Using the blessing from Dr. Gavin, the founder of Polkadot, in his year-end summary, “May there be more freedom, peace, and happiness in the world!” This article is sourced from Polkadot’s article “2023 Annual Report on Polkadot’s Ecological Development: Refreshing!” and is compiled, translated, and written by Foresight News.
Background:
Conversation with Manta Network Founder: Why did we leave Polkadot and OP Stack?
Background Supplement:
Spending like a bull market, zero progress in business, Polkadot initiates the largest layoff in history.
Table of Contents:
Background
2023 Important Events Review
Ethereum Layer2 Upgrade Heating Up
Polkadot 1.0 Officially Delivered, Polkadot 2.0 Proposed
The Rise of 3 Chain Development Tools, Multi-Chain Ecology Becomes Mainstream
Introduction of Modular New Concept
Writing and Fairlaunch Spark a New Wave
BTC Ecosystem Awakens
DePIN Concept Heats Up
Polkadot Ecological Projects Explore Multi-Chain Development
Regulation Continues to Strengthen
Further Decentralization of Polkadot
Increased Influence of Polkadot in Traditional Fields
10 Predictions & Outlook for 2024
Polkadot’s Four Key Technologies to be Launched
Follow-up Developments of Polkadot 2.0
ETF Approval May Revitalize the Industry
BTC Ecosystem May Experience an Explosive Outburst
Writing Derives New Gameplay
RWA May Become a Popular Track in 2024
DePIN May Experience a Wave of Application Landing
Chains and Applications Further Explode
More “Web2.5” Cases
GameFi is Worth Looking Forward To
Afterword
Web3 is the current Internet’s evolution, bringing about many changes and impacts. As an important player in Web3, Polkadot’s technological updates and important programs are closely related to the development of the Web3 industry. Therefore, we are launching this issue of the “Polkadot Major Events” column to provide interpretations of the latest trends and developments in Polkadot, helping everyone grasp the development trends of Polkadot.
October 2023 will undoubtedly be an important time node in the next one or two years. The Federal Reserve of the United States has shifted from hawkish to dovish and indicated a pause in interest rate hikes, which has triggered a “dry onion in a drought” market for BTC and laid the groundwork for the ongoing small bull market.
According to Coingecko, the global market value of Crypto has increased by over 100%, from over 830 billion USD at the beginning of 2023 to 1.7 trillion USD now. It is highly likely that the market will take another step forward with the approval of physical BTC ETF, which will be an important event at the beginning of 2024.
Compared to the ups and downs of the Crypto market in 2022, the whole of 2023 was relatively mild. However, many noteworthy events still occurred in the past year, from the bankruptcy of Silicon Valley Bank to the conviction of SBF, and from CZ’s temporary departure from Binance to various regulatory issues throughout the year. The market seems to be bidding farewell with a different voice, but the future is still flourishing.
Polkadot also returned to the public’s attention a little over half a month ago due to a good round of price increases. However, this is only a market reaction. In fact, the Polkadot ecosystem has many commendable aspects in the past year, but the uneventful market has not brought it much attention until recently when it has improved.
As a research institution that has been focusing on Polkadot and its ecosystem for several years, we (Polkadot Ecological Research Institute) have released the Polkadot Annual Development Report for three consecutive years. Although the just-concluded 2023 cannot be described as eventful, new concepts are still emerging, and new stories are still unfolding. Therefore, it is interesting and hopeful to observe the development of the Polkadot ecosystem through these narratives and share trends. Since the Parity data team has already released detailed reports on various events, we will share the highlights of Polkadot in 2023 and the already started 2024 with you through the “Review” and “Outlook” sections. Enjoy the following.
The past year can be described as a year of reflection, turning point, and innovation. As observers of the Polkadot ecosystem, we not only need to focus on the development of Polkadot itself but also observe the development of the entire Crypto industry, as well as macro policies that affect the Crypto industry. In this regard, we will summarize the major events in the Polkadot ecosystem, the events that have influenced the entire industry, and the events related to chains in the past year into several trends, in order to summarize 2023.
As a giant in the blockchain industry, Ethereum plays an undeniable role.
