Polkadot, a decentralized autonomous organization, has decided to impose a hard limit on the issuance of its DOT token, marking significant changes in its economic model.
Change in Tokenomics Model
The new decision sets a maximum supply of 2.1 billion DOT tokens. This is a significant pivot from the previous model, where tokens were issued without limit. Previously, Polkadot minted about 120 million tokens annually, which could have led to a total supply exceeding 3.4 billion tokens by 2040. Under the new framework, issuance will decrease every two years, with the current total supply around 1.5 billion tokens.
Expansion into Capital Markets
Polkadot also announced the launch of a new division called Polkadot Capital Group, aimed at engaging with institutional investors. The division is designed to help traditional financial institutions explore opportunities in crypto, including asset management and OTC trading.
Response to Changes and Consequences
However, following the announcement of the cap, the price of the DOT token dropped by 5%, falling from $4.35 to $4.15. Despite this, the fixed limit on the token supply is expected to help reduce inflationary pressure and increase the predictability of the token's value for investors.
Therefore, the implementation of a hard cap on DOT token issuance signifies an important step in the evolution of Polkadot and may significantly impact the cryptocurrency market.
