3 possible reasons why Polkadot is playing second fiddle in the L1 race

3 months ago 87

2021 was a benignant of "coming-of-age" for galore layer-one (L1) blockchain protocols due to the fact that the maturation of decentralized concern (DeFi) and nonfungible tokens (NFTs) forced users to look for solutions extracurricular of the Ethereum (ETH) web wherever precocious fees and web congestion continued to beryllium barriers for many.

Protocols similar Fantom (FTM), Avalanche (AVAX) and Cosmos (ATOM) saw their token values emergence and ecosystems flourished arsenic 2021 came to a close. Meanwhile, fashionable projects similar Polkadot (DOT) underperformed, comparatively speaking, contempt the precocious expectations galore had for the sharded multi-chain protocol.

FTM/USDT vs. AVAX/USDT vs. ATOM/USDT vs. DOT/USDT regular chart. Source: TradingView

Setting speech the circumstantial capableness that each protocol offers successful presumption of transactions per 2nd and clip to finality, present are respective factors that whitethorn person played a relation successful DOT's laggard show erstwhile compared to different L1 competitors.

Interoperability is simply a cardinal factor

One of the large themes of 2021 was cross-chain interoperability betwixt abstracted blockchain networks, with a span to Ethereum being the astir important transportation to found owed to the information that a bulk of projects presently tally connected the network.

Protocols similar Fantom, Binance Smart Chain, Avalanche and Harmony developed cross-chain bridges and this led to a noticeable bump successful their token price, full worth locked and on-chain activity.

Despite the information that Polkadot was specifically designed to connection multi-chain enactment arsenic a “layer-zero” meta protocol, determination was nary large merchandise of a span that connected Polkadot with Ethereum successful 2021 and this near the protocol unloved by crypto traders looking to prosecute with DeFi and NFTs.

Cosmos, likewise, didn’t spot the merchandise of a large span that connected its ecosystem with Ethereum, but determination were insignificant integrations similar the summation of Ether arsenic a collateral plus connected Terra which demonstrated that cross-chain compatibility was possible.

The precocious motorboat of parachain auctions

As 2021 came to a close, each of the antecedently mentioned networks were seeing a steadfast magnitude of enactment and cross-protocol interactions portion projects connected Polkadot were inactive finalizing their preparations to motorboat connected the mainnet.

This was successful portion owed to the information that the parachain auctions for Polkadot didn’t statesman until November 11 erstwhile Moonbeam (GLMR), an Ethereum-compatible astute declaration parachain, secured the archetypal slot.

DOT saw its terms emergence to an all-time precocious of $55 connected Nov. 4 arsenic those funny successful contributing to the parachain auctions secured their tokens, but by the clip the auctions had officially started its terms was already connected the downslope toward a debased of $23.28 connected Jan. 10.

Moonbeam authoritative went unrecorded connected the Polkadot web connected Jan. 11 and has managed to rack up much than 1 cardinal transactions arsenic users were yet capable to transportation ERC-20 tokens into the Polkadot ecosystem.

— Moonbeam Network (@MoonbeamNetwork) January 20, 2022

The terms of DOT saw a flimsy bump higher pursuing the motorboat of Moonbeam but has erstwhile again slid backmost down beneath $25.

Related: Moonbeam (GLMR) motorboat brings EVM interoperability person to the Polkadot network

The benefits of holding DOT

A 3rd origin that whitethorn beryllium weighing connected the popularity and terms of DOT is disorder astir what the token is utilized for and what benefits it provides to token holders.

Thinking astir selling my $DOT. I don't spot the intent of the task anymore, galore of the chill projects that were going to physique connected it migrated to $MATIC oregon so.

Why should I support it?

— Quinten François (@QuintenFrancois) July 29, 2021

On galore of the competing networks, the autochthonal token is utilized to behaviour declaration actions specified arsenic token transfers oregon swaps whereas protocols that are successful the Polkadot ecosystem usage their autochthonal tokens to wage for gas.

Aside from being utilized to enactment successful parachain auctions, the main uses for DOT see staking to enactment the cognition and information of the web and for usage successful governance votes.

While governance abilities are important for the wide wellness of blockchain protocols, the mean cryptocurrency users inactive haven’t shown overmuch enthusiasm for participating successful votes and are much funny successful things similar gaming, DeFi and NFTs.

Multiple layer-one solutions are launching developer and liquidity inducement programs and up and coming DeFi protocols are inactive offering precocious output staking opportunities. Currently DOT offers 13.94% APR to stakers and its perchance that this is not capable to fulfill the appetite of output farmers who are looking to get much bang for their buck.

The semipermanent outlook for Polkadot remains beardown and the task has an progressive and dedicated assemblage of followers to spell on with an experienced improvement squad led by Ethereum co-founder Dr. Gavin Wood.

The motorboat of Moonbeam mightiness so people a turning constituent for DOT arsenic cross-chain compatibility is present unrecorded and different parachain projects should commencement to motorboat connected the mainnet shortly, but it remains to beryllium seen however agelong it volition instrumentality the web to drawback up to its L1 competitors who person a caput commencement connected cross-chain interactions and accrued on-chain activity.

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.

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