Developed by Ethereum co-founder Gavin Wood, the Polkadot zero-level network once was one of the top 10 most capitalized crypto projects, peaking at $50 billion. However, since mid-2022, it has failed to break out of a prolonged bear trend.
During 2024, the company’s management faced a string of criticism from the blockchain industry related to the DAO fund’s waste, toxic atmosphere, and even racial discrimination.
In the roadmap presented at the end of the year, the team shared a global vision for the future Polkadot 2.0 ecosystem and the realization of the technical upgrade – JAM. According to analysts’ predictions, in 2025 DOT may become one of the growth leaders among “legacy” projects;
In a new Coinpaper piece, we parse the project’s fresh economic development model, upcoming upgrades, and the likelihood of the return of once-powerful competitor Ethereum.
Gavin Wood’s “Simplicity and Accessibility”
The idea for the “simplest possible” version of Ethereum – Polkadot – began nine years ago. Co-founder and first CTO of the second most capitalized cryptocurrency, Gavin Wood, driven by his vision of scaling, left the team. The talented scientist, who developed the foundation of smart contracts – the Solidity programming language – had produced the first version of the white paper Polkadot.
Back at Ethereum, Wood and his colleagues founded a commercial blockchain technology company, Parity Technologies. The team is behind the creation of the Polkadot network and the Substrate framework.
In 2017, Gavin Wood and developer Peter Chaban founded the Web3 Foundation, a nonprofit organization, to accelerate the development of decentralized internet protocols. A tokensale took place the same year. The project raised $145 million by selling 5,000,000 DOT.
In 2019, a second token sale was held to cover production needs, and the developers in turn launched the experimental Kusama network. The first parachains were deployed on it. “Kanarechain” network with the KSM token still exists today, allowing testing of new Polkadot features.
In late 2022, Wood gave up his CEO position at Parity Technologies to make the project “more relevant to the general public.”
In an August 2024 interview with Cointelegraph, he recalled a 2013 conversation with Ethereum co-founder Vitalik Buterin. The main point of the conversation was to separate the token of the second most capitalized cryptocurrency from its ecosystem to make it as easy as possible for users to interact with the Web3.
“Vitalik and I have been discussing the possibility of getting rid of Ethereum as a currency entirely. It seems unthinkable now”,” Wood noted.
The main goal, he said, is to make Web3 technologies available to everyone. The concept is evident in the network architecture itself, where layer zero already simplifies life for L1 network (parachain) creators by abstracting away unnecessary interaction. Polkadot sells infrastructure, but in a development environment that is not easy to understand.
Simplifying user interaction and promoting privacy can be seen in another programmer’s development – tattoo-based Proof-of-Ink. The Proof-of-Ink algorithm involves authenticating a user by his distinctive drawings on his body;
In July 2023, a new global concept – Polkadot 2.0 – is presented. It envisions a fresh economic vision of the technology: a move towards “on-demand” slot rentals instead of auctions. Its component, the JAM (Join-Accumulate Machine) technical upgrade, is designed to embody the ideas of mass Web3 adoption.
“JAM achieves this by virtually reducing transaction fees on the blockchain to zero, but a more sustainable solution would be individualization in Web3, which would eliminate the need for a spam protection mechanism and therefore transaction fees”,” Polkadot’s co-founder added.
“Pancakes in polka dots”: Polkadot 2.0.
Polkadot 2.0 is a set of changes expressed in a concept that promotes a qualitative transformation of the blockchain.
According to Decrypt, Wood metaphorically described the transition to the new version of the network using the business of selling pancakes:
“Imagine a company that sells exclusively pancakes: it makes its own sugar, water, milk and eggs, but sells only pancakes. The pancakes are parachains, and the company itself is Polkadot 1.0.”
In Polkadot 2.0, the “pancake company” decides to sell pancake mix as well, and perhaps also the individual ingredients: sugar, water, and eggs. The listed ingredients are Coretime – units of computing power that can be rented on a portion-by-portion basis.
Customers will be able to use the resources not only for parachains, but also for other forms of applications and blockchains.
Previously, to launch a project, a team needed to win an auction and gain the support of the community, which holds in staking tokens in favor of the startup. With the introduction of Polkadot 2.0, developers don’t need to engage in the complicated, time-consuming process of auctioning a parachain slot. Doing away with this model will make the ecosystem more flexible and make it easier for new organizations to enter.
In a realized focus on dapps, users will be able to experiment with the network, accessing the computing power of a “global supercomputer” without investing in infrastructure as before.
The JAM technical upgrade, announced in April 2024, will fulfill many of the promises of Polkadot 2.0. The upgrade will completely replace the core chain – Relay Chain with a focus on implementing Agile Coretime.
The Web3 Foundation is actively incentivizing developers of the JAM protocol. The total prize pool for work in the new technology stack is 10,000,000 DOT and 100,000 KSM. The promotional tour with Gavin Wood – JAM Tour, focusing first on Asia, began on February 17 in Hong Kong.
Polkadot 2.0 is being rolled out in phases with key innovations:
- Asynchronous Backing. Launched in May 2024, the update improved the efficiency of block processing. Creation time was reduced from 12 seconds to six seconds, enabling parallel validation of transactions and block production. The technology provided a nearly 10-fold increase in throughput while quadrupling the amount of data storage per block, opening up the possibility of increasing the limit of parachains from 100 to 1,000;
- Agile Coretime. Implemented September 2024. Opened up new opportunities for developers: lowered barriers to entry and allowed them to buy block space “on demand”, which is especially beneficial for projects with variable load;
- Elastic Scaling. Designed to expand network capacity. It allows you to serve more blockchains and increase the volume of transactions. The technology helps to handle increased load more efficiently through parallel processing.
