution of usage rights, but both follow the principle of prioritizing capital.

Polkadot uses a variant of "candle auctions" for slot bidding, aimed at maximizing the amount of DOT bonded over a two-year period. This mechanism may lead to an increase in the price of DOT, but there are also potential risks, such as a loop where new bidders pay for the previous wave.

In terms of performance, Polkadot is considered a major competitor to Ethereum. However, Polkadot's daily transaction volume is currently far lower than that of Ethereum. Data shows that Polkadot peaks at about 6 transactions per minute, while Ethereum averaged over 850 transactions per minute in December 2020.

In terms of market capitalization, Polkadot accounts for approximately 10.94% of Ethereum, but its trading volume is only 0.7% of Ethereum's. This indicates that the title of "King of Performance" does not solely depend on the complexity of the technical structure; market choice is key.

With the development of DeFi technology, the demand for public chain performance is becoming increasingly urgent. The Polkadot white paper proposes methods to support global commercial-grade scalability and privacy. However, addressing transaction congestion and performance issues remains a core challenge in the development of blockchain technology.

Although we look forward to a more diversified blockchain ecosystem, improving transaction efficiency and performance is still the fundamental task at this stage.