In the past year, Ethereum Layer2 upgrades have become the market focus. The Arbitrum project successfully launched the native governance token ARB in March and held the largest airdrop in history. In addition to competing with another major Ethereum Layer2, Optimism, Arbitrum has attracted a lot of attention through strict airdrop rules and anti-whale strategies.
At the same time, on April 12th, Ethereum officially completed the Shanghai upgrade, causing a sensation in the market. In the previous consensus mechanism upgrade, Ethereum transitioned from Proof of Work (PoW) to Proof of Stake (PoS), and validators need to stake 32 ETH to participate in block validation. This also means that staked ETH and rewards will be locked for two years until the implementation of the Shanghai upgrade.
The Shanghai upgrade allows users to withdraw staked ETH, unlocking over 16 million ETH. Contrary to expectations, the market did not see a sell-off but instead experienced a price increase, and market attention soared. The significance of the Shanghai upgrade lies not only in unlocking staked ETH but also in promoting the decentralization of the Ethereum network, heralding the opening of the DeFi 2.0 era and marking a new milestone for “finance as a service.”
With the progress of the Cancun upgrade plan, which is expected to be implemented between March and April 2024, Ethereum will further improve transaction responsiveness and reduce transaction fees, creating favorable conditions for the development of new-stage data storage and retrieval capabilities. This series of upgrades undoubtedly brings good news to the Ethereum Layer2 network and may drive market innovation again.
Looking back at the Polkadot ecosystem, in July of last year, the official announcement of the delivery of Polkadot 1.0 version was made, achieving all the planned functions in the white paper since 2016. This version breaks the isolation between different blockchains by introducing innovative technologies such as parallel chains and relay chains, making Polkadot an open and interoperable platform.
Through cross-chain message passing, token staking, on-chain governance, non-forking upgrades, and other functions, Polkadot 1.0 provides a powerful infrastructure for the development of multi-chain ecology and the construction of Web3. To enhance Polkadot’s network governance and security sharing, dispute slashing and Polkadot OpenGov governance were also launched in the second half of the year as upgrades to Polkadot 1.0.
Of course, in the context of rapid industry development and change, Polkadot also realizes the need for more innovation and adaptability. Therefore, in the Polkadot Decoded 2023 event in June, Dr. Gavin proposed Polkadot 2.0, “Polkadot is a multi-core computer.”
This proposal marks Polkadot’s pursuit of higher performance and a more flexible ecosystem. Through the concept of core time, Polkadot 2.0 will bring a new resource allocation method, addressing some issues in the 1.0 version, such as the high threshold of slot auctions and the lack of consumption scenarios for DOT.
The block space of Polkadot, which is the block space of the relay chain, will become a valuable resource, and core time provides the possibility for its reasonable allocation. This flexibility provides more possibilities for the future ecosystem of Polkadot, allowing developers and users to freely utilize Polkadot’s cores.
With the continuous advancement of the underlying blockchain architecture, 2023 also witnessed the explosive rise of chain development tools.
As early as October 2022, Optimism introduced the concept of OP Stack, becoming the first Layer2 network to propose L2 Stacks products. In March of last year, Arbitrum launched Arbitrum Orbit, and in June, zkSync released ZK Stack for building ZK Rollup chains.
Subsequently, at the Paris EthCC conference in July, Starknet announced the release of Starknet Stack, a component tool for custom application chains (Appchains). Polygon also launched Polygon CDK in August, a development kit for developers to build zkEVM L2 networks. This series adopts standardized and modular technical architecture stacks, providing developers with faster capabilities to build blockchain networks.
Currently, mainstream L2 Stack solutions on the market mainly consist of Optimistic Rollup (OP Stack) and ZK Rollup (ZK Stack). OP Stack plans to build a superchain empire with a unified and standardized underlying infrastructure for shared security, while ZK Stack adopts zero-knowledge proof algorithms. The main difference between different Stack solutions lies in their openness and extension package strategies.
