2021 Annual Polkadot Report

Brief

2021 witnessed the rapid growth of the Polkadot network and its canary network Kusama, with a surge in developers as well as ongoing parachain auctions. While leading projects started to sprout, the ecosystem expanded dramatically in NFT, DeFi, DAO, and other trending segments. The core deliverables and vitality of Polkadot have demonstrated its strong development at an unprecedented pace in the year 2021.

Part 1: Mainnet Performance

On-Chain Statistics

Since August 2020, the official launch of Polkadot’s mainnet, the on-chain

statistics showed Polkadot ran steadily for more than one year. Up to the present, it has processed more than 6.3 million transactions and 7.71 million signing transactions in total. The DOT staking rate has reached 63.8%, with more than 8.5 million addresses holding DOT assets and 297 validators maintaining the network.

In addition, more than 30 Substrate-based projects have launched their mainnets by the end of 2021. 22 parachains went live on Polkadot and Kusama, accumulating nearly 3 million user accounts and 6000 verification nodes. The Polkadot ecosystem has driven 540 forkless upgrades with the majority through decentralized governance.

Technology Updates

The functionality of Polkadot has been delivered accordingly to foster parachain development and network performance, which includes:

• Official Launch of Parachains: Parachain slot auctions and crowdloan modules have been successfully deployed on relay chains of Kusama and Polkadot at the beginning and the end of 2021 respectively.
• New Metadata System: This is a remarkable improvement for developers to minimize development frictions and errors.
• Launch of XCM V2: This is the first “production-ready” version of XCM (Cross-Consensus Message Format) that allows multiple forms of asset transfer between chains. It also serves as a common transaction layer that allows interconnected chains to perform specific functions.
• Optimization of Staking Technology: The number of nominated accounts that Polkadot can support has increased from 6,000 at the end of 2020 to 22,000 at the peak of 2021, with an increase of 267%.
• Addition of Pallets: Several pallets such as Assets and Uniques have been added, unlocking the capabilities of Polkadot in terms of token and NFTs respectively. The Statemine and Statemint chains use these pallets for their core features.

Secondary Market Performance

The DOT price varied with market volatility over the past year. From the lowest price at around $8 to the highest price at around $55, there was a nearly 6-fold increase. The market cap reached more than $55 billion at the peak, while it currently sits at about $27 billion with a 51% decrease. However, It’s ranked 7th in market cap and has outperformed LUNA and AVAX excluding stablecoins such as USDT and USDC.

Figure 1: DOT Price versus its Market Cap in 2021; Source: Sanbase

The price of DOT has not outperformed the overall market yet. Even parachain auctions have actuated the DOT demand, leading to a slight increase in its prices, the potential value of DOT will be consolidated in the future with network functionalities and infrastructure development. Besides, based on the statistics of Q3 from a report of Messari, it demonstrated DOT was the most commonly held asset other than BTC and ETH in hedge fund portfolios.

Part 2: Developer Activity

The development within the Polkadot ecosystem is rocketing and the core of Polkadot is certainly not underperforming. The Substrate repository which powers both the Relay chains of Polkadot and Kusama as well as every parachain in the ecosystem sits just a shave from half a million lines of code. Adding on the size of the Polkadot, Cumulus and Smoldot codebases brings us up to a little over 750k lines.

According to Sanbase, compared to public chains such as ETH/SOL/AVAX, the Polkadot Github codebase is more active in 2021 and the amount of activity remains in a stable range.

Figure 2: Polkadot/Ethereum/Solana/Avalanche Github Codebase Activity Count Comparison; Source: Sanbase

According to the 2021 Developer Report recently released by Electric Capital, in the mainstream blockchain ecosystem, the number of developers in the Polkadot ecosystem ranked second (after Ethereum), and Cosmos, Solana and Bitcoin are in the 3rd-5th place accordingly. The total number of developers (including full-time, part-time and one-time Developers) in Polkadot is over 1,400, and full-time developers (10+ commits/month) amount to more than 500. Over the past year, The number of developers in the Polkadot ecosystem has grown 66.7%, much faster than that of Ethereum (up 31.5%).

