A proposal to redenominate Polkadot’s DOT tokens has been shelved for the time being by the Web3 Foundation, a Switzerland-based non-profit entity that supports the growth and development of technologies and applications in the fields of decentralized web software protocols.
Polkadot is a sharded protocol that aims to allow separate blockchain networks to operate together in a seamless manner. The protocol’s developers want independent distributed ledger technology (DLT) networks to achieve “true interoperability” with each other, in order to enable cross-blockchain transfers of assets (among other use cases).
If the proposal to redenominate DOT tokens had been passed, then it would have increased their total supply by as much 100x.
The decision to set the proposal aside, for now, was made on May 15, 2020, after a referendum that took place on Kusama, an older iteration of the Polkadot network that now acts as a “governance” platform.
While the referendum vote passed, the Foundation says it will not be implementing the proposal for now.
Web3 Foundation’s blog noted:
“Informally, had the referendum recorded very little dissent, it is likely that Web3 Foundation, in its central role over the initial network launch, would have stood behind the redenomination proposal. However, given the non-negligible amount of opposition, including from some within the ranks of Web3 Foundation and Parity, the Foundation decided that we cannot, in good faith, sponsor redenomination at present.”
The proposal, which was submitted by the Foundation, suggests changing the denomination of Polkadot’s native platform tokens (DOTs). At present, each DOT is worth a trillion Plancks, which are the smallest unit of account in the Polkadot ecosystem.
A redenomination will effectively reduce this figure by 100x to 10 billion Plancks. If this proposal is implemented, then each token holder’s DOTs will increase by 100x, so that their share of the network stays constant.
Over 13% of the Kusama stakeholders reportedly took part in the latest poll, which notably made it the most widely voted-on referendum ever (on the platform).
The proposal also led to many discussions between members of the Polkadot community, as people were concerned that redenomination would create problems, because it would require making updates to many related documents and infrastructure would also need an upgrade.
A change in the DOT token supply could potentially harm certain retail investors who may have acquired DOT futures contracts as part of their trading strategy. Exchanges might not be willing to provide 100x the target DOTs at the time when the contracts expire.
The Foundation confirmed that it would host a final vote on the Polkadot network regarding whether to move forward with the redenomination.
The Web3 Foundation stated:
“From here, we see only two options: do nothing and allow the current denomination to stand, or conduct a final, binding vote on the Polkadot network itself. As proponents of self-determination and on-chain governance, the latter is our favoured option.”