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On Sunday (October 10), highly popular New Zealand based crypto analyst Lark Davis explained why he is currently so bullish on $DOT, which is the native token of Polkadot.
What Is Polkadot?
Here is an overview of Polkadot using information from the Polkadot website:
“Polkadot is a network protocol that allows arbitrary data—not just tokens—to be transferred across blockchains. This means Polkadot is a true multi-chain application environment where things like cross-chain registries and cross-chain computation are possible. Polkadot can transfer this data across public, open, permissionless blockchains as well as private, permissioned blockchains.
“This makes it possible to build applications that get permissioned data from a private blockchain and use it on a public blockchain. For instance, a school’s private, permissioned academic records chain could send a proof to a degree-verification smart contract on a public chain.“
Polkadot “unites a network of heterogeneous blockchains called parachains and parathreads.” These chains “connect to and are secured by the Polkadot Relay Chain” and they can “also connect with external networks via bridges.”
And here is what Binance Academy says about Polkadot’s parachains and Relay Chain:
“An individual blockchain in the Polkadot ecosystem is called a parachain (parallel blockchain), while the main chain is called the Relay Chain. The idea is that parachains and the Relay Chain can easily exchange information at all times. You could think of parachains as being similar to individual shards in the planned implementation of ETH 2.0.
“Any developer, company, or individual can spin up their custom parachain through Substrate, a framework for creating cryptocurrencies and decentralized systems. Once the custom chain is connected to the Polkadot network, it becomes interoperable with all other parachains on the network.“
As for the use cases for the $DOT token, Binance Academy has this to say:
“Similar to most other blockchain infrastructure projects, Polkadot has its own native token. Known as DOT, it serves as the network token, just like ETH is the token for Ethereum and BTC is the token of Bitcoin.
“Several use cases exist for this token. First of all, it grants token holders with governance rights of the entire Polkadot platform. This includes determining network fees, voting on overall network upgrades, and the deployment or removal of parachains.
“DOT is also designed to facilitate network consensus through staking. Similar to other networks that involve staking, all DOT holders are incentivized to play by the rules at all times. How come? Well, if they don’t, they could lose their stake.
“The third option is to use DOT for bonding. This is required when new parachains are added to the Polkadot ecosystem. During a bonding period, the bonded DOT is locked. It’s released once the bond duration has ended and the parachain is removed from the ecosystem.“
The Upcoming Launch of Polkadot’s Parachain Slot Auctions
Davis believes that the $DOT price will start to surge as soon as Polkadot Co-Founder Gavin Wood announces the start date for the launch of Polkadot’s parachain slot auctions at the two-day substrate developer conference “sub0 Online” (held October 13-14), where Wood is scheduled to speak.
$dot face melting season will come as soon as Gavin announces parachains.
— Lark Davis (@TheCryptoLark) October 10, 2021
October 13-14, #Sub0 Online is back with two days of in-depth talks and workshops on all things Substrate. Register now to hear from @Polkadot founder @gavofyork, the #substrate core developers, as well as the teams building innovative #Web3 projects: https://t.co/74eCuNBdUH
— substrate (@substrate_io) September 6, 2021
Some of the replies to Davis’ tweet are quite interesting — especially those by Twitter user “Argonauts” (@DOThodler) — because they illustrate nicely how Polkadot, which is a layer 0 blockchain, differs from layer 1 blockchains such as Ethereum and Cardano) and are so excited about the upcoming launch of its parachain slot auctions (for which projects that wish to run on Polkadot, i.e. that wish to secure one of the around 100 parachain slots, will need $DOT in order to make their bids during these auctions):
$DOT is layer 0. Developer can easily build blockchain on top of it, without worrying about security, interoperability, and scalability. Imagine ETH is a shop, and dApps are the products. DOT is a shopping mall.
— Argonauts (@DOThodler) October 10, 2021
Interesting analogy. @Ja2od
— MrAtwood (@MrAtwoodMusic) October 10, 2021
And here in layman´s terms is what is significant about the launch of Polkadot’s parachain slot auctions:
Parachain is built on top of DOT. DOT is layer 0. Parachain is layer 1. Developer can build a smart contract blockchain like ETH as a parachain. But they need to get a slot first, which is auctioned by Crowdloan. To participate you need $DOT.
— Argonauts (@DOThodler) October 10, 2021
As for the criticism that the parachain slot auctions announcement could be a “buy the rumor, sell the news” event that could push the price of $DOT lower rather than higher, “Argonauts” said that what many/most people do not seem to understand is that this won’t be just some piece of news:
Indeed, many people don’t understand this. You literally need $DOT to participate in the parachain auction. It’s not only some news.
— Argonauts (@DOThodler) October 10, 2021
Most people don’t know and will FOMO in later on. Plus, It’s not a one time thing. The auction will continue until 100 parachains is there. So more and more $DOT will be locked. Less circulating supply.
— Argonauts (@DOThodler) October 10, 2021
$DOT’s Latest Price Action
According to data by TradingView, currently (i.e. as 1:00 p.m. UTC on October 11), on crypto exchange Kraken, $DOT is trading around $35.0811.
DISCLAIMER
The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.