Polkadot's Strategic Report: How to Break the Deadlock?

Introduction

Hello to all friends concerned about Polkadot, we are the Polkadot Ecosystem Research Institute. We focus on researching Polkadot and the development opportunities and prospects within the Polkadot ecosystem, and we have continuously received support from the Polkadot treasury for six times.

As a team that has been researching Polkadot for nearly five years, we have been hearing increasing voices of frustration in the community regarding Polkadot recently. Many people see no hope and have even left the Polkadot ecosystem, which is something we do not wish to see. With the recent launch of OpenGov on Polkadot, we see that governance rights are increasingly being handed over to the community, and we can become a driving force for the development of Polkadot. Therefore, we have decided to shift from a previously passive research role to an active participation role. This article is a Polkadot growth strategy planning report that we believe outlines how Polkadot should grow, and many of the viewpoints are the results of our years of research.

This article will directly address the market rather than just technology and ideals. We confront the most real issues head-on and propose improvement ideas and suggestions. Of course, we also see that many teams are actively proposing solutions to some of Polkadot's current issues on official forums and in the community. However, these solutions are often singularly targeted at specific problems, lacking a comprehensive approach from a broader perspective, or a unified solution to multiple issues under a strategic framework.

We welcome everyone to point out the shortcomings of this article, and we also encourage everyone to generously provide guidance and to propose practical suggestions for improvement. Our only hope is to make Polkadot better, so let us work together.

The Current Status of Polkadot

In the past six months, Polkadot has made significant progress, successfully achieving two important milestones in its Roadmap. Among them, the launch of OpenGov introduced an advanced governance model, providing community members with broader participation and decision-making power; the release of XCM V3 improved the messaging format, enhancing Polkadot's functionality and interoperability, laying a solid foundation for future development.

The infrastructure of the Polkadot network remains strong, and the level of developer activity has significantly increased, currently ranking first among public chains, with the total number of developers also rising to second place. This indicates that the number of developers attracted by Polkadot is continuously growing, and their contributions to its technical ecosystem are also on the rise.

However, despite achieving remarkable progress, Polkadot still faces some difficulties. The price trend of the DOT token is unstable, with significant fluctuations, which may bring certain uncertainties to investors and ecosystem builders. At the same time, user activity is declining, the development of ecological projects is sluggish, and there are some urgent issues in treasury governance that need to be addressed.

Overall, Polkadot is on a path of continuous advancement, filled with innovation, but it has also faced challenges.

1. Technical Update Status

Polkadot has been committed to continuously improving its technology and features. In the first half of this year, Polkadot has implemented two significant technical updates, releasing OpenGov and XCM V3 on June 15. Currently, Polkadot has announced the official completion of version 1.0, and at the Polkadot Decoded 2023 at the end of June, Dr. Gavin presented the vision of Polkadot 2.0.

OpenGov: The new governance model introduced by Polkadot achieves decentralization through community voting and power checks, utilizing a structured implementation lifecycle. The Technical Fellowship has replaced the old technical committee and acts as the developer DAO.

XCM V3: As the latest version of the cross-consensus messaging format, XCM has been launched through governance on Kusama. The release of XCM V3 brings innovative designs, supporting functions such as external network bridging, NFT transfers, and asset locking.

With the complete delivery of Polkadot 1.0, Polkadot will enter a new stage of development. Polkadot 2.0 is a multi-core computer that will shift from a chain-centric to an application-centric approach, introducing several brand new concepts and technologies.

• Accord( Agreement): A voluntary treaty across multiple chains, where chains voluntarily comply with the treaty and ensure its faithful execution. During the realization of Accord, Polkadot introduced two key technologies: SPREE and Project CAPI.
• SPREE Technology: Runtime logic fragments based on a relay chain, acting like a secure tunnel, ensuring that information and value can be safely transferred between different parallel chains.
• Project CAPI: A middleware project aimed at promoting the development of decentralized applications based on Polkadot ( DApp ). It provides developers with a lightweight client solution, enabling them to create cross-chain applications with a good user interface.

In the vision of Polkadot 2.0, Polkadot reiterates its commitment to building a resilient application platform (Resilience). Polkadot will focus on constructing a ZK primitive library, and currently, the first library is nearing completion, which will provide privacy protection for the on-chain collective (Fellowship). Polkadot will also invest in updates for several technologies including Hermit Relay, Smoldot lightweight client, Sassafras consensus, and Internode Mixnet.

In addition, technologies such as parallel threads developed by Parity, system parallel chains, and asynchronous support are also being fully supported and are yet to be realized.

2. On-chain situation

As of the writing of this article, according to Messari's report on Polkadot for the second quarter of 2023, Polkadot's on-chain progress has experienced some ups and downs. Below is a brief overview of Polkadot's on-chain situation in the second quarter.

Development activity status:

• The developer participation of Polkadot and Kusama has maintained a good upward trend, reaching peak active developers of 613.71 and 600.29 on May 28 and June 16, respectively.
• The number of core active developers reached a historical high of 181 on March 22 and has remained relatively stable.
• Polkadot has the highest number of submissions in terms of protocols and ecosystems, and ranks first in the number of active developers.

