Polkadot (DOT) and Kusama (KSM) gathered side by side on June 3 as traders considered VC’s largest investment in their blockchain systems.
Asian blockchain incubator and venture capitalist Master Ventures have announced that they have launched a $ 30 million venture capital fund called Master Ventures Polkadot VC Fund. In a press release released on Wednesday, the company said the foundation will “support and fund Parachain bids” for tier 1 blockchain projects seeking to win a Parachain track on the Polkadot relay chain.
Master Ventures also noted that the proceeds will also help early-stage projects across Polkadot and Kusama ecosystems.
Traders took this announcement as a signal to increase rates for DOT and KSM pairs. Their unexpected interest pushed the DOT / USD price up 27.91% to $ 29.21 from Wednesday’s opening price. Meanwhile, the KSM / USD exchange rate for the same period rose 39.35% to $ 511.91.
Double draw at Polkadot and Kusama markets. Source: TradingView
The strong rally was accompanied by bullish expectations on social media, and many analysts expected that the bullish trend would continue in the spot markets Polkadot and Kusama.
At the heart of the bullish comparisons was the promise that Master Ventures’ $ 30 million investment in the Polkadot ecosystem would lead to a faster “Parachain Slots” auction. Previously, Parachain was equivalent to a blockchain (tier 1) associated with a particular functionality, with its specialized features and management structure.
For example, you can invest in the purchase of the Polkadot Parachain track, for example to build a decentralized network of oracles on it. The result will be a unique application, user and liquidity blockchain that can request data from other parachains, with Polkadot as a level 0 solution – a node that provides communication between the implementation and the blockchain.
Meanwhile, Kusama is a beta version of Polkadot, but exists as an independent blockchain network. It acts as a sandbox for developers who want to test preliminary versions of their projects before they are published on the Polkadot network.
Potential demand for DOT and KSM
Developers offering Parachain slot machines at Polkadot and Kusama must use the project’s original assets, DOT and KSM respectively.
The $ 30 million Master Ventures Foundation aims to support and fund these developers and their top-tier projects. This means that VC must purchase DOT and KSM tokens to support bids at the Parachain auction. In turn, Polkadot and Kusama will block tokens as long as the developers want their project to work on the parachute – from six months to two years.
If the Polkadot ecosystem is successful, it means that the number of DOT and KSM tokens locked throughout the life of a parachain slot is constantly growing. As a result, the total workload will be emptied. This may to some extent explain why traders suddenly became optimistic about DOT and KSM.
Mira Cristanto, a researcher at cryptodata analysis firm Mesari, wrote in a post in May that 65% of DOT shipments were frozen. In the meantime, 30% of DOT is still in circulation. Thus, the upcoming Parachain auction will draw more Polkadot tokens from circulation. Christanto added:
“When the parachute is released, 40% of the DOT can be bound in the parachute, thus reducing the effective circulation delivery to only 15%.”
Conversely, lower turnout at Polkadot and Kusama’s Parachain auctions may give DOT and KSM lower-than-expected demand, which may lead to an adjustment in spot prices.