Figure3：Comparison of the developer number in Polkadot/BSC/Solana/Avalanche/Near/Terra; Source: 2021 Developer Report by Electric Capital

In addition, among the major public chains, Polkadot is the fastest-growing ecosystem in terms of full-time developers after mainnet launch, and it stays ahead. For example, in the first 600 days after mainnet launch, Polkadot has nearly 150 full-time developers, while the number for BSC full-time developers is around 100, and Ethereum, Near, Terra, Avalanche, etc. have approximately 50 in the same period.

Figure 4：Comparison of the developer growth trend after mainnet launch in Polkadot/BSC/Solana/Avalanche/Near/Terra; Source: 2021 Developer Report by Electric Capital

Part 3: Parachain Performance

After several upgrades, Polkadot officially released the final phase of its core features-parachain in the second half of 2021, which included slots auction, crowdloan and parathreads.

The first batch of Polkadot parachains auction officially kicked off on November 11, 2021, and a total of 5 projects won the auctions and successfully onboarded on December 18. The 2nd batch of Polkadot parachain auction started on December 23, 2021, and 6 parallel chains will complete around March 11, 2022. Efinity has won the 1st auction of the 2nd batch.

The 6 winning parachains have successfully locked 107 million DOT in total, accounting for approximately 9.26% of the total DOT supply and generating 118,500 crowdloan transactions. In addition, Kusama, the canary network of Polkadot finished 20 parachain slots auctions with over 3 million KSM locked, accounting for about 30.32% of the total supply, and 16 parachains onboarded on Kusama in the past few months.

Figure 5: Polkadot and Kusama’s crowdloan related data; Source：https://parachains.info/

The launch of the parachains not only initiated the cross-chain era of Polkadot but also brought branding exposure to industry shareholders, attracting a significant number of crypto natives and projects participating in parachain auctions & crowdloan events. As DOT holders contribute their assets in parachain auction, reducing the circulating supply of DOT, the launch of the parachains has greatly stimulated the long-term value commitment of Polkadot.

Part 4: Ecosystem Incentives

When Polkadot was founded, the team made long-term considerations for its development. The Polkadot Treasury keeps raising a constant cash flow of DOT to fund the Polkadot ecosystem through inflation, transaction fees, slash, and more. In addition, several Grant programs launched by Web3 Foundation in 2018 provide financial support for ecosystem projects, such as Open Grant, General Grant and Substrate Builders Program.

• Polkadot Treasury 2021 cumulative expenditure is 74,424 DOT

In 2021, the Polkadot Treasury spent 74,424 DOT, which accounts for approximately $1.86 million. Among those expenditures, 50 proposals were granted or approved with awards of approximately 70,584 DOT; 177 tips were given with awards of approximately 3,840 DOT; 0 bounty assignments were issued; 99 new tip recipients and 25 proposal recipients were sponsored by the treasury while 2.47 million DOTs were burned simultaneously in the past year.

Figure 6: Polkadot/BSC/Solana/Avalanche/Near/Terra Developer Comparison; Source: doTreasury and OpenSquare

• The Web3 Foundation has provided 124 grants for ecosystem projects in 2021

The Web3 Foundation, founded by Gavin Wood, continued to promote the ecosystem incentive program to fund software development and research work related to Polkadot, Kusama and Substrate.

The Web3 Foundation has funded 124 instances during 2021, which is slightly lower than the beginning of the mainnet launch in 2020 (144 times in 2020). Among them, 48 projects were funded in Q1 in 2021, which is the most funded quarter since the launch of the Grants Program in 2019. Thus far, the Web3 Foundation has funded 330 times and more than 300 projects through the Grants Program (some projects have received more than one funding). The Grants program has covered all layers of the Web3.0 technology stack, covering all major sectors of the Polkadot ecosystem.