Unlike OP Stack’s focus on building a unified and standardized superchain, Polkadot’s multi-chain architecture introduces a more flexible concept. For example, each chain in the Polkadot ecosystem introduces new consensus algorithms and can have its own set of validators. Cross-chain information is transmitted through relay chains or the IBC protocol. Although this approach adds some complexity, it also makes the entire Polkadot ecosystem more diverse.
The explosive rise of chain development tools means that Layer2 networks are no longer limited to the development of a single chain. The market is also shifting from competition in the number, types, and prosperity of applications on the chain to a more open multi-chain platform.
Modular blockchain concepts gained widespread attention in 2023, especially after Celestia released a large-scale Genesis airdrop at the end of September. Celestia is the first public chain to emphasize the concept of modular blockchain, and its airdrop covered 7,579 developers and over 570,000 on-chain addresses, once again sparking market interest in modular blockchain.
Previously, Celestia had completed a $55 million financing with a valuation of $1 billion in October 2022. Through measures such as establishing the Celestia Modular Fellows program, it motivated innovation and development in various projects in this field. In addition, according to the latest data from the cryptocurrency data platform RootData, there are currently more than 30 modular blockchain concept projects, including EigenLayer, Saga, Fuel, etc., and nearly 10 projects have received investment from well-known institutions.
The concept of modular blockchain originated from thinking about traditional monolithic blockchain architectures, especially addressing the “impossible triangle” of blockchains. This concept was first mentioned in a white paper co-authored by Mustafa Albasan and Vitalik in 2018, aiming to solve problems related to scalability, flexibility, maintenance, and updates.
From the perspective of underlying applications, modular blockchains improve system scalability, maintenance, and financial efficiency, better adapting to changing market demands.
Secondly, Polkadot, as a multi-chain ecosystem, is particularly important for the adoption and development of modular concepts. The design philosophy of Polkadot itself includes modular features, with different parallel chains realizing multi-chain collaboration. In this context, the rise of modular blockchains will complement the development of the Polkadot ecosystem.
In 2023, a highly anticipated emerging concept emerged in the digital asset field – writing, becoming the industry focus, and also sparking intense discussions about whether it is technological speculation or valuable innovation. The rise of writing is mainly due to the protocols in the BTC ecosystem, with the Ordinal protocol as a representative.
(End of translation)Once the leader in the field of inscriptions, 
the concept of inscriptions can be traced back to early 2023. ORDI completed its mint on March 9th, although it did not initially attract much market attention, with the rise of the BRC20 ecosystem, ORDI’s performance gradually caught the market’s attention.
It wasn’t until November 7th, 2023, when Binance announced the listing of ORDI trading pairs, that the counterattack of BTC inscriptions truly began. ORDI skyrocketed to over $90, achieving a thousandfold increase from its initial mint cost of less than 1 cent in less than 300 days. At the same time, SATS, as the second leader of the BTC inscription protocol, was listed on Binance on December 12th, with a market value of up to $1.137 billion, even surpassing ORDI’s market value at one point.
The performance of ORDI and SATS ignited the concept of inscriptions, and other chains followed suit and launched their own inscription protocols, such as eths for Ethereum, sols for Solana, and AVAV for Avalanche. The Polkadot community also launched the inscription DOTA for Polkadot.
The success of inscriptions is not just a new form of assets, after all, smart contract chains themselves have the ability to issue assets. The rise of inscriptions is more importantly driven by the concept of fair launch. Taking ORDI as an example, its issuance model avoids pre-mining and private placement, distributing tokens equally to community members, which has attracted widespread community participation. This fair launch model has also promoted the popularity of the concept of inscriptions to a certain extent.
Although there is still controversy over the value of inscriptions, innovators will only move forward, and inscriptions will bring more possibilities.
At the end of 2023, the BTC ecosystem once again sparked a nearly two-month frenzy, and this frenzy also pushed some ecosystem projects built around BTC onto the stage, rising with the tide.
This starts with the Bounce platform. Bounce is a decentralized DeFi auction protocol that was launched on Binance even before the rise of the Ordinals ecosystem. With its team background and industry resources, Bounce has successfully launched several projects that have attracted market attention.
