The DOT token
The DOT token serves three distinct purposes:
governance over the network, staking and bonding.
Polkadot token holders have complete control over the protocol. All privileges, which on other platforms are exclusive to miners, will be given to the Relay Chain participants (DOT holders), including managing exceptional events such as protocol upgrades and fixes.
Game theory incentivizes token holders to behave in honest ways. Good actors are rewarded by this mechanism whilst bad actors will lose their stake in the network. This ensures the network stays secure.
New parachains are added by bonding tokens. Outdated or non-useful parachains are removed by removing bonded tokens. This is a form of proof of stake.
What are DOTs? keyboard_arrow_rightDOTs will be the token created and native to Polkadot for the purpose of carrying out the key functions of the platform as detailed below.
What are the functions of DOTs within Polkadot? keyboard_arrow_right
DOTs will serve four key functions in Polkadot, namely (i) providing governance for the network, (ii) operating the network, (iii) creating parachains by bonding DOTs, (iv) fees for ferrying messages across parachains.
The first function of DOTs will be to entitle holders to complete governance control over the platform. Included in this governance function is determining the fees of the network, the auction dynamics and schedule for the addition of parachains, and exceptional events such as upgrades and fixes to the Polkadot platform. These functions are not formally granted to the holders of DOTs, but rather the underlying code of Polkadot will enable a holder of DOTs to participate in governance.
The second function of DOTs will be to facilitate the consensus mechanism that underpins Polkadot. In order for the platform to function and allow for valid transactions to be carried out across parachains, Polkadot will rely on holders of DOTs to play active roles. Participants will put their DOTs at risk (referred to as “staking” or “bonding”) to perform these functions, which acts as a disincentive for malicious participation in the network. The DOTs required to participate in the network will vary according to the activity undertaken, the duration DOTs are staked for, and the total number of DOTs staked.
The third function of DOTs will be the ability to add new parachains by tying up DOTs (referred to as “bonding”). Outdated or non-useful parachains are removed by removing bonded tokens.
The fourth function of DOTs is to pay fees to validators to ferry messages across parachains. According to a market mechanism, users will pay a fee for their message to be sent to other state machines on the Polkadot network.
What rights will DOTs confer on their holders? keyboard_arrow_rightHolders of DOTs will have certain functions within the Polkadot platform, including:
- the ability to act as a validator, collator, nominator or fisherman;
- the ability to participate in the governance of Polkadot;
- the ability to participate in the decision-making process in relation to adding or removing parachains; and
- the ability to participate in the decision-making process in relation to global upgrades and/or changes to Polkadot.
Are DOTs ERC20 tokens? keyboard_arrow_rightNo, DOTs are tokens native to the Polkadot platform.
I’ve seen some exchanges trading a DOT Token, and is this related to Polkadot? keyboard_arrow_rightNo. The DOT token has not been distributed. Do not trust any third party offering the sale or exchange of DOT tokens, which will not be generated until Polkadot's genesis block, which is currently scheduled for mid-2020.
Are DOTs transferable ERC20 tokens? keyboard_arrow_rightNo, the contract under 0xb59f67A8BfF5d8Cd03f6AC17265c550Ed8F33907 simply records the allocations of DOTs and is not transferrable. The actual transferable DOTs will be available upon network genesis.
When will I receive DOTs? keyboard_arrow_rightThe initial development cycle for Polkadot is expected to be at least two years following the completion of the first general sale. This estimated time period anticipates a research phase culminating in a set of technology proofs-of-concept, a series of prototypes with an eventual formal protocol specification, the deployment of a testnet, a fully refined implementation, an external auditing process, and a bounty programme. To the extent these phases are successful, the Web3 Foundation will proceed to make the Polkadot genesis block available for deployment such that participants in the first general sale can access DOTs allocated to them.
How can DOTs be accessed once allocated? keyboard_arrow_rightUpon a deployment of the Polkadot genesis block, DOT owners will be able to access their DOTs using the private key corresponding to the Ethereum address used for contribution in the DOT sale.
Is the supply of DOTs capped? keyboard_arrow_rightIt is intended that the Polkadot genesis block will contain 10 million DOTs. The overall supply of DOTs over time will not be fixed, nor will it be subject to a pre-determined upper limit. DOTs will be subject to an as yet determined inflation model which envisages that the supply of DOTs will increase each year and are likely to be designed to incentivise participants such that a sufficient proportion (yet to be determined, but perhaps 50%) of all DOTs in issue at any point in time will be staked to support the proof of stake consensus mechanism that underpins Polkadot.
Will DOTs be valuable? keyboard_arrow_right
As above, DOTs are designed to fulfill certain functions within Polkadot and does not act as a currency per se. The Web3 Foundation makes no comment at this stage as to the current or future value of DOTs.
DOTs are largely illiquid by design. Following the deployment of the Polkadot genesis block, it is expected that a large proportion of all DOTs in issue at any point in time will be staked for the purposes of supporting the Proof of Stake consensus mechanism that underpins Polkadot, and consequently will be illiquid and will not be capable of being transferred or traded.
Will DOTs be tradeable? keyboard_arrow_rightIn respect of those DOTs in existence that are not bonded for the purposes of supporting and operating Polkadot, the Web3 Foundation does not intend to provide, develop or support any infrastructure to enable the trading of DOTs, and the possibility of any third party offering such infrastructure will be entirely outside the control of the Web3 Foundation.
Are DOTs going to be another virtual currency? keyboard_arrow_rightIt is not the intention of the Web3 Foundation for DOTs to be used as a virtual currency, as detailed in the sections above. The Web3 Foundation does not intend to provide, develop or support any mechanism by which DOTs can be exchanged into an underlying value of fiat currency. On this basis, the Web3 Foundation considers it is unlikely that DOTs would be appropriate for use as a form of virtual currency. Notwithstanding this, it is possible that under the laws of certain jurisdictions, DOTs may be considered virtual currencies. The Web3 Foundation provides no comment as to what such classification may entail for holders of DOTs, and any potential holders seeking further information as to the potential impact of holding a virtual currency should seek independent legal advice.