Author: Xia words
What I must admit is that when I invested in DOT in the primary market, there was indeed a big uncertainty. At that time, it was only possible to go through the white paper, vision, code capabilities of the development team, the sustainability of the economic model, and the needs of the industry. Make judgments with thick lines.
Fortunately, this investment has brought good returns for me and the friends who participated with me. It is precisely because of this book income that I began to carefully consider whether to cash out and leave? Or continue to hold?
To answer this question, it becomes, where is the growth of the DOT project? What is the investment logic?
Different from the situation when investing in the primary market, DOT now has more fundamentals, ecology, and data that can be analyzed and referenced, and most importantly, it has market pricing in the secondary market as a reference.
This is not a popular science article, but a self-question and answer as an investor and stakeholder from the perspective of their own investment benefits. Therefore, if the article mentions some terms and abbreviations unique to the project, it is difficult for me to explain them specifically. If you are interested, you can go to the WeChat public account: PolkaWorld, and you can basically get the answers you want.
The necessity of non-Ethereum public chain
Since the release of the white paper in 2017, Polkadot has been comparing it with Ethereum. Especially now, it is considered to be the most powerful competitor of Ethereum. This is no secret.
I have to admit that Ethereum is a very good public chain. After 7 years of development, the ecology has been greatly enriched. On Ethereum, people see the huge possibilities of blockchain.
What restricts the development of Ethereum is the high handling fee and the limited TPS.
Ethereum 2.0 aims to solve these two problems. Whether it can effectively solve these two problems requires several years of verification.
In the blockchain world, Ethereum’s dominance in the public chain field makes it easy to create an illusion, that is, as long as Ethereum does not cause major problems, the competition pattern of the public chain seems to be set.
However, let’s look at the blockchain and Ethereum objectively: Ethereum has been around for 7 years, and the concept of the blockchain has been proposed during this period of time. The total market value of ETH is currently 67 billion U.S. dollars, which is approximately equal to the market value of Weilai Automobile a few days ago, and Weilai Automobile is only one of many players in the field of new energy vehicles. Excluding the BTC market value, ETH accounts for 24.5% of the entire non-BTC market value.
As for blockchain, I think it should reach a market size comparable to or even larger than that of future new energy vehicles. The proposal of the Internet of Value is not a slogan, but an inevitable infrastructure for the development of the era.
The above data is listed, I want to make one point: At present, the entire blockchain is very, very early, whether it is the total market value of the market or the total market value of ETH as the current carrier, it is extremely small. And such a small scale caused ETH, as an early entrant, to have a higher proportion of the total market value. Experience tells us that such a high proportion in the early stage is obviously a reasonable stage but unhealthy for a long time. In the future, more competitors will inevitably grow up, and the performance and ecological level may compete or complement each other.
Going back to the two major problems facing Ethereum above: high transaction fees and limited performance.
The need for continuous market development and the current window period for Ethereum’s problems have given the existence and development of non-Ethereum public chains. What the market needs, if you can respond to what, then the ecological and market consensus of the project will be greatly improved in a short time.
But it should be noted that the huge advantages of Ethereum determine that later competitors cannot follow the route of Ethereum, otherwise there will be no way to go.
I spent a long time explaining the “necessity of the existence of a non-Ethereum public chain”. Because this is very important and the premise of everything.
Next, let’s talk about a few points about Polkadot:
01 Founder Gavin Wood has a strong developer appeal
The current fundamentals of the blockchain have fallen to the most practical point, and it is still technological competition. The abundance of developers in the ecology determines the future vitality of the ecology and the ability to grow and evolve. And a founder with a strong technical background and a strong personality will become a decisive factor in attracting developers to bravely try new things in the early stage of the project. This is not the effect that can be obtained by subsidizing money. Gavin Wood’s blockchain history and his own coding capabilities have such appeals.
Up to now, the official Polkadot ecological projects have reached 300+, covering infrastructure, stablecoins, games, Defi, tools, DAPP, etc.
02 Polkadot’s ultimate sharding logic is different from the different routes of sharding on the Ethereum chain.
Through the cross-chain protocol, a multi-chain sharding network is constructed. Developers build a proprietary chain based on Polkadot. The proprietary chain can be customized according to their own business needs, is autonomous, and has strong flexibility. The multi-chain network constructed by Polkadot can process various transactions on multiple chains in parallel. This essentially brings great theoretical scalability and customization capabilities to Polkadot.
From the perspective of performance improvement, the two public chains have moved in the same direction of sharding, but unlike Ethereum’s sharding, Polkadot has achieved more extreme and thorough sharding, which brings new expectations to Polkadot Space. For the time being, the two cannot be said to be better or worse, and such uncertainty is the elastic range of valuation.