When the concept of inscriptions represented by BRC20 became popular, Bounce quickly adjusted its strategy and actively embraced the BTC ecosystem. One of the projects it launched was BitStable, a decentralized asset protocol on the BTC network that adopts a mechanism similar to MakerDAO, allowing anyone to build stablecoins with BTC-related assets. At the same time, MultiBit, a cross-chain bridge based on BTC and Ethereum, was also launched on Bounce. With the popularity of inscriptions, these BTC ecosystem applications also soared in popularity, establishing the reputation of Bounce.
It is worth noting that MultiBit was actually launched on the TurtSat platform. TurtSat is a community-driven open platform for the Ordinals ecosystem, supporting anyone to build and donate to the Ordinals ecosystem protocols, participate in the construction of the Ordinals ecosystem, and benefit from it.
Since its launch, the TurtSat platform has successfully launched multiple projects, including the BRC20 asset protocol CHAX, the Ordinals aggregation platform NHUB, the Ordinals lending platform DOVA, and the BTC ecosystem gaming platform RAIT. These projects are early BRC20 infrastructure construction platforms and have performed well after launch.
The innovation of inscriptions has attracted a large amount of funds and users to BTC, stimulating the rapid development of BTC ecosystem applications and filling the ecological gap of BTC. The BTC ecosystem is like a newly awakened lion, gradually embarking on its path to dominance.
Another hot crypto narrative in 2023 is DePIN, the decentralized physical infrastructure network.
The term DePIN was first proposed by Messari at the beginning of the year and officially defined through the research report “The DePIN Sector Map,” outlining its basic landscape. The core goal of DePIN is to deploy physical infrastructure and hardware networks in the real world through cryptographic economic protocols, and to promote the joint construction of this network by participants through blockchain incentive mechanisms.
In 2023, with the development of AI technology, the concept of DePIN was further promoted, covering several major categories including computational markets, wireless WiFi, wholesale data, service markets, vertical advertising, and energy.
The heat of DePIN intensified around October last year, with the concept tokens of decentralized hotspots such as Helium Mobile and automotive data network DIMO skyrocketing, becoming popular in the industry. At the same time, infrastructure solutions with GPU computing power, such as Render, also began to emerge.
The popularity of the DePIN concept not only attracted widespread attention in the industry, but we also saw many active DePIN projects being built in the Polkadot ecosystem. For example, with the AI boom in 2023, decentralized AI gradually entered people’s field of vision, and the Bittensor project in the Polkadot ecosystem is dedicated to building a decentralized machine learning network, which has performed remarkably well in 2023.
Peaq network, on the other hand, focuses on decentralized energy supply chains. Although the energy supply chain is considered a challenging aspect of DePIN, peaq seeks to solve the regulatory costs of the energy industry and promote the development of decentralized energy through blockchain technology and token incentive models.
According to Messari’s predictions in the 2023 DePIN market report, the DePIN market is expected to reach a scale of $3.5 trillion by 2028. At the same time, in 2024, we will witness the integration of DePIN with other crypto tracks, including deep experiments with AI, Memecoin, zero-knowledge proof (ZK) technology, and on-chain games. This further highlights the prospects of DePIN as an innovative direction covering multiple fields.
In 2023, Polkadot ecosystem projects are also actively exploring multi-chain development.
Phala Network brings off-chain computing to the Polygon ecosystem with its Lens Protocol, providing next-generation computing services for Web3 social builders. The Lens Protocol, by leveraging Phala Network’s efficient computing and cross-chain capabilities, enhances the speed of social data processing, expands the range of data sources, and creates faster and more diverse social experiences for users.
Astar also announced a partnership with Polygon to launch Astar zkEVM, an Ethereum Layer2 network, aiming to become a gateway connecting Ethereum and the Polkadot ecosystem.
Manta Network, a ZK privacy parachain based on Substrate, has launched the first EVM-compatible ZK application platform, Manta Pacific, by adopting the Polygon CDK. This platform enables efficient, secure, and scalable deployment and execution of ZK applications through Celestia’s data availability and Polygon’s zkEVM technology.
Parallel Finance, on the other hand, has partnered with Ethereum Layer2 solution Arbitrum to execute Parallel’s lending services on Ethereum Layer2 through Arbitrum Rollup and Parallel’s asset bridge, allowing assets on Ethereum Layer2 to enjoy the efficiency and low cost of Parallel.
