Polkadot (DOT), one of the leading blockchain networks in the cryptocurrency space, experienced a 16% decline in market capitalization in the third quarter (Q3) of 2023, according to a report by Messari.
This decline came after a moderate downturn in the overall cryptocurrency market in the third quarter, despite positive court rulings for XRP and Grayscale. The total crypto market capitalization decreased by 5.8%, with Bitcoin (BTC) and Ethereum (ETH) falling by 7.5% and 10.0%, respectively.
Polkadot ended the third quarter with a market capitalization of $5.2 billion, as reported by Messari, positioning it as the 13th largest crypto asset by market capitalization (currently 15th).
The financial structure of Polkadot is based on a weight-based fee model, which differs from the gas metering model in other networks like Ethereum. Transaction fees in Polkadot are predetermined and calculated. This calculation includes a weighting fee that reflects computational resources, a length fee based on transaction size, and an optional tip to incentivize block authors.
In the third quarter of 2023, Polkadot generated $94,000 in revenue, representing a 3% decline compared to the previous quarter. Messari suggests that Polkadot’s revenue tends to be lower compared to its competitors due to the structural design of the network.
On the other hand, Polkadot’s native token, DOT, serves three main purposes: governance, staking, and parachain bonding. In the third quarter of 2023, the staking rate of DOT increased by 12% compared to the previous quarter, reaching 49%. This increase led to a reduction in staking rewards and a 12% decrease in the annualized nominal yield to 15%. According to Messari, the close alignment of Polkadot’s staking rate with the ideal rate demonstrates the effectiveness of its mechanism.
During the third quarter, Polkadot’s Treasury supported various initiatives, including software development, bounties, client upgrades, and community events such as meetups and hackathons. The implementation of OpenGov on June 15 marked a significant milestone, revolutionizing treasury management and enabling simultaneous proposals with different requirements. At the end of the quarter, the Polkadot Treasury held approximately 45 million DOT ($185 million).
Furthermore, Polkadot recently completed the official release of Polkadot 1.0, reaching a major milestone described in the Polkadot Whitepaper. The network’s codebase has been fully transitioned to a repository managed by the community through Polkadot OpenGov and the Technical Fellowship. The roadmap for the next iteration, Polkadot 2.0, will be determined through community discussions and consensus. Founder Gavin Wood has proposed ideas for additional mechanisms to allocate Polkadot’s block space and create contract-like agreements between multiple blockchains, called “pacts.”
At the time of writing this article, the DOT token has been experiencing a notable upward trend since October 19, closely following the example of Bitcoin. Currently, the token is trading at $4,839, representing a remarkable increase of over 16% in the past fourteen days.
Selected image from Shutterstock, chart from TradingView.com.