Will Inscriptions On Polkadot Push DOT Prices Back Above $10?
23 December 2023 - 8:00AM
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There has been a notable spike in the number of Polkadot
transactions in recent days. The surge also coincides with DOT
prices racing to new 2023 highs when writing on December 22. Taking
to X, asynchronous rob noted that Polkadot is currently
processing around 250,000 transactions per hour or 400-450 per
block. Polkadot is a modern blockchain that aims to drive
blockchain interoperability. Based on its design, relying on a
Relay Chain and numerous Parachains, the network can process
transactions cheaply, considering its high capacity. Polkadot
Transactions Swelling: Blame Dota and Inscriptions The rapid
expansion of transactions on Polkadot can be attributed to the
recent launch of inscriptions, a new type of cross-chain asset
developed by the Dota platform. Uniquely, Dota’s inscriptions aim
to simplify the process of deploying and minting assets on
Polkadot’s parachains. Related Reading: Solana Flips BNB To
Become 4th-Largest Crypto, Is Ethereum Next Though parachains
operate independently as “chains” that rely on the Relay Chain for
security, this design will eliminate the need for Cross-Chain
Message Forma (XCM), which is needed for Polkadot parachains to
communicate. Usually, the XCM requires complex coding and can
be time-consuming. Therefore, the simplicity of DOT-20 inscriptions
by Dota directly explains why there is a surge in the number of
transactions. According to Dota on X, inscriptions on
Polkadot account for 98% of the recent transaction volume. Though
there has been a change in the number of transactions processed,
transaction fees on Polkadot remain low. At the same time, the
network hasn’t “skipped a bit,” with capacity being around
10%. By how Polkadot is designed, network fees will increase
only once 25% of the total network capacity is changed. To reach
this level, each block being confirmed on Polkadot must pack at
least 1,250 transactions. This will require even more
inscriptions to be created via Dota, meaning despite the observed
spike, Polkadot is technically underutilized from a bandwidth
perspective. Will DOT Continue Rising In 2024? While the deluge of
transactions also coincides with rising DOT prices, currently at
2023 highs, there have been concerns about inscriptions causing
network congestion in a network like Bitcoin facing scaling
challenges. Critics maintain that inscriptions, though defended by
some, serve nothing more than spamming the network and discouraging
use due to accompanying increases in transaction fees. For
now, it remains to be seen if inscriptions will be sustainable,
helping onboard more users. So far, Polkadot, as mentioned, can
handle the uptick in transactions. Related Reading: BONK Crashes
31% After A Solid Month – Is the Success Story Ending? Even so, if
there is a 3X rise in transactions exceeding the 1,250 transactions
per block threshold, the demand for DOT will rise. Subsequently,
DOT will likely trend higher towards $10 and other critical
resistance levels. Feature image from Canva, chart from TradingView
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