Messari Releases Polkadot Q1 2024 Report: Daily Active Addresses Exceed 510,000, Setting a New Record

Messari recently released the Polkadot status report for the first quarter of 2024, analyzing key data indicators related to Polkadot, network analysis, ecosystem analysis, and the latest roadmap. The key points of the report are as follows:

• The number of daily active addresses in the Polkadot ecosystem has reached 514,000, setting a new historical high, with a month-on-month growth of 48% and a growth of 192% over six months. Moonbeam continues to maintain its leading position, while the growth of the Manta network is the most significant.

• The XCM message volume has increased by 94% month-on-month and 314% over the past six months. Over the past year, the number of XCM messages and channels has been increasing each quarter.

• Gavin Wood proposed a plan for the future development of Polkadot, introducing the Join-Accumulate Machine ( JAM ). JAM integrates the features of Ethereum and Polkadot, aiming to enhance scalability and performance while maintaining resilience.

• The referendum 457 aims to diversify the Polkadot treasury by introducing USDT and USDC, and allowing treasury proposals in stablecoins. This referendum plans to use HydraDX's DCA functionality to exchange 3.4 million DOT.

Introduction

Polkadot is a distributed blockchain computing platform that serves as the foundational layer for other sovereign blockchains known as parachains, used for validation and shared security. Polkadot is built using the Substrate blockchain development framework. Additionally, Polkadot's foundational layer is called the Relay Chain, which employs the nominated proof-of-stake NPoS consensus mechanism, and its state machine is compiled to WebAssembly Wasm.

The core function of the Polkadot relay chain is to validate and provide security for its parachains. Parachains are added to the relay chain through parachain slot auctions. Currently, the auction process is a week-long candle auction where potential parachains "bid" DOT tokens to obtain a parachain slot. However, this model will be updated in 2024.

Finally, the parachains on Polkadot can communicate with each other through the cross-consensus message format (XCM). XCM is a message format that standardizes messages between Polkadot parachains, thereby achieving greater interoperability.

Key Indicators

( Financial Analysis

)# Market Cap

In the fourth quarter of 2023, DOT's market capitalization increased by 111% compared to the previous quarter, reaching $8.4 billion. Following this strong quarter, in the first quarter of 2024, DOT's circulating market capitalization further increased by 16% compared to the previous quarter, reaching $12.7 billion. From the bear market low, DOT has risen by 270%. At the end of this quarter, it ranked 16th among all crypto protocols. DOT is still 80% lower than the historical high of $55.5 billion set on November 8, 2021.

(# Income

In the fourth quarter of 2023, Polkadot's revenue reached $2.8 million, a month-on-month increase of 2880%. This surge was primarily attributed to a significant increase in external information )extrinsics### in late December, driven by Polkadot inscriptions. In the first quarter of 2024, the revenue indicators saw a sharp month-on-month decline. The dollar-denominated revenue was $241,000 ###, a month-on-month decrease of 91% (, while the DOT-denominated revenue was 28,800 DOT ), a month-on-month decrease of 92% ###. Compared to the third quarter of 2023, the dollar-denominated revenue grew by 249%, and the DOT-denominated revenue grew by 97%. It is noteworthy that due to the structural design of the network, Polkadot's revenue is relatively lower compared to its competitors.

(# Supply

Polkadot's native token DOT has three main uses: governance, staking, and parachain bonding. As of the end of Q1 2024, Polkadot's staking rate is 52%. DOT adopts an inflationary monetary policy with no maximum supply. The monetary policy of DOT is determined by its consistency with the ideal staking rate, which provides sufficient support to prevent potential security risks while maintaining the liquidity of the native token. If the staking ratio is below the ideal staking rate, the staking rewards for nominators will increase, encouraging more staking. Conversely, if it exceeds the ideal staking rate, staking rewards will decrease.

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)# Treasury

The funds of the Polkadot treasury come from block rewards, validator penalties, transaction fees, and insufficient staking efficiency. The treasury funds are kept in a system account for expenditures during a 24-day spending period, and any unused funds must be burned at a rate of 1%. It is worth noting that all treasury expenditures are executed automatically on-chain, ensuring transparency and accountability.

The Polkadot referendum 457 aims to diversify the Polkadot treasury by introducing USDT and USDC, and allowing fiscal proposals in stablecoin denominations. This referendum plans to leverage HydraDX's DCA investment feature to exchange 3.4 million DOT at a rate of 1.7 million DOT for each stablecoin, by trading small amounts of 100 USDT and USDC daily, totaling 36,000 USDT and USDC each day. Additionally, this referendum will prepay 5,000 DOT to HydraDX to cover transaction fees and will use pure agency accounts for the exchange on HydraDX. The obtained USDT and USDC will be regularly sent to the main treasury, with each transfer being 5,000 USDT and 5,000 USDC. The treasury in stablecoin will provide more predictability for the treasury.

As of the end of the first quarter of 2024, the Polkadot treasury holds approximately 37 million DOT( worth $347 million). This represents a 5.3% decrease in USD terms and a 16% decrease in DOT terms compared to the previous quarter.

