“Unscrupulous” Exchanges Accused of Cashing in on Polkadot Redenomination
Cryptocurrency exchanges have been accused of jumping the gun by redonominating DOT tokens ahead of schedule, confusing traders in the process. In their eagerness to secure more trading fees and attract more users, several leading exchanges have reduced the size of DOT tokens by 100x, 72 hours before they were due to be redenominated.
The decision may sound benign but it has had major ramifications for traders who were purchasing DOT under the impression that they were buying a $300 token – not a $3 one. The confusion can be seen in the price spike upon DOT’s listing on Binance, followed by a rapid drop to the newly denominated price of 100x less, despite the change having yet to be officially ratified. Polkadot founder Gavin Wood has called the exchanges “irresponsible” for putting the community at risk.
What’s in a DOT?
Denomination Day, set for Friday, August 21, is when Polkadot’s native token is meant to be adjusted, reducing its number of decimal places from 12 to 10 and reducing the value per token by 100x. When the change occurs at block number 1,248,328, token-holders will see the number of DOTs in their wallet increase by 100x to counteract the value per token dropping by the same amount. With exchanges prematurely redenominating DOTs, however, it risks traders depositing their newly unlocked tokens and market selling them, only to realize that they’ve received a fraction of their true worth.
The Exchanges That Redenominated Early
Binance and Kraken both listed New DOT on August 28, 72 hours before the denomination was formally set to occur. From the perspective of the exchanges, this was a good deal, as it allowed them to cater to retail demand for trading DOTs, which has been three years in the making. For DOT holders, however, who have been patiently waiting to have their tokens unlocked, the early transition to New DOT was a recipe for disaster and source of confusion.
Holders who have retained their tokens, and who have no intention of selling any of them until after the official denomination date, will be fine. Anyone who sold early on an exchange this week, however, may have lost out due to confusion over which DOTs they were trading: New DOT or DOT (old).
Denomination Day Hasn’t Changed
The date chosen by Polkadot for redenomination was carefully selected, occurring 72 hours after DOT transfers were enabled, giving the community time to adjust. Instead, ordinary traders have been hurt by the adjustment, after the price of DOT went 10x immediately after listing on CEXs, only to rapidly retreat. The whole affair is a mess that few participants will emerge from unscathed, save for Polkadot themselves.
Had exchanges heeded the project’s invocation not to denominate early, the confusion could have been avoided. Instead, DOT has gotten off to an inauspicious start due to circumstances beyond Polkadot’s control. Fortunately, there are plenty of positive developments in the works from Substrate-based projects that should instill some cheer in the community in the weeks to come. First, though, there’s the small matter of Denomination Day to complete, which will formally pass on Friday, August 21, just as it was always intended.
Image: Gavin Wood on TED Talks