Polkadot

Launched in October 2017, Polkadot released 10 million dot tokens into circulation via an initial coin offering (ICO), raising 485,331 Ether (approximately $145 million at the time).

The tokens in the current supply are allocated as follows:

• 58.4% of the tokens are held by investors, including 50% issued in the original token sale, followed by a sale of 5% of the total supply in 2019 and another sale the following year representing 3.4% of the total supply.
• The Web 3 Foundation, the Swiss organization that runs the network, owns 11.6% of the tokens.
• 30% is held by founders and the foundation.

The dot token serves three key functions in Polkadot:

• To be used for governance of the network.
• To be staked for the operation of the network.
• To be “bonded” to connect a new blockchain – called a “parachain” – to Polkadot.

An interesting feature of Polkadot is that it has no hard limit on its total supply. Instead, new dot tokens are constantly released into circulation, at a predetermined, annual inflation rate of 10 percent.

DOT’s price reached a peak of $6.30 shortly after it launched in May 2020, then wavered between $4 and $5 for the remainder of 2020. In May 2021, DOT’s price hit an all-time high of $49.80. During the Q4 bull run of 2021, DOT’s price hit another peak of $44.41 in October.

There are thousands of cryptocurrencies across the ecosystem, a vast majority of which can’t communicate with each other. For example, users can’t send their Dogecoin over Chainlink or vice versa. Polkadot aims to fix that by building a framework that interconnects blockchains, even if each chain performs different functions.

At the center of Polkadot sits the “relay chain,” a central blockchain that connects all other participating blockchains together. The relay chain processes all transactions taking place in the ecosystem at the same time, with the goal of improving scalability.

User-created blockchains that hook into the relay chain are known as “parachains.” By allowing blockchains to communicate with its platform, Polkadot is able to connect many blockchains in a way that wasn’t possible before.

Polkadot relies on Nominated Proof-of-Stake (NPoS), a method of validating crypto transactions based on how many coins each participant has put up as collateral. NPoS is designed with four roles for users who hold dot:

• Validators: Those who secure the network by staking their dot tokens and performing verification of the Relay Chain.
• Collators: Users who maintain the entire history of the Relay Chain and their particular parachain nodes, which is vital for cross-chain messaging.
• Fishermen: Individuals who have full nodes of Parachains but police for invalid transactions.
• Nominators: Those who are active dot holders but don’t want the responsibility of the other roles and choose simply to stake their tokens.

Polkadot’s roadmap describes in more detail how far along the developers are in connecting blockchains.