What is happening with Polkadot (DOT) in 2024, and what dynamics does the project demonstrate?
Polkadot's problems
Over the past year, Polkadot has shown disappointing dynamics: while at the beginning of the year, the number of daily active users ranged from 7 000 to 10 000, in August, this figure reached only 4 000. These are shallow figures for projects with such a large capitalization, which Polkadot has at $6.4 billion. For example, Avalanche has more than 22,000 daily active users as of August 2024, and TON has more than 300,000.
All of this is happening against a backdrop of no major network updates. The last significant news, except the Polkadot 2.0 announcement, wasn't until 2023. For example, Polkadot joined the Cosmos multi-chain ecosystem in June 2023.
The Polkadot ecosystem has not had any meaningful updates since 2021. The last time the protocol was updated in April 2024, there was a failure during the deployment of the runtime environment on the network that resulted in the blockchain not producing blocks for ~ an hour. That said, earlier in October 2023, the organization behind Polkadot's development, Parity Technologies, announced it was cutting its workforce by as much as 30%.
In addition, the Polkadot ecosystem has internal conflicts present as well. One of the key developers of Manta Network, an L2 scaling solution for Ethereum, pointed out discrimination against Polkadot ecosystem members. He noted that Polkadot executives favor teams from Europe and the U.S. over teams from Asia, where most of the ecosystem was focused initially. The developer also believes that Polkadot is not genuinely decentralized and that its ecosystem is "essentially dead." Scandalous crypto blogger Ben Armstrong, under the nickname BitBoy Crypto, also believes that the DOT cryptocurrency, like ADA, is dead and that it is useless for institutional investors.
However, it is worth noting that these are only the opinions of experts who may also pursue their interests. For example, the thesis that Polkadot is not decentralized is quite controversial: In 2023, the Polkadot network passed a special test, demonstrating decentralization with a Nakamoto coefficient of 93 — this is not bad but also far from the highest. In comparison, the Solana network has a Nakamoto coefficient of only 19, and Avalanche has a Nakamoto coefficient of 26.
Nevertheless, Polkadot has a well-developed ecosystem of more than 50 parachains. Polkadot, like Cosmos or Avalanche, is essentially a zero-level blockchain. Polkadot itself is the parent blockchain, and parachains are the first-level networks that can interact with each other and the parent network. Also, according to the Polkadot team, more than 200 projects have used Polkadot SDK tools to develop blockchain solutions.
Polkadot updates
Despite the internal challenges in the ecosystem, developers are preparing to launch a major update to the Polkadot 2.0 network, the critical elements of which will be:
- Agile Coretime,
- Async Backing,
- Elastic Scaling.
The Agile Coretime feature, which is already tested and running in the Polkadot ecosystem's Kusama network, will allow users to move from the auction system to secondary trading platforms such as Lastic and CoreHub.
The Async Backing or asynchronous backing feature, endorsed by the Polkadot Technical Fellowship community back in May 2023, reduces the blocking time from 12 seconds to 6 seconds, which increases the speed of transaction processing and, therefore, the throughput of the Polkadot network. Async Backing will allow transactions to be verified in parallel with each other and will also increase the storage space on the blockchain by 4x, further improving blockchain performance.
Finally, Elastic Scaling will allow network participants to rent additional cores to act as processors (CPUs) in the Polkadot blockchain. With Agile Coretime and Async Backing, Elastic Scaling will provide dynamic scalability to the Polkadot network and allow ecosystem projects to manage their computing resources more efficiently.