Polkadot 2 Is Coming

Polkadot 2.0, the upgraded version of the popular PoS blockchain, is set to go live sometime in early 2024, so it’s high time we all refreshed ourselves on what we can expect from the update. 

Polkadot is a widely used blockchain, with its native DOT token being amongst the top 20 cryptocurrencies with its roughly $4,5 billion market cap. The blockchain started to become popular back in 2021 when the altcoin boom started and has managed to stay a significant token since. Unlike many other altcoins, Polkadot offers a wide range of blockchain functionalities. 

DOT is a governance token that has been traded between $4 and $7 this year, before entering a downtrend in the beginning of October, to currently trade just below $3,7 per piece. Given that the Polkadot blockchain has a number of popular functions, the current downtrend may present a buying opportunity for those that believe in the future of the Polkadot network.

What is Polkadot 2.0?

The initial announcement of the update was made in June of this year, by Polkadot founder Gavin Wood himself. The blockchain’s proof-of-stake verification algorithm can already handle a huge number of actions rapidly and securely, but the network’s growth in popularity has pushed it to its limits. 

A previous update released in 2022 has already increased transaction speeds by more than a 100 times, but it still does not appear to be enough. The main purpose of the current update will be to put in place a completely new system for more efficiently allocating resources and block space. It would also make it easier for users to purchase blockspace more dynamically than currently possible. Polkadot consists of thousands of different parachains (or layer-2 chains), that are all running different functions and are under the ownership of users. 

The current network primarily serves as an intermediate blockchain used to transmit data between two or more different blockchains to offer multi blockchain functionality. Improving the speed and efficiency of the blockchain will allow users (typically developers), to introduce Web3 solutions easier for their own businesses through the parachains. Somewhat similar to Ethereum, the world’s most known general-purpose blockchain, Polkadot is primarily used by Web3 application developers, though it is not a general-purpose blockchain, but rather a shared multi-chain protocol.

How will the new version differ from the old one?

Most of the changes are very technical, serving the purpose of creating a faster, better and more dynamic blockchain, so the upgrade will take place mostly behind the scenes. However, there are some key changes that users will experience. The ordinary investors holding or mining the tokens will notice little change, but the developers who use the blockchain will see several key changes in the ecosystem. 

For example, users will be able to buy and sell coretime (time used by the main network to validate each user’s own layer-2 chain). When a user has more network activity, he can buy more coretime and when he has less network activity, he can sell coretime, so that the main network can focus on validating parachains that are busier for the time being. Currently coretime can only be bought in advance on a fixed basis.

Access to the different layer-2 chains within the main network will also be flexible instead of only being provided on a fixed, predetermined basis. The aim of these changes is to create a financial incentive for users to better manage their coretime, so that everyone will only use as much coretime as necessary and the blockchain will become more efficient. Hence, the update not only provides technical background for Polkadot to be more efficient, but also provides the possibility for user-driven efficiency improvement through practical methods.

The future of Polkadot

With the DOT token selling at its lowest price since the past several years, many analysts say that it is currently undervalued. DOT is not a hollow speculative token, but a token that offers actual key functionality, which could make it a safer long term bet. 

However, it is wise to remember that Polkadot still might be in trouble with the United States’ SEC, that has been investigating it for years for potential non-compliance with US law as it argues that DOT can be considered a financial security.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.