Polkadot (DOT) has made a significant decision that could impact DOT’s price and trigger the ecosystem’s growth. The decentralized blockchain protocol resolved a governance call from members of its community.
Community Vote Lower Inflation to Support Supply Control
Notably, Polkadot has announced a decrease in the inflation rate of DOT, the native currency of the ecosystem.
Through OpenGov, the platform’s decentralized governance system, Polkadot users agreed to lower the inflation rate.
Before the decision, the old inflation rate stood at 10% per annum. This means that the supply of DOT increased at a constant rate each year.
However, after the referendum, the community voted to reduce inflation and set the new inflation rate at 7.78%.
This new rate implies a new structure that allows it to decrease over time has been established. This complements the community’s new positioning. Hence, lower inflation means reducing the number of DOT tokens created daily.
Overall, this could serve as a way to control DOT supply and reduce selling pressure in the ecosystem. This development might positively affect the long-term value of DOT.
Will Polkadot’s Lowered Inflation Support Growth?
Analysts argue that this decision might support Polkadot’s comprehensive growth.
Lowering inflation will significantly reduce the total DOT tokens in circulation. With this, Polkadot will be scarce, especially if the current demand persists or increases.
Based on the laws of demand and supply, the scarcity of the coins can likely drive up the price since supply is lower than demand.
Additionally, the protocol can better manage and sustain the staking reward system by adjusting the inflation rate.
Notably, with lower inflation, staking rewards might not overtake the inflation of DOT. This will make it more attractive to long-term holders to stake rather than sell.
Another notable impact of the lower inflation is that it could attract investors looking for stable assets. DOT could become appealing to investors if they can predict its supply and value over time.
Experts predict that the reduction in inflation could lead to better network usage, increased adoption, and more staking. DOT’s price could significantly appreciate and register a boost if this happens.
Combined with the anticipated Polkadot 2.0 scheduled for launch in the first quarter of 2025, the price action might soar.
Price Movement and Market Sentiment
As of this writing, DOT price has climbed by 2.44% to $4.89. DOT has experienced intense volatility in the past seven days, fluctuating between $4.40 and $4.90.
The asset has failed to gather enough boost to break past the $5 level.
Despite this volatility, investors have remained optimistic about DOT. In the last 24 hours, trading volume has surged by 42.58% to $245.41 million as interest soared.
Market watchers suggest that the announcement of a lowered inflation rate could trigger more DOT accumulation in the short term.
Proponents of this thesis insist that if market participants sustain the current momentum, the price of DOT could hit new levels.
As reported by The Coin Republic, Polkadot emerged as one of the top performers for 2024, and its achievements positioned it for a bull run.
Its monthly transaction volume increased from 20 million to 60 million, signaling growth. This has led to some forecasts of a likely leap in DOT’s price to as high as $10.
The post Polkadot (DOT) To Lower Inflation Rate To 7.78%, Here’s Impact on Price appeared first on The Coin Republic.
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