Polkadot (DOT-USD) is making headlines this week as it looks to solve a prominent issue in the crypto industry. Bridges — platforms through which users can move assets from one network to another — are a convenient but dangerous product. Now, though, the Polkadot network is taking on the downfalls of blockchain bridging with its new network upgrade. Still, it seems the DOT crypto simply can’t escape losses today, even with that catalyst.
The Polkadot network already has a lot of eyes on it. A frontrunner of the Web 3.0 movement, Polkadot aims to decentralize the web by creating its own ecosystem of independent applications, each outfitted with its own chain. Since launching in 2020, the network has enjoyed a great deal of interest from developers looking to secure their own chains. This had lead to its auctions enjoying high bids; the 16 projects on the network have collectively raised nearly $2 billion in DOT for their leases.
This network is not stopping at creating its own project ecosystem, either. Rather, DOT has its sights set on creating a safer and more efficient way for multiple different blockchain ecosystems to connect and exchange data.
Currently, most chain-to-chain data movement is conducted with bridges — protocols that allow users to move assets across networks. But these bridges are all too commonly targeted in hacks. For example, the over $600 million Ronin Network (RON-USD) hack was made possible through a bridge exploit. In the last year or so, hacks on bridges have become so common that more than $1 billion in crypto has been stolen.
Polkadot Is Saving Users From Bridge Hacks, But DOT Crypto Prices Don’t Reflect the Good News
Polkadot is looking to save its users from the pratfalls of bridges. Specifically, it’s implementing its own cross-chain communication system to cut bridges out of the equation for Polkadot-based blockchains. That news brought in a price surge today, although it seems that DOT has since cooled off.
Cross-Consensus Messaging (XCM) is Polkadot’s solution to the bridge dilemma. Using XCM, Polkadot’s multiple parachains can directly communicate with each other. This allows chains to facilitate their own chain-to-chain transactions of assets. The model is similar to that of other blockchain ecosystems like Cosmos (ATOM-USD), which uses a protocol called Inter-Blockchain Communication (IBC).
With Polkadot’s XCM announcement earlier this week, one might expect a big price boost for the DOT crypto. That doesn’t seem to be the case. While the announcement did precede a 12% upswing, the coin has already erased these gains and is trading down by 4%. Of course, this isn’t completely unforeseen; technical analysts had pegged DOT for losses following the news. Currently trading at $14.48, expectations show the crypto falling to $11 before it reconsolidates.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
