THE BIG DOT UNLOCK

The major event in the Polkadot ecosystem occurred in October 2023 with the unlocking of over 100 million DOT tokens. These tokens had been locked during the initial crowdloans for parachain slot auctions.

· Moonbeam: 35 759 931 DOT ($154 840 503)

· Acala: 32 515 980 DOT ($140 794 194)

· Astar Network: 10 333 552 DOT ($44 744 280)

· Parallel Finance: 10 751 519 DOT ($46 554 076)

· Clover Finance: 9 752 487 DOT ($42 228 271)

The significance of this event aligns with the bearish market conditions, as DOT holders were concerned that a significant token dump in the market might occur, causing the price of the DOT token to decline further and potentially reducing liquidity in the ecosystem as players sought liquidity.

The Polkadot blog itself published an article showcasing use cases for the DOT token within the ecosystem, aiming to encourage users not to sell their tokens. Instead, the article suggested using them for network security through native staking, participating in governance, interacting with ecosystem dApps, or engaging in new crowdloans.

However, the scenario following the unlocking of the tokens is extremely positive for the ecosystem, as the average DOT in stake per validator node increased by 77k (3%) — from a total of 2.26M to 2.33M DOTs. This indicates that a total of 22.6M DOTs were added to staking to ensure network security.

One day after the unlocking of the tokens, the data obtained showed that over 5M DOTs were staked on ecosystem platforms:

• +2.1M in Acala’s Liquid Staking
• +550k in Bifrost’s Liquid Staking
• +160K in Stella Swap on Moonbeam

Liquid Staking in the ecosystem proved to be a preferred alternative, with users showing increased trust, with over a 100% increase in Acala (from 2.2M to 4.6M DOTs) and over 40% in Bifrost. Data indicates that out of the over 12M DOTs staked since the token unlocking, almost 30% (3.5M) were allocated to Liquid Staking solutions. Another relevant statistic is that more than 11% (1.4M DOTs) were allocated to native staking in the nomination pools.

The alternative to native DOT staking, Liquid Staking offered by Bifrost, initiated a campaign to capture liquidity from DOTs locked in crowdloans with an extremely attractive APY for users. Additionally, Bifrost integrated its Liquid Staking service with Beamswap and Stella Swap on Moonbeam, as well as with Arthswap on Astar Network.

The campaign results were extraordinary, with over 1 million DOTs transferred to Bifrost in October, reaching a record of 2.7 million DOTs staked on the Bifrost platform. The Polkadot community demonstrates strong support and confidence in the ecosystem.

In addition to the creative solutions from dApps and parachains, the core protocol of Polkadot has been updated with Referendum #166 (approved with over 99% of votes in favor). This update increased the minimum percentage of DOTs in staking to ensure network security. The proposal introduced an ideal staking rate based on the following formula: 0.75 — min(45, 60)/300 = 0.6, i.e., 60%.

This represents an 8% increase in the ideal staking rate, rising from 52% to 60%. The reason for this increase was to ensure that the ideal staking rate remains higher than the staking rate, preventing any changes to staking rewards.

We observe that even amidst the bear market and crypto community FUD, the Polkadot ecosystem emerges stronger with increased support from its community. The locking of DOTs in staking demonstrates how much users trust the ecosystem and believe in the network’s potential. The future looks bright for Polkadot.