These collaborations are a practice of cross-chain communication and interoperability, improving the compatibility and openness of the Polkadot ecosystem, and winning more partners and users for Polkadot. At the same time, the value and innovation in these collaborations can increase the returns of the Polkadot ecosystem and incentivize more investors and developers to support the Polkadot ecosystem.
With the continuous development and innovation of the crypto industry, regulatory authorities in various countries and regions have strengthened their regulation of the industry over the past year to prevent potential risks and adverse effects. Some centralized exchanges (CEX) have faced stricter regulatory requirements, such as the U.S. Securities and Exchange Commission (SEC) charging the second-largest U.S. crypto exchange, Kraken, with offering unregistered securities.
Regulatory agencies have also taken other actions, such as requiring the submission of user identity information, compliance with anti-money laundering rules, and payment of taxes. These regulatory measures have posed a certain threat to the circulation of some crypto assets, leading to a sharp decline in their prices and market value.
However, not all crypto assets have been affected in the same way, and Polkadot’s native token DOT has shown strong resilience in the midst of the regulatory storm.
The organization behind Polkadot, the Web3 Foundation, has publicly stated that through their communication and cooperation with the SEC over the past three years, DOT has ultimately been recognized as software rather than a security or currency. This means that DOT is not subject to the regulatory restrictions of CEXs and does not need to pay additional taxes, thus maintaining its liquidity and value.
From the very beginning, Polkadot has actively taken measures to make the network more decentralized and resilient. And the fact has proven that Polkadot can adapt to different regulatory environments, providing strong support for the development of the crypto industry.
Polkadot’s original vision is to realize Web3, which requires Polkadot to be a resilient project, and the key to this lies in whether Polkadot is decentralized enough. To achieve this vision, Polkadot continues to promote the decentralization of its governance and market operations to ensure the security, stability, and innovation of the network. OpenGov and Decentralized Future Plan are two important initiatives representing the decentralization ideas and practices of Polkadot in governance and market operations.
OpenGov is an open decentralized governance platform launched by Polkadot, aiming to simplify and optimize its governance model. It eliminates centralized governance institutions such as the council and technical committee and decentralizes all decision-making power to token holders, enabling governance decisions to be made through public voting.
The Decentralized Future Plan, on the other hand, is a funding program launched by the Web3 Foundation to support and develop innovative projects in the Polkadot ecosystem. The program provides $20 million and 5 million DOT in funding, covering nine key areas in three major categories: technology, ecosystem development, and community. The goal of the program is to cultivate a prosperous and self-sustaining Polkadot network, where both for-profit enterprises and non-profit organizations can receive funding support to realize their ideas and contribute to the decentralized future.
Polkadot is leading the development direction of cross-chain platforms with its open, inclusive, and innovative attitude, making contributions to the construction of a more free, fair, and sustainable decentralized future. Our report released in October, “Ten Thousand Word Strategic Report: How can Polkadot overcome its growth challenges and find a way forward?” provides many suggestions for Polkadot’s governance. Interested friends are welcome to explore it.
In the past year, Polkadot’s influence in traditional enterprises has also been further enhanced. Here are some news mentioned in Polkadot’s official annual report about enterprises adopting Polkadot technology:
Zodia Custody announced the provision of institutional custody and staking services on Polkadot.
Import/export provider Banxa is helping users access the Astar parallel chain through various payment methods and is committed to comprehensive integration with Polkadot.
Energy Web disclosed its plan to join Polkadot to help major companies such as Shell, Vodafone, and Volkswagen embark on the path to decarbonization.
The Polkadot parallel chain Frequency has brought autonomous blockchain-based identity verification to its social media platform MeWe with 20 million users.
KILT is collaborating with accounting giant Deloitte to issue reusable digital certificates for its KYC identity verification.
KILT and Deloitte are also working with the new ecosystem team Polimec to issue reusable KYC certificates, making global integration of digital assets possible.
