The Polkadot DAO has recently passed a proposal to limit DOT token supply at 2.1 billion, which had no supply cap till date. This landmark implementation was included in the Referendum 1710 on the “Wish For Change” track that received 81% votes in favor.
In the official X post, Polkadot announced that the rate of new DOT issuance will decrease every two years on March 14 (Pi Day). This will lead to lower token emission and increased scarcity in the market.
Projecting the long term impact of this move, the Polkadot team noted that the DOT supply will sit at nearly 1.9 billion, which would have been 3.4 billion without this upgrade. Appreciating the development, a user on X noted that the “2.1B hard cap initiative is excellent, a crucial step for long-term value.”
Polkadot’s current consensus model adds 120 million DOT into circulation annually. This has led to a total of 1.61 billion DOT in total supply. Such excessive increase in token’s circulating supply often leads to unhealthy market dynamics. If the demand for token is shallow and emission is substantial, it would drastically impact token’s market price.
At the time of writing, DOT was trading near $4.34 and has a market cap of $7.03 billion. Despite the significance of Referendum 1710, DOT price has shown lackluster movement with it hardly breaking past $4.6 last week. It is currently the 24th largest crypto asset by market capitalization, as per CoinMarketCap data.
Polkadot’s Obscure Downfall
Launched in May 2020, Polkadot gained notable traction during its early months due to its focus on parachains architecture. Founded by Gavin Wood, one of the co-founders of Ethereum, it initially created a strong presence in the blockchain industry while having a notable community.
However, the market interest in Polkadot has shrunk over the past couple of years. Its native token DOT, which peaked at $55 in November 2021, has taken a massive hit with it currently down 92% from that mark.
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