Polkadot, the community-governed blockchain protocol launched by Ethereum co-founder Gavin Wood, was one of the overwhelming success stories of 2020. Not only has its native DOT token firmly established itself as one of the top 10 cryptocurrencies by market cap. , but its community has rapidly expanded as the promise of fast throughput, fork-free upgradability, rich customization capabilities, and most importantly, cross-chain interoperability resonates with developers.
Like Ethereum, with which he is often compared, Polkadot aims to solve the blockchain’s long-standing scalability problem by joining a vast network of purpose-built parachains and allowing them to seamlessly operate with each other on a large scale via the Polkadot. Relay Chain. His vision? Paving the way for “the emergence of new decentralized markets by offering more equitable ways to access services through a variety of apps and providers.”
If this ambition sounds familiar, then you’ve clearly been paying attention to the boom in the DeFi movement, whose permissionless systems have largely been built on Ethereum. Protocols like Uniswap, Maker, Aave, and Yearn helped boost cryptocurrency trading volumes by $ 155 billion in the third quarter, and a quick scan of Polkadot-based projects suggests they want some share of the action.
Interestingly, Polkadot helps fund the development of software protocols (dApps, parachain) through its parent company, the Web3 Foundation. Funds are disbursed without trust in the chain and to date the Foundation’s grant program has initiated over 100 projects in over 20 countries. Grants are paid out in Quarterly Waves, with recent recipients including Nsure.Network, an open insurance platform for open finance, and Saito, a Polkadot protocol and game library.
DeFi isn’t the only use case for Polkadot, by the way: the blockchain infrastructure is such that products like cross-chain ledgers and cross-chain computation are possible. Suffice it to say, however, that DeFi attracts the lion’s share of developers: agricultural production protocols, stablecoins, wallets, decentralized exchanges (DEX), automated market makers (AMMs), toolchains created to enhance substrate-based dApps – the list could go on.
Polkadot’s DeFi stack may be a fraction of the size of Ethereum at the moment, but that’s to be expected given the age of the project. Importantly, Polkadot has seen the biggest surge in development activity this year, according to a report by Outlier Ventures. Conversely, developer numbers on Ethereum, EOS and Stellar all declined over the observed period (12 months to May 2020).
According to the PolkaProject directory, there are 282 applications active on the network, including a number of sovereign and interoperable parachains. If Polkadot is to give Ethereum a run for its money, many of them will have to pave the way for new concepts and ways of open finance, while others must simply outshine their Ethereum-based equivalents.
MANTRA DAO might seem eerily close to MakerDAO, but it’s something else: a community-governed DeFi platform that promises to harness the wisdom of the crowd to help users grow their wealth. One of 86 projects based on Parity Substrate, the development framework for building distributed or decentralized systems, MANTRA DAO allows users to load collateral from other connected chains while interacting with staking, lending, lending and governance mechanisms.
As for the slogan “wisdom of the crowd”, it refers to the utility of the platform’s OM token, which confers voting rights that influence ecosystem grant allocation, support for staking and lending products and factors such as inflation levels and interest rates. The founders of MANTRA, whose background lies in finance, business and cryptography, chose Polkadot for its interoperability, scalability and network speed.
Thanks to Polkadot’s unique infrastructure, MANTRA is able to create cross-chain links to existing open source DeFi lending protocols, allowing users to access lending interests for Ethereum-based assets.
Another intriguing Substrate-based project is Acala. Composed of a multi-collateralized stablecoin (aUSD), staking derivatives and DEX, the Acala network powers cross-chain DeFi applications on Polkadot and beyond. A self-proclaimed “all-in-one DeFi service center,” this particular parachain carries serious institutional weight behind it, having recently closed a funding round backed by the likes of Pantera Capital, Coinfund and Arrington XRP Capital.
Acala recently launched a sister network, Karura, intended as a DeFi hub for the Canarian network of Polkadot Kusama. In essence, Karura will be to Kusama what Acala is to Polkadot. Once the Canary network is connected to Polkadot, both Karura and Acala will be interoperable with each other.
Since Polkadot allows the transfer of any type of data between very different blockchains, its real-world applications are practically limitless. The real test will be whether its products reflect the ambition of its technology and whether it can capitalize on both Ethereum’s high gas tariffs and its failed efforts to launch 2.0.
DeFi may be the current talking point, but it’s clearly not the end of the line for Gavin Wood’s latest venture.
