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28 October 2022

In this issue

Weekly price tracker || New kids on the block || Polkadot’s ambitious multi-chain gambit

Hello, This week saw BTC rally and hold above the USD 20K levels, while ETH saw a 10% gain the past 5 days. Meanwhile, DOGE soared as Elon Musk finally took control of Twitter…

and Meta tanked after Zuckerberg announced that he will not give up on his metaverse project.

It was a big week for Reddit NFTs as their trading hit an all-time high. The crypto markets are yet again awaiting another decision from the US Fed, which are expected to dull the ongoing rally. But nothing can dull the institutional money and interest pouring into crypto, or the bucket load of building which is happening in the ecosystem.

Stablecoin Tether has partnered with third-party crypto tech company Smartpay to open 24,000 USDT ATMs in Brazil. Lawmakers in the UK have voted to make crypto a regulated financial instrument. Paypal and Western Union have filed trademarks for a wide range of crypto services, signalling their efforts to roll out more crypto services.Speaking of building things, one magnificent thing which is being built is Polkadot, which we are going to analyse for you on this issue.

The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram here.

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WEEKLY PRICE TRACKER

Price movements from last Friday

BTC: Up 6.3%, thanks to a weakening USDETH: Up by 16%, as aggressive build-up of futures contracts got squeezed (or if you need a simpler reason, ETH rallied on back of BTC's hold above $20,000)MATIC: Up by 11%, as Reddit's partnerships with Polygon resulted in creation of 3 million wallets and surge in NFT activities in the marketplaceDOGE: Up by 26%, as Elon officially takes over Twitter, which is considered a hot-bed for crypto discussion and sentimentsADA: Up by 13%, as renewed interest in Cardano NFT's leading to surge in number of transactions

NEW KIDS ON THE BLOCK

New coins to watch out for: Aptos and Magic.New projects to look out for: SUI, new layer-1, heavily backed by major market players.

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THE BIG STORY

Polkadot’s ambitious multi-chain gambit

BASICSHundreds of blockchains are being built across the crypto ecosystem right now. Most of them will perish in the coming years, but even by conservative estimates, we are looking at a few of major networks and several smaller ones which will survive and make it to the mature version of Web 3.0. How will networks in a multi-chain environment communicate with each other? Polkadot is attempting to provide an answer to that question, and be the solution.

Polkadot is a Nominated Proof-of-Stake (NPoS) blockchain network designed to join the dots with all other networks. It's commonly referred to as a multi-chain network, because it can join networks together, unlike networks like Bitcoin, which operates on its own. It is designed to support various interconnected, application-specific Layer-1 chains known as “parachains”.Each chain built within Polkadot uses Parity Technologies’ blockchain development framework Substrate, which allows developers to select specific components that best suit their application-specific chain. Polkadot refers to the entire ecosystem of parachains that plug into a single base platform known as the Relay Chain. This base platform does not support application functionality but instead houses all validators and is responsible for securing, governing, and connecting the parachains.

Here’s the Polkadot whitepaper. The DOT token is Polkadot’s native token.  It serves four functions:

• payment for fees

• governance over the network

• interoperability

• bonding

NUMBERS7.5 Billion USDMarket cap of DOT token12DOT coin rankUSD 55.08DOT all-time-highUSD 6.48DOT price as of Oct 261.13 BillionDOT coins in circulation PEOPLE AND ORGANISATIONPolkadot is the brainchild of Dr. Gavin Wood, who is one of the co-founders of ETH and the inventor of the Solidity smart contract language. Dr. Wood started working on his idea to “design a sharded version of Ethereum” in mid-2016 and released the first draft of the Polkadot white paper in Oct. 2016.In 2017, Dr. Wood and Parity’s Peter Czaban founded the Web3 Foundation, a non-profit entity established to support the research and development of Polkadot as well as to oversee its fundraising efforts. Last week, Gavin Wood stood down from his position as CEO of Parity, that runs the blockchain, raising some eyebrows on how the blockchain will function hereon. He continues to be involved as chief architect of Parity.TOKENOMICSNearly 1.13B DOT tokens are in circulation today, with a market cap of $7.3B. DOT hit an all-time high of $55 closer to its parachain auctions in Nov. 2021 post which it has shed 85-90% of its value. It currently trading at $6.5 a token – we believe that $3-6 range is the accumulation range for long term investment in DOT. DOT/BTC has underperformed significantly this year like many altcoins – it remains safer to hold BTC than DOT in bear markets.

Source: TradingView

Token saleThe Switzerland-based Web3 Foundation hosted Polkadot’s first token sale in Oct. 2017, using a Spend-All Second Price Dutch Auction to distribute the funds. The sale raised $145 million in just under two weeks, selling 50% of the initial 10 million DOT (old) supply, and the Web3 Foundation chose Parity Technologies to develop Polkadot.

SUPPLY ALLOCATIONThe following allocations are the same for both DOT (old) and new DOT:•    50% allocated to token sale investors•    5% allocated to the 2019 private sale investors•    3.4% allocated to 2020 token sale investors•    11.6% retained by the Foundation for future fundraising efforts•    30% allocated to the Web 3 Foundation for immediate use to develop the Polkadot network and other undisclosed Foundation activities.The DOT token is inflationary, with a targeted 10% annual inflation rate. The treasury is funded primarily through block rewards and transaction fees.Meanwhile, extraneous metrics like revenue saw fairly large fluctuations. Overall, Polkadot’s Q3 2022 financial performance was relatively stagnant.

SPECIAL MENTIONSPolkadot uses what it calls a hybrid consensus, which separates finality from the block production mechanism. At a high level, Polkadot allows the network to produce blocks at a rapid pace while permitting the slower finality agent to run in a separate process, thereby not affecting transaction execution times. While the core technology of Polkadot is the relay chain, the network reaches consensus through a modified and proprietary PoS mechanism consisting of four key participants - Collators, Validators, Nominators, Fishermen.FINAL THOUGHTSPolkadot will eventually enable the connections to outside networks like ETH and BTC through a series of specialized bridge contracts or modules. Developers building innovative, decentralized systems currently have to engineer these systems from the ground up. This also means that time, talent and resources are diverted into building competing networks, rather than creating a standard everyone builds off.  That's Polkadot's aim, to create a way for developers to build value on top of all blockchains, rather than just one.In the coming months, Polkadot will release an assortment of products to further decentralize the network and improve its capabilities and functionality. If the platform is able to execute on its goals and roadmap, the Polkadot ecosystem could very well be a vital piece of infrastructure for web3 beyond Ethereum.Polkadot has great potential as an alternative to Ethereum and other Layer 1 blockchains. While it has shed a lot of value in the last one year, it remains a top 15 cryptocurrency and is currently nearing an accumulation zone at $3-6.Along with ADA and SOL, investing in DOT remains a great diversification strategy for layer 1 enthusiasts. Patience is however required as the ecosystem needs more adoption and maturity for solid long term growth.

Disclaimer: Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

That’s all we have for this issue, see you next week! 

If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

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