Figure 7: 2019–2021 Web3 Foundation Grant Count Statistics; Source: https://github.com/w3f/Grants-Program

Additionally, the Substrate Builders Program initiated by Parity is also progressing steadily in 2021: 163 new teams applied for a place on the Program over 2021, of which 36 projects were admitted. The Web3 team conducted 53 technical reviews and 11 teams finally completed all milestones set.

Part 5: Applications within the Ecosystem

PolkaProject, a Polkadot ecosystem statistics platform, shows there are 523 projects thriving in Polkadot and Kusama ecosystems, with an increase of 74.33% from that in 2020. Among those projects, 176 of them are Substrate-based. For better reference, the number of tooling, wallet and infrastructure projects are 58, 40, and 46 respectively.

Figure 8: Overview of Polkadot Ecosystem; Source: PolkaProject

Polkadot projects have maintained a relatively intensive development activity, with 32 projects having activities above 100, based on the number of monthly development activities in Github. Among the projects with high development activity (see table below), except for Polkadot, all of them are early-stage projects that have not yet won the parachain slots. In addition, approximately 79 Polkadot projects have issued their native tokens, accumulating a total market cap of around $46.3 billion (about 2.2% of the total market cap of the cryptocurrency market).

Figure 9: Top 10 Development Active Projects in Polkadot Ecosystem (as 2022/01/07); Source: PolkaProject

Figure 10: Top 10 Market Cap Projects in Polkadot Ecosystem (as of 2022/01/07); Source: CoinGecko

Part 6: Performance of Leading Parachains

Acala and Moonbeam were the first two parachains launched, with leading roles in Polkadot and great progress in 2021. Both of them have started expansions in their respective layouts. The market cap of Acala’s canary network Karura is approximately $72.38 million while Moonbeam’s canary network Moonriver is approximately $472 million at the present.

• Acala

Crowdloan: In June 2021, Karura won Kusama’s first parachain slot, and over 500k KSMs were locked. In November, Acala won Polkadot’s first Polkadot parachain slot and obtained a contribution of more than 32.5 million DOTs. The distribution of ACA tokens is currently in progress, but not transferable, and transfers will be enabled via governance after the removal of the Sudo module.

Ecosystem: There are currently 25 Acala and Karura based projects listed on their official websites, including Centrifuge, Subscan, Ren, ChainX, Compound. In the past year, the team launched the first DEX, Karura Swap, and listed the decentralized cross-chain stable coin KUSD on the Kusama with LKSM liquidity mining. Currently, there are approximately 69k Karura holders, 1.03 million transfers, and more than 537k signature transactions on the Karura network. According to Defillama, the current TVL on Karura is approximately 67.13 million USD.

In addition, Acala has launched the Foundation Grants Program to subsidize its ecosystem projects. The NUTS Finance team’s TAIGA protocol received the first grant in September 2021.

Community: Acala has about 221k followers on Twitter and 36k members on Telegram. The global community has accumulated more than 830k participants with an increase of 315%. The number of active users reached about 72k with an increase of 167%.

• Moonbeam

Crowdloan: In June 2021, Moonriver won the Kusama parachain slot, with a total of 5977 users contributing more than 200k KSMs. In November 2021, Moonbeam won the Polkadot parachain slot, with a total of 200k contributors staking more than 35 million DOTs.

Ecosystem: There are a large number of projects being deployed on Moonbeam and Moonriver every month. Currently, 111 projects are listed on Moonbeam’s official website such as Solarbeam, Composable, Sushi (DeFi); Seascape, RMRK, Zoombies (NFT); ChainBridge, Meter (cross-chain bridge); Ocean, KILT (asset protection), with more than 75 of them having officially launched. Furthermore, there are approximately 162k Moonriver holders, 2.92 million transfers, more than 156k signing transactions and approximately 1.41 million tokens (11.1%) staked on Moonriver. According to Defillama, the current TVL on Moonriver is approximately 262 million USD.