03 Economic model with high correlation to offset losses.
In Polkadot’s token economic model, from the perspective of supply and demand, in addition to traditional GAS consumption, staking, and governance, there are some interesting designs.
The most important of these is the bidding of parallel chain slots and the use of parallel threads.
To access the Polkadot network, developers need to bid for Parachain slots. The lease period of Parachain slots is 6 months, 12 months, 18 months, and 24 months. The acquisition of the project party is not without threshold, it needs to be through an open auction, and the higher bidder gets the right to use the slot within a specified period. It is worth noting that the bidding is in the form of DOT; and the DOT locked by the project party after the successful bidding is not consumed directly in the form of purchase, but is returned after expiration.
A question arises here. In order to bid for the slots, does the project party need to purchase all the required DOT? Obviously, this is unreasonable in terms of the utilization rate of funds. Therefore, the form of emergence is IPO (First Parachain Issuance). IPO is a unique financing method for Polkadot ecological projects. Project parties can initiate an IPO to raise DOT bids for parachain slots. If the auction is successful, these DOTs of course also need to be locked for a certain period of time. The project party will provide some incentives to the IPO participants, such as airdropping the project party token.
The project party attracts the majority of token holders to provide the required DOT for their own auction slots by airdropping their own project tokens. This will become the most important form of token distribution for the Polkadot ecological project. In other words, this type of function is the same as the original Ethereum ecological IC0.
IC0 is in the form of direct purchase by users, while supporting the project’s square wave card slot auction to obtain project tokens will not lose their own DOT principal.
It is foreseeable that this kind of wool-like method of obtaining project tokens will be extremely attractive to investors. Parachain slot auctions may push the final auction price due to the psychological effect of wool wool. To a very high position. This will bring huge and continuous demand for DOT’s secondary market prices. As long as the secondary market price of a Polkadot ecological project brings huge wool returns, the market will be detonated.
Parathreads are a way for projects that want to become parachains to temporarily participate in Polkadot’s shared security, without the need to rent dedicated parachain slots. This is achieved by economically competing in multiple parallel threads to share the scarce resource of parachain slots. Those chains that cannot obtain a complete parachain slot, or think that it is not economically wise to do so, can still participate in Polkadot’s shared security, and the network will collect related fees based on each block.
Parallel threads require a minimum amount of mortgage (50-100 DOT). On the basis of achieving shared security and connection, parallel threads allow the chain to submit a block to the relay chain after processing a batch of transactions.
04 The allocation of chips is basically completed. This is a more important point, but it is often overlooked.
For many projects, they like to adopt the rules of lock-up and linear release to allocate chips for private placement, public placement, and team. Although this has effectively controlled the selling pressure in the market in the short term, it actually shifted the selling pressure to the medium and long term. As a result, the redistribution of market chips should have been completed in the short term. It was extended to a longer period of time. As for the market, because of fear of continued selling pressure, it is unable to give a healthy price for the project.
Polkadot did this very well. Although the valuation was already high at the time of private equity financing, it did not take the form of mandatory lock-up. At present, the total amount is 1 billion, and more than 900 million have been in circulation, and only a small part of the tokens from public offerings have not been released (will be unlocked on January 19). This lays the foundation for the healthy growth of the future DOT price with the development of the project.
05 Is DOT underestimated?
The EOS mainnet reached 160 billion RMB when it was launched, which is approximately US$24 billion in market value. If DOT reaches the valuation level of EOS at that time, I think the probability is extremely high, and the corresponding DOT price is about 24 dollars. (At present, Polkadot’s ecological development has surpassed the EOS ecosystem at that time, and the richness of ecological developers is higher)
As a strong competitor of Ethereum, a valuation between one-third and one-half of Ethereum is an ideal level. The peak of the market value of Ethereum in 2017 is about 150 billion US dollars. In the near future, ETH will return to historical highs. I think the probability is higher. Then we can calculate based on this. The corresponding DOT market value is 50 billion-750 The corresponding DOT price is in the range of 50-75 US dollars.
However, it must be emphasized that DOT has reached one-third to one-half of the market value of Ethereum, and there is no high probability of appearing at present. This is just an expectation and goal.
But in any case, the current DOT price, I would think it is seriously underestimated in the long run.
Finally, I need to make a special point: my investment logic for the project will be adjusted with the development and schedule of the project. It is not static, and sometimes it will be completely changed. And I’m not sure when, my friend, you saw this article. No matter when, please keep your independent judgment.
