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Saturday, May 21, 2022

3 Reasons Why Polkadot May Be Second In The Layer-1 Race

The previous proved to be the year of maturity for quite a few Layer-1 protocols of blockchain. However, Polkadot (DOT), one of the more popular projects, underperformed with comparison to Cosmos (ATOM), Avalanche (AVAX), and Fantom (FTM).

Here are some reasons why Polkadot’s performance was lagging behind in the Layer-1 race.

Polkadot’s Layer-1 Race

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One of 2021’s biggest themes was interoperability between different networks of blockchain. In that, the Ethereum Bridge prove to be the connection that was most important for establishment. This is because most of the projects presently run on this network.

Polkadot was particularly designed to support multi-chain as a meta-protocol for “Layer-zero”. However, there were no major bridges released that connected Polkadot and Ethereum last year. As a result, the crypto traders who preferred NFTs and DeFi did not prefer the protocol.

The second reason was that Polkadot’s parachain auctions did not begin till very late in the year – Nov 11. It started with Moonbeam (GLMR), a smart contract parachain compatible with Ethereum, secured the network’s first slot.

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On November 4th, DOT’s price increased to a record high that stood at $35. This is because the traders who wanted to contribute to the auctions on parachain purchased their tokens. However, before the auctions officially began, the price of the token was already going downwards. As a result, on January 10th, it hit a low that stood at $23.28.

The final reason that might be decreasing Polkadot’s popularity and the price is that there is no clarity as to the usage of the token. Similarly, token holders do not exactly know how they are benefited from holding it.

The protocol’s long-term outlook still looks strong. The community made up of its followers is also dedicated and active. As a result, Moonbeam’s launch may be the turning point the protocol needed.

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