Additionally, Moonbeam launched its Grants Program in June 2021. At the early stage, the Grants will focus on infrastructure projects such as oracles, API services, wallets, governance and tools. Afterward, the Grants program will cultivate Defi, NFT, and other application projects. At the present, Subscan, MathWallet, Onfinality, and several projects have been successfully awarded grants.

Community: Moonbeam has about 177k followers on Twitter and 36k members on Telegram.

Part 7: Investor Trend

The Polkadot ecosystem met a significant cash in-flow from both retail and institutional investors in 2021, with an estimation that about 50 projects raised a total of more than $670 million in early financing stages (seed round and A round). Many venture capital firms such as DFG, Signum Capital, AU 21 Capital, and Hypersphere Ventures, who have actively invested in over 10 Polkadot ecosystem projects, flock in with capital and resource support. Trending segments such as NFT, DAO, DeFi and Infrastructure sustain a high volume of investment, mapping a sound future for Polkadot.

Figure 11: Part of Polkadot Ecosystem Projects Funding History in 2021; Source: Public Media

Part 8: Community Trend

The Polkadot community has grown tremendously over 2021. The official Polkadot website saw roughly 2 million page views, about four times that in 2020. While Polkadot Twitter followers grew 10 times, from under 100 thousand to more than 1 million, similarly, Kusama’s Twitter fanbase also grew from around 30,000 to over 200,000, representing a 500% surge. In the Chinese community, Wechat subscribers have nearly tripled from 18,000 to almost 50,000. Among other media, Polkadot remained dominating, with 70,000 Reddit members, 20,000 Discord members, and over 40,000 Youtube subscribers. It has 1.1 million viewers spending 126,200 hours on Polkadot educational materials, and the Polkadot Wiki saw 1.5 million visitors, with 3.2 million page views.

Sanbase, providing social volume statistics among 1,000+ crypto channels (including Telegram, Reddit, Discord, and traders’ communities), shows that with the launch of parachains in October 2021, Polkadot attracted increasing attention in the crypto community.

Meanwhile, when comparing the social dominance (ratio of specific crypto to a pooled top 50 heated cryptos in media mentions) of major public chains like BTC/ETH/SOL/AVAX, DOT behaves like value-recognized assets BTC and ETH, receiving the most attention from the crypto community at the beginning of 2021. With the launch of the parachain auctions, DOT continued to gain traction and surpassed popular assets such as BTC/ETH/SOL, leading discussions in the mainstream community.

Figure 12: DOT/ETH/SOL/AVAX Twitter Followers Growth; Source: Sanbase

Figure 13: DOT/BTC/ETH/SOL/AVAX Community Discussions Comparison; Source: Sanbase

Part 9: Future Prospects

2021 left a remarkable stroke on Polkadot’s development, with core features deployed and parachian auctions launched. Based on work and achievements from all teams, we cannot wait to open a new chapter for Polkadot in the coming 2022. Polkadot will continue to optimize current network features and deepen its impact, which includes:

• Parachain Expansion: Unless technical issues happen, it is expected that the parachain auctions will continue throughout 2022. As an increasing number of teams win parachain auctions and access to the Polkadot relay chain, they will focus on the product and partnership development to continuously fill industry gaps and innovate among competitors.
• Decentralized Cross-Chain Bridges: The cross-chain interoperability requires the introduction of a cross-chain bridge. For starters, the Parity cross-chain bridge will be introduced to connect Polkadot and Kusama, which will be followed by the deployment of Snowfork connecting Polkadot and Ethereum.

Network Upgrades: Researchers from the Web3 Foundation are studying Polkadot 2.0, which will keep increasing network capabilities. All upgrades need to be approved by on-chain governance. Planned upgrades include parathreads and XCM.