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What Is The Role Of DOT In Polkadot?

The smallest unit of DOT, the native token of Pokadot network, called “Planck”. This token plays different roles in Polkadot ecosystem. In...

Written by Wallebi Author · 1 min read >
What is the role of DOT?

The smallest unit of DOT, the native token of Pokadot network, called “Planck”. This token plays different roles in Polkadot ecosystem. In this article we are going to get familiar with the role of DOT token.

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The role of DOT ; Voting!

The first utility of DOT is to vest voting right to its holders.  It includes determination of fees, parachain-based connections and upgrades. Users, who want to submit a proposal must send DOT along with their request.

The second role of this token is to simplify Nomination Proof-of-Stake mechanism. Here, the role of DOT is to act as a validator and nominator.  Accordingly, users, who are interested in the network survival will start staking. They can gain reward by establishing validator nodes. Validators’ rewards would be distributed regardless of how much they have staked. Other DOT holders (nominators) can gain profit through staking DOT and selection of 16 top validators.

Rent a parachain

The third role of DOT is to rent parachains. Parachains (parallel chains) are one of Polkadot special features, which make transactions process in parallel. For a parachain connection to Polkadot network, an auction will be executed to rent it for a limited time.  The winner would lock his DOTs in the parachain for the rental period. At the end, tokens would be returned and the parallel chain would get removed.

DOT holders also can participate in renting parachains process. This can be through granting DOT to a project. This increases the possibility of winning the auction. Providing DOTs will be throughout a crowdloan campaign. The incentives of these campaigns must be something more than parachains staking rewards. Instead of staking, if users show interest in participation in crowdloans, fewer tokens will be locked in parachains. On the other hand, this improves staking annual return rates. Thus, DOT demand and its price would surge. Also, participation in crowdloans is more difficult than staking tokens.

Recently, DOT has performed weakly. What is the reason for this matter in your opinion?

Written by Wallebi Author
Author and analyst in the field of cryptocurrency Profile

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