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 Outdated or non-useful parachains are removed by removing bonded tokens.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.