User activity and financial status:

• The daily active accounts of Polkadot in the second quarter decreased from 6,290 in the first quarter to the current 5,810.
• Polkadot revenue in the second quarter decreased from over $120,000 to nearly $81,000.

Parallel Chain Lockup Value ( TVL ):

• In the Polkadot ecosystem, the top 6 parachains focused on DeFi are dominated by Moonbeam, Astar, Parallel, Acala, Moonriver, and Karura.
• The total locked value of the parallel chain experienced a decline after a period of increase in the second quarter, dropping from a peak of 236.12 million USD on April 14 to 146.77 million USD on June 30.

DOT staking rate and return rate:

• The staking rate of DOT in the second quarter of 2023 was 46%, lower than the ideal staking rate.
• The current return rate is approximately 9%, but it varies with changes in the staking rate.

3. Developer Information

According to data released by Electric Capital, in the first half of 2023, Polkadot has a large developer base in the industry. As of September 17, Polkadot currently has 645 full-time developers, ranking second in the number of full-time developers; the total number of developers is 1923, jumping from third place to second, and maintaining a relatively stable proportion compared to last year, with full-time developers accounting for about 33.54% of the total. This data indicates that the developer community of Polkadot is continually expanding and plays an important role in the development of the Polkadot ecosystem.

4. Ecological Situation

The Polkadot ecosystem is a rapidly developing and diverse blockchain ecosystem designed to provide cross-chain interoperability and innovative solutions.

According to PolkaProject statistics, there are currently 580 ecological applications related to Polkadot, including DeFi, infrastructure, NFTs, browsers, wallets, forums, etc., developed based on Substrate.

On June 15th, the launch of XCM V3 attracted widespread attention, providing advanced programmability, bridging functions with external networks, cross-chain locking, improved fee payment mechanisms, and support for non-fungible token (NFT). In terms of the total value locked (TVL) in parachain, Moonbeam and Nodle are the two projects with the highest number of active accounts. Moonbeam has always been the leader in TVL, while the TVL of parachains such as Acala, Astar, and Parallel also remains at a high level.

Slot auctions are the process of allocating access to the relay chain, with the winners receiving the permission to operate a parachain. Additionally, projects within the Polkadot ecosystem are attracting increasing attention and collaboration, with notable progress made by entities such as Mythical Games, Kilt, Frequency, Composable Finance, and Aventus Network.

Overall, the Polkadot ecosystem is continuously growing and developing, the Roadmap is progressing smoothly, and several key projects have been successfully implemented.

5. Market Cap Situation

As of the current date ( October 11, ), the market capitalization of Polkadot is approximately $3.375 billion, ranking 14 in the Crypto market. In the past few months, it has shown a downward trend, with prices relatively stable from early May to mid-June. Overall, the price of DOT has decreased by 31.87% in recent months.

Both Polkadot and Cosmos are committed to solving the problem of cross-chain communication, but they have taken different technical approaches. Compared to Cosmos, the price of ATOM is currently in a relatively low state, having dropped about 27.42% so far this year (, except for a brief rebound in June ). However, overall, the market cap of Cosmos has declined, currently standing at approximately $2.598 billion.

The migration of stablecoins to Layer 2 solutions has become a highlight of 2023, such as Optimism. OP is one of the best-performing crypto projects of 2023, with an increase of up to 227% at the beginning of the year, and Optimism now has a market capitalization of approximately 1 billion USD.

Arbitrum(ARB) is another highly regarded Layer 2 solution, with a trading volume exceeding 1.7 billion dollars and a current market capitalization of 1 billion dollars.

6. Social media situation

The official media for Polkadot mainly includes the Polkadot official website, the Kusama network, Polkadot Twitter, Web3 Foundation Twitter, Reddit, YouTube, and other channels. The official website provides detailed information about the Polkadot project, including technical documents, news updates, community governance, ecosystem development, and more; social media platforms like Twitter, Reddit, and Medium are used to publish the latest Polkadot updates and important events, facilitate community interactions, and expand influence; YouTube offers video resources such as speeches, technical sharing, and community activities from the Polkadot team, helping users to better understand the Polkadot ecosystem.

In addition, there are discussions on technology and the future of Polkadot in the Polkadot forum, Polkadot GitHub, and other platforms, as well as the Polkadot Support Knowledgebase ( Polkadot Support Knowledgebase ) providing tutorials and support for Polkadot. Overall, Polkadot's official social media is quite rich, offering users various forms of participation and communication, which is very important for strengthening community consensus and expanding influence.

7. National Treasury Governance Situation

OpenGov is a new governance system introduced by Polkadot, launched on the Kusama network in November 2022. It has significant advantages in improving governance efficiency and promoting community participation. However, OpenGov also faces some challenges, such as uneven voting rates and rapid treasury spending.

Efficient governance processing: Compared to the original governance system Gov1, OpenGov has improved the operational efficiency of the governance system, allowing multiple referendums to be processed in parallel, significantly enhancing the efficiency of governance.

Currently, there are several issues with OpenGov governance.