There has been a notable spike in the number of Polkadot transactions in recent days. The increase also coincides with DOT prices racing to new highs in 2023 as of this writing on December 22.
Going to X, asynchronous robbery noted that Polkadot currently processes approximately 250,000 transactions per hour or 400-450 per block. Polkadot is a modern blockchain that aims to boost blockchain interoperability.
Based on its design, based on a Relay Chain and numerous Parachains, the network can process transactions cheaply, given its high capacity.
Polkadot trades swell: 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 are intended to simplify the process of staking and minting assets on Polkadot’s parachains.
Although 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 necessary 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 the number of transactions is increasing.
According to Dota on X, Polkadot signups account for 98% of recent transaction volume.
Although there has been a change in the number of transactions processed, transaction fees on Polkadot remain low. At the same time, the network has not missed a beat, with a capacity of approximately 10%.
Due to the way Polkadot is designed, network costs will only increase if 25% of the total network capacity is changed. To reach this level, each block confirmed on Polkadot must contain at least 1,250 transactions.
This will require even more inscriptions to be made through Dota, meaning that despite the perceived peak, Polkadot is technically underutilized from a bandwidth perspective.
Will DOT continue to rise in 2024?
While the flood of transactions also coincides with rising DOT prices, which are currently at 2023 highs, there are concerns about inscriptions causing network congestion in a network like Bitcoin that faces scaling issues.
Critics argue that inscriptions, while defended by some, serve no purpose other than spamming the network and discouraging usage due to associated increases in transaction fees.
For now, it remains to be seen whether the inscriptions will be durable, helping to attract more users. So far, as mentioned, Polkadot can handle the increase in the number of transactions.
Still, demand for DOT will increase if the number of transactions exceeds three times the threshold of 1,250 transactions per block. Next, DOT is likely to rise towards $10 and other critical resistance levels.
Feature image from Canva, chart from TradingView
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