It’s not a secret that in China, Polkadot resembles a newer, better EOS, the public blockchain that swept the Chinese crypto ecosystem in 2018.
Both projects have inspiring foreign—in particular Caucasian leaders—who frequent China’s blockchain conferences and cocktail parties. (I don't want to sound racist but the fact that they are white plays a huge role. Some Chinese ponzi scams have actually hired white actors during their roadshows to fool retail buyers.)
EOS and Polkadot are backed by Chinese capitalists, who spread the Ethereum-killer narrative whenever they can on crypto Wechat. These capitalists, especially exchanges such as Binance, Huobi, and MXC, come with a war chest of funds to lure entrepreneurs to the Polkadot ecosystem. Both projects have attracted strong interest from Chinese retailers but somehow are far lesser-known abroad.
Despite the two projects’ perceived similarities, Polkadot has developed its own narrative and community. This week’s da bing examines the rise of Polkadot and how that reflects the state of crypto in China.
It takes more than a day to build Rome
Obviously, Polkadot, whose selling point as a blockchain of blockchains, is big everywhere right now, having recently flipped XRP to become the fourth-largest cryptocurrency by market cap.
No project can win China without spending time and money on blockchain conferences and roadshows. And Polkadot perfected that game. Not only is its founder, Gavin Wood, a semi-resident in the Shanghai area, but he has also established a community of vocal influencers, investors, developers, marketers, and speculators. They believe in Polkadot’s technological vision, its monetary vision, or both.
Perhaps more importantly, Polkadot has gotten many developers to abandon Ethereum, which Wood co-founded, and build on its blockchain instead. A report from Outlier Ventures shows that Polkadot saw a 44% increase in monthly active developers in the 12 months ended in May 2020, while Bitcoin and Ethereum saw mild decline.
Chinese developers are particularly active in the Polkadot community. Based on Web3’s recent announcement, among its 200 grant recipients, close to 20% of recipients come from China.
For example, Marvin Tong, founder, and CEO of Phala Network, a Substrate-based confidential smart contract blockchain, told me that in his original quest to bring privacy to the blockchain world, he examined EOS, Ethereum Layer2, Cosmos, and Polkadot.
“We chose Polkadot instead because we believe that its technology is the most advanced, and I think we made the right decision. More importantly, Substrate is an important tool. It allows us to reduce repetitive blockchain development work,” Tong told me. (Substrate is a framework that allows devs to build blockchains.)
It’s too early to say whether Polkadot is more advanced than other blockchains. Data shows that at its peak, Polkadot processed 12,619 transactions in a day, which, compared to Ethereum’s average of 1.1 million per day, indicates that the technology race is not over yet. (Indeed, even in January 2017, when Ether’s price was roughly $10, the network still had an average of 50,000 transactions per day—more than four times higher than Polkadot’s best day thus far.)
But in China at least, there’s something else beyond technology that differentiates Polkadot. “The Web3 Foundation, Parity and Gavin are very powerful together,” Tong told me. “No other foundations can be as generous and strategic when selecting grant recipients. They are also very supportive in marketing our projects.”
This sentiment of being taken care of hits a home run.
After all, entrepreneurs require not only initial capital, but also attention and cultivation. Ethereum, and many other blockchains, have taken a neutral but distanced approach to the Chinese market, partly due to the language barrier, and partly due to a lack of understanding. Polkadot manages to penetrate the Chinese market like a well-oiled marketing machine; it also shows that it cares.
Cynics could argue that this “care” stems from a desire to shill its token. Perhaps. But given that the crypto world is built on “consensus,” anything that can get people to believe in one narrative is a win.
Missed DeFi, gotta catch the $DOT
Polkadot also fills a narrative vacancy. China was late to the DeFi yield farming festival last summer. The country only woke up in September, shocked by the unstoppable force of the degens’ 5-digit APY farming, wondering “what’s the next hot thing?”
Chinese retailers move into Polkadot satisfies their FOMO while providing some comfort.
First, it has a legit founder, who is portrayed as the real developer behind Ethereum. Wood’s narrative of Ethereum-as-a-toy versus Polkdadot-as-the-real-thing resonates with many in China. After all, who there would not choose a senior engineer who has decades of programming experience over a 26-year-old “kid?”
Second, Polkadot adopted an auction game that’s similar to EOS’s, in which both projects ask investors to stake tokens to gain influence. For EOS, users stake tokens to become a supernode; for Polkadot, users stake $DOT to win a parachain.
The Chinese crypto circle already went through a wild EOS supernode race in 2018, so running another one in 2021 sounds, well, just fine. The winning strategy of such a game is to collect enough capital so your node or parachain gets the final seat. How to collect capital? Good old marketing and community shilling. These are familiar tactics that Chinese capitalists can play with their eyes closed.
And lastly, DeFi happened. As Ethereum embarks on a journey to find its true product-market-fit, Polkadot benefits from this narrative win as well, because it can simply claim that DeFi works better in its ecosystem rather than on the clogged Ethereum network. In fact, Binance established a $10 million fund to attract developers to solely build DeFi projects around the Polkadot ecosystem. Two birds, one stone.
Chinese home-grown projects such as Acala also managed to raise capital from known investors even though it’s just building Polkadot’s version of lending and DEX products. If Ethereum DeFi continues to innovate, Polkadot can sustain its DeFi ecosystem for some time, too.
Game is still on
The rise of Polkadot in China should come as no surprise. It showcases the perfect playbook of how foreign projects can succeed in China: iconic founder, relentless marketing, and a receptive audience awaiting the next crypto narrative.
But let’s not forget one thing: it’s all about the community because the community builds consensus. Polkadot has built a reputable consensus in China as the most credible Ethereum wanna-be. That narrative has been strengthened by international players’ increasing interest from the likes of investors such as Polychain, which announced a Polkadot focused fund in October, 2019.
However, can it escape the same rise and fall fate as the other Ethereum-wanna-be, EOS? It’s still early days and some Polkadot projects, such as Mantra, a MakerDAO copycat that claims to be the first DeFi project on Polkadot, are getting very bad press in China.
But the game is far from over. As long as the community is still expanding, and entrepreneurs are building on Polkadot, the platform will continue to be the Chinese crypto circle’s darling child.