A Coretime unit can be used to balance the resources expended. Web3-game teams can buy additional computational power during periods of high demand, avoiding unnecessary expenditures during normal times. NFT projects, on the other hand, are able to attract capacity during startup, when activity increases dramatically.
Users can resell Coretime in bulk on secondary markets. This scheme is likely to increase the efficiency of computing power trading. All transactions are carried out using DOT, which in the long run can affect the growth of its value.
The first first sale took place on October 6, 2024, less than a month after the mechanism was launched. One of the five available Core’s was purchased for 69 DOT.
Much publicity, like criticism, does not happen
In July 2024, following the team’s report on the state of Polkadot’s coffers, criticism of the management team rang out in the community.
“Polkadot’s coffers are becoming increasingly complex and difficult to understand,” wrote the project’s chief ambassador Tommy Enenkel in a report for the first half of 2024.
“At current spending levels, the treasury has roughly two years of reserves, although due to the volatility of cryptocurrency-denominated assets, it is difficult to make accurate predictions,” Influencer noted.
He also added that efficient use of the treasury’s capital will likely involve the creation of separate units, in the form of bounty programs and collectives.
Enenkel also called for lower DOT inflation to reduce sales pressure. According to Polkadot’s annual report, that measure has materialized. In 2024, the community voted on mechanics that could bring inflation down to 8%.
For its part, DeFi-researcher under the nickname Ignas noted that Polkadot is still “invisible” on X and other platforms despite the large expenditure.
Polkadot’s treasury spent $37 million to promote the project in the first half of 2024. The expenses included advertising integrations, partnerships, shilling from opinion leaders and other marketing campaigns.
Polkadot-activist Giotto di Filippi parried in a Cointelegraph comment, recalling that roughly 7% of total token inflation in the form of rewards for staking goes back to the Treasury:
“Inflation at Polkadot is shared between the stakers and the treasury to ensure that the treasury will always have funds… So to say that ‘the money will run out’ is just nonsensical.”
Adding fuel to the fire was the founder of L2-protocol Mantra Network under the nickname viktorji.eth. He stated that Polkadot has no real value in Web3, and as a project is “toxic” in nature.
According to the developer, the ecosystem discriminates in favor of teams from Europe and the US, to the detriment of colleagues from Asia. He also hinted at the centralized nature of the network.
Viktorji.eth recalled a meeting with Gavin Wood, who allegedly had no idea that Manta Network was one of the biggest projects in the ecosystem he founded.
According to the Polkadot report, the number of network validators in October 2024 is close to 500, up significantly from 297 in August. The Nakamoto Ratio, which reflects the level of decentralization, was 132 at the end of 2024, one of the best among blockchains. By March 21, 2025, it surpassed 165.
On December 4, the Kusama network set a record for transaction execution speed: in Spammening’s synthetic stress test, the figure reached 143,000 TPS.
Sentiment in the ecosystem
The ecosystem showed a 150% increase in unique accounts, from 5.2 million in January 2024 to 13.2 million by November. Nearly 6 million of the new addresses belong to the Mythos network, which has significantly strengthened the Polkadot ecosystem since last year.
The company behind Parachain, Mythical Games, develops Web3 games. Their new app FIFA Rivals will be a continuation of an idea from a previous Mythical Games project called NFL Rivals, a popular mobile arcade game about American soccer. The project involves marketplaces for trading NFT cards of athletes.
The team left Ethereum as part of their expansion strategy, choosing Polkadot due to its high throughput, low fees, and excellent interoperability, which fits their goals perfectly.
The total number of transactions in the ecosystem increased by more than 200%, from 13.1 million in January 2024 to 39.6 million in November. The growth is partly due to the activity of Mythos and DeSoc project – Frequency. They are followed by Neuroweb, Phala, Moonbeam, and Litentry.
At the time of writing, there are 216 projects operating in the ecosystem, according to Parachain Observer.
As of April 2025, Polkadot ranks fourth among L1 networks in terms of key developers with 95 specialists.
Given the current market volatility, many blockchains, including Polkadot, are showing declines compared to early January 2025. The previously reported data is no longer relevant, and April continued the downward trend in a number of key metrics: number of active addresses, new users and unique accounts.
Against the backdrop of bearish sentiment, developer activity and the transition of projects to Polkadot can be considered positive signals. In addition, the upcoming major upgrades, which can fundamentally change the economics of the network, give hope to DOT and KSM holders;
On the institutional side, an important move is also being prepared – the launch of spot ETF on Polkadot. Crypto funds Grayscale Investment and 21Shares have already filed corresponding applications. Although some members of the community are skeptical of this event, it could act as a catalyst for other positive factors.
Some analysts expect to see Polkadot in 2025 as part of the team of the first projects to make a comeback after the success of 2020-2021.
The bottom line
With Polkadot 2.0 implementation, network resources have been utilized more efficiently. The time to create a block has been reduced to six seconds, and it is now possible to select a resource for a specific task instead of buying unnecessary capacity;
Management found a solution to previous problems related to high barriers to entry for smaller projects due to the slot auction format and the need to block a significant number of DOTs. Previously, large projects were often prioritized for connectivity, crowding out small startups.
Technological improvements and updated tokenomics aimed at reducing inflation are designed to increase scalability, reduce costs, increase network speed and drive the growth of dapps in the Polkadot ecosystem.
Source: https://coinpaper.com/8593/polkadot-2-0-major-upgrades-ecosystem-growth-and-the-future-of-web3-in-2025