90 Interactions, 2 Today
Earlier this fall, Cardano and Solana were soaking up the limelight as the two “Ethereum killers” competed for positions on the cryptocurrency leaderboard. Polkadot’s DOT coin is now elbowing its way to the front.
The price of DOT rose 25% over 24 hours—part of a 36% gain over the last week—to zoom past $42 today. That’s the most expensive the asset has been since May, when it reached an all-time high of $49.35, according to CoinGecko. As of publication, the price sits at $41.50.
It’s probably not a coincidence that, after five years of development from Parity Technologies (the engineering team behind Polkadot), the project announced yesterday it was ready to launch what it calls “parachains.” The Polkadot leadership group subsequently voted to begin auctions for parachain slots starting November 11.
Parachains are their own blockchains that run alongside the main network, serving as security and transaction validation. Polkadot, on the other hand, is all about blockchain interoperability, with the goal of increasing the number of transactions a network can handle.
DOT is a governance token that grants its holders voting rights. Users can also “stake” DOT to the network to increase its security. Holders, crucially, require DOT in order to create new parachains. Of course, this increases demand for DOT from those looking to launch on the network.
“Today’s council motion to begin the rollout of parachains on Polkadot is a huge step forward for the industry,” Peter Mauric, head of public affairs for Parity Technologies, told Decrypt. “As the only layer-zero protocol in blockchain, Polkadot is designed to disrupt the entire layer-one landscape in the coming years by dramatically reducing the overhead required to secure and connect layer ones in the form of parachains.”
Layers, in crypto parlance, typically refer to the levels built atop a blockchain. Layer 2 technologies, such as Lightning for Bitcoin or Polygon for Ethereum, help process transactions more quickly by taking some of the burden off the (layer 1) blockchain. “Layer 0,” by contrast, increases efficiency by bundling together various blockchains.
Polkadot is the brainchild of Ethereum co-founder Gavin Wood and Parity co-founder Robert Habermeier, who both play key development roles. Parity was still splitting time between Ethereum and Polkadot until 2019. But, after years of running the second-largest Ethereum client, it chose to hand over the codebase to a decentralised autonomous organisation in December and focus solely on Polkadot.
Polkadot made parachains available on its experimental Kusama network in May, a sort of testnet for Polkadot features that has its own token, KSM, with a market cap of $3 billion. DOT’s price dropped by more than one-third in a matter of days. DOT holders are hoping that today’s price boost—and the emergence of parachains on the main network—holds.