Polkadot’s decentralized autonomous organization (DAO) passed a referendum approving a hard cap on the network’s native token for the first time.
The decision set the maximum supply at 2.1 billion Polkadot (DOT) tokens, a significant pivot from the previous tokenomics model, under which new tokens were indefinitely issued yearly. Under the old inflationary model, Polkadot minted about 120 million DOT tokens annually, with no limit on the token’s total supply.
The project said the supply could have swelled to more than 3.4 billion tokens by 2040 under the old model. The new framework introduces a gradual issuance reduction every two years. At the time of writing, Polkadot had a total supply of about 1.5 billion tokens.
According to Polkadot, the issuance reduction will happen every two years on Pi Day, which is March 14. The project also shared a chart, demonstrating the difference in supply under its new model.
Coinpectra reached out to the Web3 Foundation, the team behind Polkadot, for more information, but did not receive a response by publication.
Polkadot launches capital markets division
The change comes as Polkadot moves to expand its reach with institutional investors. On Aug. 19, the project launched the Polkadot Capital Group, a new division designed to connect Wall Street firms with its blockchain infrastructure.
The division aims to connect traditional finance players with Polkadot's blockchain infrastructure to help institutions explore crypto-related opportunities in areas like asset management, banking, venture capital, exchanges and over-the-counter (OTC) trading.
It will also showcase blockchain use cases like decentralized finance (DeFi), staking and real-world asset (RWA) tokenization.
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Polkadot token has dropped 5% since announcement
While the change may have long-term implications for the Polkadot token’s price, it did not have an immediate positive effect. Since the announcement, DOT’s price has dropped from $4.35 to $4.15, a nearly 5% tumble.
Capping the DOT supply at 2.1 billion is expected to introduce long-term scarcity to the token and reduce inflationary pressure, making its value more predictable for investors.
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