2021 used to be a kind of “coming-of-age” for heaps of layer-one (L1) blockchain protocols since the enhancement of decentralized finance (DeFi) and nonfungible tokens (NFTs) forced users to search around for options originate air of the Ethereum (ETH) network the keep excessive fees and network congestion persisted to be boundaries for heaps of.
Protocols esteem Fantom (FTM), Avalanche (AVAX) and Cosmos (ATOM) saw their token values upward thrust and ecosystems flourished as 2021 came to a shut. Meanwhile, neatly-liked initiatives esteem Polkadot (DOT) underperformed, comparatively talking, no matter the excessive expectations many had for the sharded multi-chain protocol.
Setting aside the declare means that every protocol affords when it involves transactions per 2nd and time to finality, listed below are quite a lot of issues that would possibly private conducted a position in DOT’s laggard performance when compared to quite a lot of L1 competitors.
Interoperability is a key ingredient
One of the crucial foremost issues of 2021 used to be harmful-chain interoperability between separate blockchain networks, with a bridge to Ethereum being a really mighty connection to place on account of the reality that a majority of initiatives currently bustle on the network.
Protocols esteem Fantom, Binance Easy Chain, Avalanche, and Concord developed harmful-chain bridges and this led to a noticeable bump in their token label, total fee locked, and on-chain process.
Despite the reality that Polkadot used to be particularly designed to offer multi-chain strengthen as a “layer-zero” meta protocol, there used to be no foremost liberate of a bridge that connected Polkadot with Ethereum in 2021 and this left the protocol unloved by crypto merchants taking a look for to lift shut with DeFi and NFTs.
Cosmos, likewise, didn’t discover the liberate of a foremost bridge that connected its ecosystem with Ethereum, however, there were minor integrations that esteem the addition of Ether as a collateral asset on Terra which demonstrated that harmful-chain compatibility used to be that you just are going to be ready to imagine.
The slack birth of parachain auctions
As 2021 came to a shut, all of the beforehand mentioned networks were seeing a healthy quantity of process and harmful-protocol interactions whereas initiatives on Polkadot were peaceable finalizing their preparations to birth on the mainnet.
This used to be in a segment on account of the reality that the parachain auctions for Polkadot didn’t birth up unless November 11 when Moonbeam (GLMR), an Ethereum-esteem minded clean contract parachain, secured the first slot.
DOT saw its label upward thrust to an all-time excessive of $55 on Nov. 4 as these attracted to contributing to the parachain auctions secured their tokens, however by the time the auctions had formally begun its label used to be already on the downslope in direction of a low of $23.28 on Jan. 10.
Moonbeam legit went live on the Polkadot network on Jan. 11 and has managed to rack up bigger than 1 million transactions as users were sooner or later ready to switch ERC-20 tokens into the Polkadot ecosystem.
— Moonbeam Network (@MoonbeamNetwork) January 20, 2022
The cost of DOT saw an itsy-bitsy bump larger following the birth of Moonbeam, however, has every other time slid reduction down below $25.
The advantages of preserving DOT
A third ingredient that will be weighing on the recognition and fee of DOT is confusion about what the token is outmoded for and what advantages it affords to token holders.
Excessive about selling my $DOT. I don’t discover the purpose of the project anymore, loads of the chilly initiatives that were going to assemble on it migrated to $MATIC or so.
Why should always I protect it?
— Quinten François (@QuintenFrancois) July 29, 2021
On loads of the competing networks, the native token is outmoded to behavior contract actions equivalent to token transfers or swaps whereas protocols that would possibly perhaps be in the Polkadot ecosystem employ their native tokens to pay for gas.
Rather than being outmoded to take part in parachain auctions, the foremost make employ of for DOT embrace staking to bolster the operation and safety of the network and for employ in governance votes.
While governance abilities are crucial for the general health of blockchain protocols, the frequent cryptocurrency users peaceable haven’t shown great enthusiasm for participating in votes and are extra attracted to issues esteem gaming, DeFi, and NFTs.
Multiple layer-one options are launching developer and liquidity incentive purposes and up and coming DeFi protocols are peaceable offering excessive yield staking alternatives. On the 2nd DOT affords 13.94% APR to stakes and it’s perhaps that right here’s no longer ample to fulfill the urge for food of yield farmers who’re taking a look to get extra bang for their buck.
The lengthy-term outlook for Polkadot remains solid and the project has an energetic and devoted community of followers to affiliate with a skilled pattern crew led by Ethereum co-founder Dr. Gavin Wood.
The birth of Moonbeam would possibly indeed label a turning point for DOT as harmful-chain compatibility is now live and quite a lot of parachain initiatives should always birth up to birth on the mainnet quickly, however, it remains to be viewed how lengthy this can like shut the network to construct up to its L1 competitors who private ahead birth up on harmful-chain interactions and elevated on-chain process.
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