These collaborations are examples of cross-chain communication and interoperability, improving the compatibility and openness of the Polkadot ecosystem, and winning more partners and users for Polkadot. At the same time, the value and innovation in these collaborations can increase the returns of the Polkadot ecosystem and incentivize more investors and developers to support the Polkadot ecosystem.
With the continuous development and innovation of the crypto industry, regulatory authorities in various countries and regions have strengthened their regulation of the industry over the past year to prevent potential risks and adverse effects. Some centralized exchanges (CEX) have faced stricter regulatory requirements, such as the U.S. Securities and Exchange Commission (SEC) charging the second-largest U.S. crypto exchange, Kraken, with offering unregistered securities.
Regulatory agencies have also taken other actions, such as requiring the submission of user identity information, compliance with anti-money laundering rules, and payment of taxes. These regulatory measures have posed a certain threat to the circulation of some crypto assets, leading to a sharp decline in their prices and market value.
However, not all crypto assets have been affected in the same way, and Polkadot’s native token DOT has shown strong resilience in the midst of the regulatory storm.
The organization behind Polkadot, the Web3 Foundation, has publicly stated that through their communication and cooperation with the SEC over the past three years, DOT has ultimately been recognized as software rather than a security or currency. This means that DOT is not subject to the regulatory restrictions of CEXs and does not need to pay additional taxes, thus maintaining its liquidity and value.
From the very beginning, Polkadot has actively taken measures to make the network more decentralized and resilient. And the fact has proven that Polkadot can adapt to different regulatory environments, providing strong support for the development of the crypto industry.
Polkadot’s original vision is to realize Web3, which requires Polkadot to be a resilient project, and the key to this lies in whether Polkadot is decentralized enough. To achieve this vision, Polkadot continues to promote the decentralization of its governance and market operations to ensure the security, stability, and innovation of the network. OpenGov and Decentralized Future Plan are two important initiatives representing the decentralization ideas and practices of Polkadot in governance and market operations.
OpenGov is an open decentralized governance platform launched by Polkadot, aiming to simplify and optimize its governance model. It eliminates centralized governance institutions such as the council and technical committee and decentralizes all decision-making power to token holders, enabling governance decisions to be made through public voting.
The Decentralized Future Plan, on the other hand, is a funding program launched by the Web3 Foundation to support and develop innovative projects in the Polkadot ecosystem. The program provides $20 million and 5 million DOT in funding, covering nine key areas in three major categories: technology, ecosystem development, and community. The goal of the program is to cultivate a prosperous and self-sustaining Polkadot network, where both for-profit enterprises and non-profit organizations can receive funding support to realize their ideas and contribute to the decentralized future.
Polkadot is leading the development direction of cross-chain platforms with its open, inclusive, and innovative attitude, making contributions to the construction of a more free, fair, and sustainable decentralized future. Our report released in October, “Ten Thousand Word Strategic Report: How can Polkadot overcome its growth challenges and find a way forward?” provides many suggestions for Polkadot’s governance. Interested friends are welcome to explore it.
In the past year, Polkadot’s influence in traditional enterprises has also been further enhanced. Here are some news mentioned in Polkadot’s official annual report about enterprises adopting Polkadot technology:
Zodia Custody announced the provision of institutional custody and staking services on Polkadot.
Import/export provider Banxa is helping users access the Astar parallel chain through various payment methods and is committed to comprehensive integration with Polkadot.
Energy Web disclosed its plan to join Polkadot to help major companies such as Shell, Vodafone, and Volkswagen embark on the path to decarbonization.
The Polkadot parallel chain Frequency has brought autonomous blockchain-based identity verification to its social media platform MeWe with 20 million users.
KILT is collaborating with accounting giant Deloitte to issue reusable digital certificates for its KYC identity verification.
KILT and Deloitte are also working with the new ecosystem team Polimec to issue reusable KYC certificates, making global integration of digital assets possible.
These collaborations are examples of cross-chain communication and interoperability, improving the compatibility and openness of the Polkadot ecosystem, and winning more partners and users for Polkadot. At the same time, the value and innovation in these collaborations can increase the returns of the Polkadot ecosystem and incentivize more investors and developers to support the Polkadot ecosystem.