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Network Analysis

) Usage

Several key functions of the Polkadot Relay Chain include protecting and connecting parachains. Therefore, its end users primarily transact and use the network through parachains. The Relay Chain does support some end-user functionalities, including token transfers, staking, validator elections, governance voting, and participation in parachain slot auctions. According to RFC-0032: Minimal Relay proposal, there are plans to migrate these subsystems to the system parachain.

In late October last year, the first batch of DOT unlocked from the parallel chain auction was completed, leading to a record high in the number of active addresses on October 24. Address activity continued to show a positive trend in the first quarter of 2024. Returning addresses reached 8,200###, a month-on-month increase of 9%(, while new addresses totaled 3,100), a month-on-month increase of 23%(, bringing the total number of active addresses to 11,300), a month-on-month increase of 12%(.

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In the Polkadot blockchain framework, extrinsic) external information### is a key element that drives the state transitions of the relay chain. It acts as a universal transaction, encapsulating external data that the network needs to validate and track. Typically, the extrinsic carries signatures and references to specific functions, enabling interactions such as token transfers between accounts. Through extrinsic, Polkadot can effectively handle external inputs, ensuring the seamless operation of its blockchain network.

From December 20 to 23, the number of Polkadot extrinsics surged, with the average daily extrinsic volume processed by the Polkadot relay chain reaching 4.3 million during this period. The network successfully handled this surge without any performance degradation. Outside of these dates, the average daily extrinsic volume continued to show a month-over-month increase of over 100%, reaching 17,000 extrinsics. In the first quarter of 2024, the average daily extrinsic volume remained unchanged compared to the filtered data from the fourth quarter of 2023.

( Development

Polkadot has one of the largest developer bases in the cryptocurrency industry. According to data from Electric Capital, Polkadot had an average of nearly 2,100 developers in December 2023, of which 792 were full-time, ranking the ecosystem second only to Ethereum.

Polkadot provides comprehensive support for developers through its open-source technology stack, including user interfaces, tools, APIs and languages, smart contracts, chains and modules ) pallet (, network maintenance tools, consensus, networks, and several other categories.

Highlights of the first quarter of 2024 include:

• Further expansion of the Polkadot Blockchain Academy, including new founder tracks, plans to grow further in the Asia-Pacific region, and provide remote options.
• Launching the Polkadot Alpha program to support developers' needs across development cycles, including agile core time.
• Dune Analytics integrates data from Polkadot and Kusama.
• The Web3 Foundation will close the W3F 0 registry for Polkadot and Kusama.
• The Web3 Foundation has provided a grant to Decentered Studio to organize events and enhance community collaboration.
• Polkadot has launched a new SDK for gaming - Polkadot Play.

In addition, Polkadot founder Gavin Wood introduced the Join-Accumulate Machine)JAM( in a "gray paper", which is a scalable, trustless virtual machine that combines the features of Ethereum and Polkadot. JAM integrates a global singleton environment with secure computation across nodes, aiming to enhance the efficiency and security of cross-chain interactions.

) Decentralized and secure

Polkadot uses a unique consensus mechanism called Nominated Proof of Stake (NPoS). Validators receive payments every 24 hours based on their completed payable actions, known as era points (era point). Every four hours, a random selection of validators is chosen to validate all parachains, and a multiplier is applied to their era points. This combination of era points and random parachain validation creates a probabilistic guarantee that the rewards obtained by validators are nearly equal. Since the rewards obtained by validators are almost equal, and these rewards are proportionally distributed to their nominators, nominators are thus incentivized to collaborate with validators who have lower stakes to achieve higher rewards. The "Validator-Nominator" reward model is designed to decentralize the set of validators in Polkadot.

The number of active validators on Polkadot has remained stable at 297 for many years, with no immediate plans for change. In the first quarter of 2024, the validator reward model continues to prove its effectiveness in promoting the decentralization of validator staking. Among the 297 validators, 289 have a staking amount between 2.19 million and 2.8 million DOT.

The uniform reward distribution of the validator model incentivizes node operators to operate multiple validators. This strategy has been adopted by multiple entities.

The Nakamoto coefficient refers to the minimum number of entities that control a majority of the network and could potentially lead to a consensus failure. For PoS blockchains, this threshold is associated with entities that control more than 33% of the total staked amount. The average Nakamoto coefficient for Polkadot's validator model in the first quarter of 2024 is 93, higher than that of other major networks.

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) Governance

OpenGov is a new governance model launched by Polkadot in the second quarter of 2023, which changes the lifecycle of public votes and the decentralized decision-making process. The system includes a proposal submission guidance period, a decision period for voting and approval, and an implementation period for execution, allowing multiple public votes to occur simultaneously to accelerate decision-making. The Historical Council and the Technical Committee have been replaced by the Fellowship, a developer DAO that ensures decentralization through community voting and checks and balances, as well as flexible delegation based on belief values and token commitments.

Since the launch of OpenGov, governance activities have significantly increased. The number of public votes, delegates, and direct voters has increased for three consecutive quarters, demonstrating the system's impact on participation. Specifically, the number of public votes has risen to 217, a month-on-month increase of 5%, and a growth of 57% over the past six months.

Ecosystem Analysis