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- For Q2 2022, Polkadot continues to see strong network activity and users accounts growth.
- Polkadot also performed relatively well on other aspects such as decentralization, staking, parachains, developer activity, etc.
The cryptocurrency market has witnessed brutal correction all through 2022 so far. Bitcoin and the broader crypto market have corrected more than 50 percent from the top leading to major insolvencies in the crypto space during the second quarter.
Blockchain and crypto analytics firm Messari has published a report “State of Polkadot Q2 2022” highlighting the developments in the Polkadot ecosystem. Polkadot (DOT) was one of the top performers during the crypto bull last year.
This nominated proof-of-stake (NPoS) supports several interconnected application-specific Layer-1 chains dubbed parachains. Polkadot refers to an entire ecosystem of parachains plugged into a single base platform dubbed Relay Chain. The Relay Chain houses all validators of Polkadot “and is responsible for securing, governing, and connecting the parachains”.
Looking at Polkadot’s performance for Q2 2022, the native DOT token faced a similar fate to the broader crypto market. During Q2 2022, the DOt price corrected 66 percent with its valuation slipping under $7 billion. Put Messari’s report notes that Polkadot has undergone similar corrections last year while managing to pull back successfully.
Polkadots Growing Network Usage
Despite a strong correction in the DOT price, Polkadot’s network usage remained strong in the second quarter. User accounts remained more or less consistent but active monthly user accounts were up. As the Messari report states:
In Q2 2022, Polkadot averaged 145,000 monthly users (77,000 active and 68,000 new) compared to 149,000 monthly users (56,000 active and 92,000 new) in Q1 2022.
At the same time, DOT token transfers remained nearly identical during the second quarter. In Q2 2022, Polkadot averaged 293 million DOT transfers per month. This was marginally high in comparison to 288 million DOT transfers in Q1 2022.
Decentralization and Staking
As said, Polkadot uses a NPoS consensus mechanism wherein nominators i.e. DOT owners stake their tokens with a validator. Validators receive rewards in the form of era points every 24 hours for completing payable actions.
Through the combination of era points and random parachain validation, Polkadot ensures that all validators earn identical rewards. These validators further distribute these rewards pro-rate to the nominators. Furthermore, Polkadot incentivizes nominators to stake with lower-staked validators and earn high returns. This reward model between Polkadot validators and nominators keeps Polkadot decentralized.
As Messari notes: “At Q2 2022 close, 283 of 297 (95%) validators had 1.8–2.6 million DOT staked, confirming the nominator staking game theory is working”.
Interestingly, Polkadot also allows a single entity to run multiple validators. During the second quarter, there were seven entities running multiple validators. These entities accounted for 22 percent of the total DOT staked.
Few more aspects of the Polkadot ecosystem
- Parachains: During Q2 2022, a total of seven parachain won parachains slot taking the total to 20. Of the 20 parachains, 11 are DeFi chains, 6 are Web 3 infrastructure chains, and 3 are smart contract platforms. In the report, Messari notes: “Collectively, 131 million DOT (11 percent of the total supply; worth $919 million) has been bonded for the two-year lease period. Unsurprisingly, auctions 1–10 saw significantly more traction compared to auctions 11-20 with 16 times more DOT bonded”. By February 2023, Polkadot has 21 new slot auctions scheduled.
- Treasury: The strength of Polkadot Treasury relies on transaction fees, validator slashing, staking inefficiencies, and parathreads. During the last quarter, the Polkadot Treasury spent 240,000 DOT ($1.7 million) across nine transactions. The largest spend came on June 12, during Polkadot’s annual meeting at World Economic Forum in Davos. By the end of the second quarter, the Polkadot Treasury had 33 million DOT in Treasury ($228 million).
- Developer Activity: Last year in 2021, Polkadot had the second-largest developer community. Messari notes that Polkadot’s developer activity continues to remain the strongest in crypto.
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